The one article on product market fit you actually need to read.
“I’d listen in on sales calls and they’d easily close the deals with incoming customers. There was rarely any going forward and backwards explaining it. People just got what we did.”
“I’d look at my monthly lead report and saw that those with the most closed opportunities were from referrals.”
“I’d look up and see another set of recruits coming into the office. The team grew from 8 to 20 pretty quickly. I became known as ‘Lucy H’ which frustrated me. I was the first Lucy to join, why did I have the H added?!”
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Reaching product market fit is about confirming - with absolute certainty - that your offering works for your customer at every level.
And when we talk ‘every’ level, we’re talking about the relationship between product, market, channels, customer and brand. They all influence one another and when you get it right, that’s what lays the foundations for an impactful go-to-market strategy.
But for me, there’s way too much emphasis on it being all about hitting a revenue target or landing a milestone number of customers.
You don’t just hit product market fit.
You don’t just reach this milestone, give yourself a pat on the back, apply for a few awards, and think your work is done.
It can take a long time to reach it.
According to Lenny Rachitsky, the average time to reach product-market fit is around 4 years.
AirBnB took 2 years, Figman took 5 years, and Amplitude spent 4 years chasing it. If that doesn’t scare you, can you imagine how I felt when I learned Miro didn’t get its first paying customer until year 2 and Airtable, 4 years.
But it wasn’t until I joined a particular business that one of its investors was obsessed with the term that I started to think about what it meant.
What I wish I’d been told when setting out to reach product-market fit:
Only 58% of businesses achieve it. If it feels difficult, you’re doing it right; everyone finds it hard.
Just because you reach it doesn’t mean you stop. It’s a process.
Just because a business has reached it, doesn’t mean they’ve got their s$%^ together either.
Side note, *just in case you are new to this: what does product market fit mean?
If you do want a super simple, summarised version try this:
It’s the process of identifying a segment where people have a problem and want to solve it, and want to PAY to solve it… and then building a solution that creates values, and solves pain in a way you can scale profitably.
If you’re into slightly complex descriptions, try this definition from Log Rocket and read a little more about what Marc Andreessen thinks it’s all about.
Where product market fit sits in the growth process
Theory based on Maja Voje
I find it useful when you consider where it sits in this process of building your startup. Let’s zoom out for a minute and consider where this process fits.
These are the three stages your business will go through, from validation to go to market to scale. Broadly speaking these are:
Problem market fit
This is all about finding a problem, understanding how to articulate it, and finding a segment that cares about it. And then designing an MVP that validates the idea, addresses the needs and helps alleviate the pains.
Product market fit
This stage is about showcasing that your offering creates value and you can generate traction by the way of paying customers. You’ll also be testing/ramping up your activity.
Platform market fit
This is where you can demonstrate that your organisation has a range of offerings that fit nicely within your overall positioning in the market. Think Hubspot and its various services for marketing, sales, customer service etc.
The three components you need to achieve it
I really like this breakdown from Leah Tharin to help explain what you’re looking for - especially if you work in a product/tech business.
Achieving product-market fit requires the following combination:
Proof of value
You’re able to demonstrate good retention rates, particularly within your ideal client profile.
Proof of monetisation
You’ve got paying users and more importantly, you have nailed your startup’s pricing structure. It may have taken like…100s of iterations… but you’re there.
Proof of value proposition
Users are able to experience the aha moment - the point whereby they realise value in your product.
What product market fit feels like
I’d listen in to sales calls and they’d easily close the deals with incoming customers. There was rarely any going forward and backwards explaining it. People just got what we did.
I’d look at my monthly lead report, and saw that those with the most closed opportunities were from referrals.
I’d look up and see another set of recruits walkingin, the team went from 8 to 20 pretty quickly. I became known as Lucy H which, I’m embarrassed to admit, I wasn't a fan of because I was the first Lucy to join. I was the original Lucy. Product market fit meant me losing my original Lucy status.
I’ve worked in businesses with product market fit. And I’ve worked in startups in the pursuit of product market fit. Trust me, they are very different.
Just because a business has reached it, doesn’t mean they’ve got their shit together either. Instead, you’re signaling to the market you’ve built the foundations to scale and instead, you enter a new world of chaos.
What we got wrong when trying to reach product market fit
Going way too broad when starting.
I’d say in one business in particular we lost around 8 months by trying to be all things to all people.
Listening to and trying to build a business around fans…
…not the people spending.
Not being open-minded when following the data.
Sometimes, a founder would be too rigid about what we had to sell something for a feature that we just had to include. That made it hard to find people who resonated with the problem we set out to solve because we were prescribing, not following.
Being obsessed - perhaps a little too much - with the launch of new products
…and thinking the launch was a one-time thing.
Steps that helped us to visualise and build around product-market fit validation
We used Brian Balfour’s four product market fit validation strategies. Read the post about what happened and what went wrong and right.
As a quick recap, he sets out these four tactics to help you to identify where you are and what you need to do next. These are:
The leading indicator survey
The leading engagement data
The flat retention curve
The trifecta
When looking to apply these, note that you cannot create a business around each one in isolation. These are merely guiding signals. I won’t go too much into detail because the follow-up article goes into a lot more detail that could be of use.
Summary
So there we have it, some insight into what I’ve learned in the pursuit of product market fit. I’ve presented this topic as a workshop and it went down really well.
Not because I claim to have all the answers, I don’t. But because very quickly, we could see that the organisations attending weren’t close to it and realised there was still a ton of work around identifying and validating the problem, choosing a segment, and building an MVP.
I’ve written a lot about these individual areas. But if you do want to chat about any of these - get in touch.
