Growth accounting and waterfall charts
Is growth changing because of acquisition, retention or returning customers?
How I use it
Define active and choose the period
Use a meaningful action and a consistent weekly or monthly window. Choose the same unit throughout: an account-level product needs account-level accounting. Exclude internal activity and verify that identity changes are not creating false new users.
Put each person or account in one group
Retained means active in both the previous and current period. New means first-ever qualifying activity in the current period. Resurrected means active now and in an earlier period, but not in the previous one. Churned means active previously and inactive now.
Here, churn means activity churn, not necessarily a cancelled subscription.
Reconcile the bridge
Current active = previous active − churned + new + resurrected.
Equivalently, current active = retained + new + resurrected. A waterfall starts with the previous total, subtracts losses, adds new and returning activity, and ends at the current total. Retained users are already inside the starting base; adding them again double-counts them.
Look beneath the total
Repeat the accounting by customer group, tenure or acquisition source. Check absolute numbers alongside rates: a growing base can lose more people even with an improving churn rate.
The chart describes movement; research and deeper analysis explain why it happened.
Illustrative weekly growth bridge
Illustrative weekly active accounts: 1,000 − 200 + 150 + 100 = 1,050. The 800 retained accounts are already in the starting total.
Start with 1,000 weekly active accounts. Of these, 800 return and 200 do not. Add 150 first-time active accounts and 100 resurrected accounts. The current total is 1,050: 5% net growth.
The activity quick ratio is (new + resurrected) / churned: 250 / 200 = 1.25. It summarises additions relative to losses; it does not tell you whether the customers are valuable or the acquisition is economical. With no churn, the ratio is undefined.
| Component | Accounts |
|---|---|
| Previous week | 1,000 |
| Lost this week | −200 |
| New this week | +150 |
| Back this week | +100 |
| Current week | 1,050 |
What to watch for
- Calling someone new because the reporting history starts recently.
- Treating activity churn and revenue churn as the same measure.
- Comparing different-length periods or an incomplete week with a complete one.
A brief for the next discussion.
A reconciled growth bridge and the segment or behaviour to investigate next.
Explain the movement
Where is your growth work getting stuck?
Use the growth diagnostic to find where to focus, or talk it through with me.