Product market fit is the number one factor for the success of a startup. If you nail product market fit you may be just fine without needing to raise funding. Everything will be easier from recruiting to paying the bills, scaling, and exiting. If you do find it wise to accept outside capital, having product market fit will make this dramatically faster and easier, and give you far more negotiating power when it comes to the term sheet.
The Holy Grail For Startup Founders
Product market fit is really like the Holy Grail for startup founders. It is what everyone is searching for. With it, everything becomes easier, and you can be well on your way to building a really big and hot business that scales.
If you don’t hit product market fit, not only will everything be moving more slowly, it will be harder. Until you hit it, your chances of failure are many, many times greater. The odds are high that you’ll run out of money before you make it. Without it, retaining customers, investors, and team members, and even your own is far more challenging.
Investors will always want this to be stated clearly on the pitch deck. You could always get started with a pitch deck template and build the story on top of it.
So, how do you know if you have it? If you don’t, how do you get it, and keep it?
Do You Have Product Market Fit?
If you have to ask, then you don’t have it.
When you strike it, you’ll know. There are several symptoms of it. The most prominent being having a hard time keeping up with demand.
Additional signs of sustainable and scalable product market fit include:
● Attractive customer acquisition costs
● Low customer churn rates
● High numbers of referrals versus purchased customers
There are some pretty obvious symptoms of not having product market fit as well.
● Customers aren’t getting enough value
● Referrals aren’t happening
● Use and customer growth is slow
● You aren’t getting rave reviews from third party media
● Sales are taking a long time, and many fall apart
How To Measure Product Market Fit
What gets measured gets improved. Achieving product market fit isn’t just a magical art and natural genius. There is a lot of science and engineering behind it too. So, it only makes sense that to get to product market fit, you can help iterate your way there by watching the most relevant metrics.
Acquisition – how good are your unit economics, and how fast are they growing?
Retention – how many users are repeat customers and long term users?
Referrals – how many referrals are you getting per customer, and what percentage of your business do they represent?
Revenues – do you have revenues, and how fast are they growing?
If these numbers are improving week over week and month over month, there is a good chance you are on the right track. Though, when you really hit it you’ll probably see a tsunami of results.
How To Get Product Market Fit
There are several other factors and actions you can focus on to prepare to get it and secure product market fit.
Have The Right Problem
Product market fit is really the outcome of tackling a strong problem. An urgent, hair on fire problem. Think of this as the difference between painkillers and vitamins. Vitamins are a nice-to-have extra luxury for most people. In contrast, when people are in pain they will go as far as they need to for help and pay whatever it costs to get out of pain. Most often, finding the right problem comes out of solving a personal frustration. Or, at least one experienced first-hand. Not just a venture embarked on to make money on an assumed problem.
Of course, you also need to come up with a solution that is at least 10x better than other existing options, at a minimum.
Know Your Customer
Getting the problem right comes from really knowing your customers. You’ve got to know them intimately. The most successful startups often spend months engaging and having conversations with their target customers to really confirm, clarify, and crystalize this problem. It’s about getting to the root of the problem in the mind of the customer. Finding out what they feel they need and want, and the benefits and features they will really pay for.
Focus On What’s Most Important
The difference between successful startup founders and the rest is the ability to really achieve laser focus on what’s most important, and the ability to ignore the rest.
Meeting the underserved need with the right value proposition is what creates the foundation for product market fit.
Once you get the bones right, you can refine, augment, and propel with the right features and user experience. Just make sure you really stay glued to the most important next task, and aren’t slowed down by all the distractions.
Find Your Sweet Spots For Customer Acquisitions
The worst thing you can do is to just try and copy your bigger competitors, assuming what they are doing is working and that you can compete on it. Understanding your customer deeply should reveal the best marketing and sales strategy and uncover ways you can get the edge, while operating lean.
Focus On Customer Happiness
When you have a product market fit your NPS score should be way up there. Pleasing and serving your customers better than the competition is how you’ll keep them, generate word of mouth business and rave reviews, while securing retention.
Achieving product market fit isn’t forever. It’s not a free pass to just slack off. It’s a daily job to win and keep it. If you start delivering poor customer service, becoming bland and complacent, and becoming detached from the front line, and don’t have customer service as a value, it will kill you faster than you found it. You must maintain it and you must evolve with your customers and environment to keep it.