A growth framework is a repeatable model for deciding where a company’s growth will come from and which bets to make next: a structured way to identify, prioritize and execute the highest-impact ways to grow revenue. The best known are Dave McClure’s AARRR pirate metrics, growth loops, Brian Balfour’s Four Fits and prioritization scores such as RICE; the five frameworks below turn them into operating rules for a founder who buys customers with paid ads.
Key takeaways
- Simon-Kucher defines a growth framework as a structured approach to identify, prioritize and execute the most impactful ways to grow revenue (Simon-Kucher, April 2026).
- Dave McClure’s AARRR model, published in 2007, splits growth into five stages: acquisition, activation, retention, referral and revenue (McClure, Startup Metrics for Pirates).
- Reforge’s 2018 growth loops essay argues that the fastest-growing products compound through closed loops whose output is reinvested, rather than one-way funnels (Reforge, July 2018).
- Brian Balfour argues that reaching $100M+ needs four fits at once: market-product, product-channel, channel-model and model-market (Balfour, Four Fits).
- Intercom’s RICE score ranks ideas on four factors, reach, impact, confidence and effort, to estimate total impact per time worked (Intercom, January 2018).
What is a growth framework?
Simon-Kucher, the pricing and growth consultancy, describes a growth framework as a structured approach that helps a company identify, prioritize and execute the most impactful ways to grow revenue, and turns strategy into a repeatable system for decisions. Tactics are the individual moves: an ad campaign, a launch, a newsletter. A framework is the rule that tells you which tactic to fund, how much it is worth and when to stop.
Every framework answers one question. How much can I pay for a customer? Where do new users drop off? Does growth compound or does it stop when spending stops? Which experiment goes first? Pick the framework whose question you can’t answer today.
The classic growth frameworks
Growth loops and Brian Balfour’s Four Fits both appear in Elena Verna’s list of her nine favorite growth frameworks; AARRR and RICE are the standard models for measuring the funnel and ranking experiments. These four are a practical starting set for software founders.
| Framework | Question it answers | Where it comes from | What to measure |
|---|---|---|---|
| AARRR pirate metrics | Where do customers drop off between first visit and payment? | Dave McClure, 2007 | Conversion at each stage: acquisition, activation, retention, referral, revenue |
| Growth loops | Does each new customer bring in the next one? | Reforge, 2018 | How much output each turn of the loop reinvests as new input |
| Four Fits | Do product, channel, pricing model and market fit each other? | Brian Balfour | Revenue per customer against acquisition cost by channel; market size against pricing |
| RICE prioritization | Which growth idea should the team work on next? | Intercom, 2018 | Reach, impact, confidence and effort for each idea |
Funnels vs growth loops
AARRR is a funnel: traffic goes in at the top and customers come out at the bottom. Reforge’s “Growth Loops are the New Funnels”, written by Brian Balfour, Casey Winters, Kevin Kwok and Andrew Chen, argues that funnels run in one direction, so you have to keep pouring more money and tactics into the top. A loop is a closed system: the output of one cycle, such as a new user, content or revenue, is reinvested as the input to the next.
Alessandro Chesser, now co-founder and CEO of Dynasty, describes a loop he helped run as VP of Sales at Carta: every company Carta signed had to invite its investors to the platform, so more companies meant more investors, and those investors brought in more companies (watch at 1:53). The funnel still matters inside a loop: it tells you which step of the loop is leaking.
Where the five frameworks below come from
The five frameworks in this guide come from one founder interview. Ricardo Vice Santos, co-founder of Dream Stories, which makes personalized children’s books with generative AI, told Nathan Latka in November 2025 that the company had made close to 100,000 sales since launching at the beginning of that year (watch at 8:41), at a price that has generally been around $60, with discounts that brought one offer to $48.
Most of those sales came from paid Facebook acquisition, not organic search. He said ad spend was in the six figures in the month of the interview (watch at 19:24), with less than $1 million raised externally (21:11) and seven people on the team (23:23). The team was running four A/B tests at the time, used PostHog for analytics and built its funnel logic in house. He credits the scale-up to a simple, guided onboarding that the team only recently managed to deliver.
Watch the full interview with Ricardo Vice Santos, with transcript.
Framework 1: Budget CAC near your first order value
Customer acquisition cost (CAC) is what you spend in marketing and sales to win one customer. Average order value (AOV) is what a customer pays at the first checkout. The rule: when you start a paid channel with no history, set your first CAC target near your AOV, then let repeat revenue justify going higher. It is a starting heuristic, not a profit target: at CAC equal to AOV the first order pays for the ad and nothing else, and loses money once delivery costs are counted.
What I usually tell people, and that’s a litmus test in every single company I’ve worked, I said, okay, you haven’t done any ads. What do you expect your CAC to be? I usually tell that you should… ballpark around what their AOV is, which is not a great answer, but it tends to be the case.
Ricardo Vice Santos, co-founder, Dream Stories. Watch at 12:32
He explains why it works as an arbitrage. In an ad auction, many advertisers stop bidding around a return on ad spend of one, spending $60 to make $60, because they cap their bids there. A company whose customers come back can bid above that line and still make the economics work, while one-time sellers drop out (watch at 13:25). He adds that you want a return of two, three or four if you can get it.
This is Balfour’s channel-model fit in miniature: what a customer pays decides which channels you can afford. To apply it to a subscription business, compare CAC with the cash a customer pays up front and with how many months of gross margin it takes to earn the CAC back. Founderpath’s CAC calculator works out the first number and the payback period calculator the second. Scale spend only once repeat revenue shows up in your own data, not in a forecast.
Framework 2: Turn one purchase into episodes
If customers buy once, lifetime value equals the first order and Framework 1 leaves no margin for error. The second framework asks how a single purchase becomes a series of natural follow-on purchases: another seat, another project, more usage, a version for someone else. In AARRR terms it works on retention and revenue.
Ricardo calls this taking a one-time purchase and turning it into an episodic thing that happens many times over, and says it is what makes paid acquisition work in an auction (watch at 11:40). At Dream Stories, a book can have several characters, so families add other family members, such as cousins, and then order what he calls “reverse books”: the same book with the other child as the hero (watch at 15:18).
For software, list every reason a happy customer would pay more, design the product so the next step feels like a continuation rather than an upsell, and measure the repeat or expansion rate by cohort. Feed that rate into the LTV calculator before you raise your CAC ceiling, and track losses with the churn rate calculator.
Framework 3: Get new users to the magic moment first
The magic moment, also called the aha moment, is the point where a new user sees the product’s value for themselves. The framework: remove every step that stands between a new user and that moment, and put the signup, paywall or sales call after it rather than before. In AARRR terms this is activation, and it decides how much of your paid traffic you keep.
Find the moment by asking which first action your retained customers share, then measure the time and the steps it takes a new user to get there. Cut forms, settings and configuration that can wait until later.
During the onboarding experience is when companies are going to sort of build that lasting impression of you, is when they’re most likely to refer you to somebody else. At NoFraud, 80% of our leads are customer referrals.
Scott Gifis, CEO, NoFraud ($10M revenue). Watch at 17:12
Gifis credits that referral share to over-investing in onboarding, and tells founders with a self-serve motion to make onboarding the priority. Activation then feeds the referral stage of the funnel, which is how a good first experience turns into a loop.
Framework 4: Run experiments continuously, ranked by impact
The fourth framework treats testing as a standing process rather than an occasional project: keep a backlog of experiments across pricing, copy, onboarding and offers, rank it, run the top items, then ship the winners and record what you learned. Small gains at several steps of the funnel multiply.
Ranking is where most teams need a framework. Intercom’s RICE score rates each idea on reach, impact, confidence and effort: multiply reach, impact and confidence, then divide by effort to estimate total impact per time worked. Boomerang adapted it.
The whole point of experiments is you don’t know what will work, so confidence doesn’t really matter… take RICE, but C is now, instead of confidence, it’s complexity.
Aye Moah, co-founder and CEO, Boomerang ($8M revenue). Watch at 15:47
Two limits apply. Each test needs enough traffic to produce a result you can trust, so a small company should run fewer, bigger tests. And not everything needs a test: Verna’s list includes Tal Raviv’s warning against over-testing, because strategy problems don’t get solved by micro-optimizing the page.
Framework 5: Choose a category that already repeats
Some markets buy once; others buy every week or every month. The fifth framework asks whether customers in your category already repeat the behavior you sell, because that sets the ceiling on Frameworks 1 and 2. Balfour calls the link between market and pricing model model-market fit; Verna’s list adds a related idea, James Currier’s “fast-moving water”: growth depends heavily on the market you pick.
Ricardo chose children’s stories partly because of that pattern: a child wants the same content several times in a week, then moves on to the next thing (watch at 4:48). He also picked a category where people already bought personalized books as gifts, so his job was to build a slightly better product and outbid the existing sellers (watch at 14:22).
For a software company the test is the same. Does the problem recur daily, monthly or once? Does usage grow as the customer grows? If repeat behavior is weak, look for an adjacent segment or product line where it is built in before you scale paid acquisition.
How the five frameworks map to the classics
| Framework | Question it answers | Classic framework | Number to track |
|---|---|---|---|
| 1. CAC near first order value | How much can I pay for a first customer? | Four Fits: channel-model fit | CAC against first order value, then payback |
| 2. Episodic revenue | How does one purchase become many? | AARRR: retention and revenue | Repeat or expansion rate by cohort |
| 3. Magic moment | How fast does a new user see value? | AARRR: activation | Activation rate and time to first value |
| 4. Continuous experiments | Which change do we test next? | RICE prioritization | Experiments shipped and share that won |
| 5. Category repeat behavior | Does the market already buy again? | Closest to Four Fits: model-market fit | Natural purchase or usage frequency |
How to put these frameworks to work
You don’t need all five at once. For individual tactics to plug into them, see our guide to growing a startup; for how larger companies sequence growth, see SaaS growth playbooks.
- Pick the framework whose question you can’t answer. If you don’t know what a customer is worth, start with Framework 1; if users sign up and leave, start with Framework 3.
- Apply it to one active channel. For example, rebuild onboarding around the magic moment for traffic from your largest paid channel only.
- Measure against a baseline. Record CAC, conversion, first order value and repeat rate before the change, and give it long enough to collect a readable sample.
- Write down the rule. Turn what worked into an internal operating rule so the next hire uses it too.
- Move to the next framework. Each one makes the others cheaper: better activation and repeat revenue raise what you can afford to pay per customer.
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Frequently asked questions
What is a growth framework?
A growth framework is a repeatable model for deciding where a company’s growth will come from and which bets to make next. It helps a team identify, prioritize and execute the highest-impact ways to grow revenue, so individual tactics are chosen and judged by the same rules.
What are the most common growth frameworks?
The most common are Dave McClure’s AARRR pirate metrics (acquisition, activation, retention, referral, revenue), growth loops, Brian Balfour’s Four Fits and prioritization scores such as RICE. Founders often add operating rules such as a CAC target, an activation goal and a test backlog.
What is the difference between a growth funnel and a growth loop?
A funnel runs in one direction: you put traffic in at the top and get customers out at the bottom, so growth stops when spending stops. A growth loop is a closed system in which the output of one cycle, such as a new user, content or revenue, becomes the input for the next.
How much should a startup spend to acquire a customer?
With no data, one starting heuristic is to set CAC near the first order value and only go higher once repeat or expansion revenue shows up in your own numbers. For subscription software, also check how many months of gross margin it takes to earn the CAC back.
How do you prioritize growth experiments?
Score each idea and work from the top. Intercom’s RICE score multiplies reach, impact and confidence, then divides by effort. Boomerang replaced confidence with complexity, arguing that you run experiments precisely because you don’t know what will work.
Which growth framework should a founder start with?
Start with the question you can’t answer today. If you don’t know what a customer is worth, set a CAC rule first; if users sign up and leave, fix activation; if customers buy once, design follow-on purchases before scaling paid acquisition.
Sources and method
Reviewed October 31, 2026. Framework definitions come from their primary sources, linked where they appear: Simon-Kucher, Dave McClure’s 2007 slides, Reforge, Brian Balfour, Intercom and Elena Verna. Dream Stories figures come from Ricardo Vice Santos’s November 2025 interview and are what he said at the time; quotes are taken from our published transcripts, lightly cleaned of filler words, and link to the moment in the video.
The earlier version of this post attributed several numbers and examples to Dream Stories that the interview does not support, including a revenue total that was the interviewer’s estimate and a list of specific A/B tests, and it gave a lifetime value multiple and a 10 to 30 second onboarding target without a source. Those were removed, and the Dream Stories details were corrected to what the founder said.
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