The founder's guide to product-market fit
A no-BS approach to the only thing that matters in a new venture
What’s the ONE Thing I can do such that by doing it everything else will be easier or unnecessary? - Gary Keller
“The only thing that matters is getting to product/market fit.” - Marc Andreessen
In the middle of a turkey-induced coma, I had a vision: This newsletter is all about exploring product-market fit (PMF). Not just this particular email, the entire newsletter.
Product-market fit is the only thing that matters in new ventures. It is the ONE Thing you can do such that by doing it everything else will be easier or unnecessary.
Before PMF, you have an idea. After PMF, you have a real business. Founders are the rare people who make it their mission to find PMF.
I’m on a mission to find PMF in my startup. And… I haven’t encountered any knockout content on how to find PMF. So I’m writing this for both you and I to explore PMF.
Without further ado, let’s nerd the heck out! This week, I’m digging into the topic: What is product-market fit? What do most founders get wrong about PMF?
PS - if you’ve been forwarded this newsletter, subscribe here:
A founder’s definition of product-market fit
“A startup is an organization formed to search for a repeatable and scalable business model.” - Steve Blank
So… what is product-market fit? There are plenty of definitions. Many are theoretical (read: unhelpful).
As I repeatedly bang my head against the wall trying to find product-market fit, it occurs to me that there are a few key components:
Customer: A specific person who faces a specific problem
Product: A unique way to solve the problem that resonates with the customer
Distribution: A profitable way to get many customers to buy and use your solution
The phrase “Product-Market Fit” is terrible. You hear PMF and instinctively think, “Alright, I need to start building a product. Then I’ll find some ‘market’ to fit it in.” This, of course, is a certain recipe for failure. The phrase PMF is too abstract, the words are out of order, and it’s entirely missing distribution.
But PMF sounds better than “Customer-Product-Distribution Fit”, so we’ll continue with PMF for now.
Let’s dig into some nuances from the trenches:
Customer: A specific person who faces a specific problem
The word “market” is misleading, but sounds good to theoreticians who like abstract concepts. So let’s get concrete. There are two components to “market”:
Component 1: The Specific Person
Who is the actual person who’s going to buy your product?
“HR departments” is BS.
“Franchisees” is vague.
“Operations directors at Domino’s, Taco Bell, and McDonald’s franchises with more than 10 stores” is better.
Component 2: The Specific Problem
The Specific Person has to have a reason to buy your product. Some circumstance is causing them to consider leaving the fuzzy comfort of the status quo to take your call and maybe even buy your product. The more specific and painful the problem, the better. Fear the abstract.
“They want to increase profit” is lazy.
“They need applicants” is vague.
“Their stores are understaffed because of the pandemic, they’re spending money on Indeed and not getting enough applicants, and have long drive-thru lines, unsatisfied customers, revenue loss because they’re so understaffed. They’re even considering reducing store operating hours due to understaffing which is unprecedented.” Better.
Product: A unique way to solve the problem that resonates with the customer
In the startup world, everybody loooooves talking about product. We love our interface design, our slick icons, our backlog prioritization schemes, our sprint planning sessions.
Product is where insecure founders squirrel away years of their lives and millions of investor dollars. “This next feature is going to make all the difference!” (Hint: It won’t.)
The hard part about product is the part many founders ignore: Differentiation. How are you unique in a meaningful way to your customers?
Instead, we read the Lean Startup and absolve ourselves of the need to think hard about differentiation. “We’ll see how customers behave with our Minimum Viable Product!” No. No. No!
I write this out of love and pain: I’ve wasted years and brain cells on bullshit differentiation and features that don’t matter to customers, and don’t want you to do the same. Being unique and creative is hard. It’s easier to copy what exists and ignore the need for real differentiation.
Differentiation is everything. A few learnings I’ll expand on in future weeks:
There’s a kernel of differentiation that’s your starting point: We found that franchisees only hire 20% of applicants, and 40% of employees quit for preventable reasons. Nothing on the market was addressing this pool of potential employees, which was our starting point.
Full differentiation emerges from the kernel: As long as you have a unique starting point, you’ll encounter problems and opportunities that emerge from there and respond accordingly. Customers will shout at you, churn, or use the product in unanticipated ways. You’ll respond quickly and build your differentiated offering.
Reflect, reposition, iterate: The way you describe, price, and sell your product will change as the product emerges. You need to shift between purely responding to customer feedback and looking at the big picture. Beware those who only want to operate in the weeds - but especially fear those who quote Steve Jobs and want to dictate from above.
I’ve spent the holiday week reflecting on our product’s positioning, pricing, and feature priorities after two months of responding to customer feedback. This reflection has helped me realize that many of the things in our backlog aren’t the most important things for us to build right now, that our positioning needs tinkering, and that some of our customers might not be the perfect fit for us.
Distribution: A profitable way to get customers to buy and use your solution
We end this week on the least sexy and most-avoided component of product-market fit. Distribution is so unloved that it’s not even included in the phrase “product-market fit”!
Ads. Cold emails. Cold Calls. Self-Promotion. Yuck.
I know, I felt it too. But the crazy thing about businesses, even startups, is that they need to make money. (Breaking news!)
And unless you’re insanely lucky, just releasing to Product Hunt, getting coverage in TechCrunch, and hoping you’ll get insane viral growth is a disservice to your team, future customers, and vision. Yes, it happens to some companies. Don’t bet on it happening to yours, especially if you’re not selling a status-signaling product to Twitter-obsessed startup founders.
Figuring out distribution also helps you refine your understanding of your customer and product. More interactions with more potential customers helps you figure out what’s important and what’s not.
A few things I’ve learned about distribution the hard way:
Include onboarding and retention in “distribution”. Everything is connected in your customers’ eyes - your positioning, pricing, advertising, demo, onboarding process, renewal messaging, etc. What you learn about distribution informs everything else about your product. When I think about distribution, I don’t just think about getting new paying customers. I think about successful customers - people who purchase for the right reasons, use the product the right way, and even refer others.
Get your hands dirty. It’s so tempting to hire someone to “figure distribution out.” This is usually counterproductive.
Experiment then double-down. Early-stage companies usually get 80%+ of their customers from a single distribution channel, whether that’s Facebook ads or cold outreach. Find the channel, then optimize the hell out of it.
That’s all for today! Let me know what you think, was this helpful?
Rob
PS - Tony Hsieh, founder of Zappos, passed away this week. His story taught me that founders can build great companies that are also amazing places to work for everyone - even customer service representatives who usually have terribly unpleasant jobs. Rest in Peace.