Product/Market Fit: The only thing that matters
If you ask most entrepreneurs, they will tell you that the most important contributing factor to their startup’s success is their team. While most engineers or app developers would say that the product is key, because what good is the best team or the hungriest market without a product?
While not entirely wrong (both are important) these two positions overlook those that will ultimately use the product, the single largest contributor to success or failure: the market.
The market is the most important factor in a startup’s success or failure
All the market needs is to be satisfied is the first viable product that is produced. The product itself doesn’t need to be great, it just needs to work. The team who makes it doesn’t need to be great, as long as it can produce that viable product. When you have a great market, the team can upgrade on the fly and the product will rapidly improve along the way. Conversely, in a terrible market you can have the best product and the perfect team but you will fail.
The #1 Company Killer is a Lack of Market
You can screw up a great market, but assuming you have a solid team and that the product is decent a great market will tend to lead to success and a poor market with tend to lead to failure. You can have the best team and the best product, but without the market your team will eventually become demoralized and dwindle and your startup with it. Markets that don’t exist can’t love your product, no matter how revolutionary or special it may be, but when great teams meet great markets, incredible things can happen.
What is Product/Market Fit?
Product/market fit means being in a good market with a product that can satisfy that market. You can always feel product/market fit when it’s happening. Customers are buying the product just as fast as you can make it, usage is growing as fast as you can add servers, you’re hiring sales and customer support staff. And…you can always feel when product/market fit isn’t happening. Customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast. Most startups fail because product/market fit never happens.
Do Whatever is Required to Get to Product/Market Fit
Including changing out people, changing your product, moving into a different market, do whatever is required. You can ignore almost everything else. Whenever you see a successful startup, you see one that has reached product/market fit, usually in hindsight the fit seems obvious. And ironically, once a startup is successful, founders will usually attribute all kinds of things to its success that had nothing to do with it actually being successful.
“The only thing that matters is getting to product/market fit”
The Fallacy of the Perfect Business Plan
According to conventional wisdom, the first thing every founder must do is create a business plan. This static document describes the size of an opportunity, the problem its solving, the solution that the new venture will provide. Typically it forecasts income, profit and cash flow for 5 years. A business plan is essentially a research exercise written in isolation before a product is made. The assumption is that once you identify the need, you can raise money then produce a product. Once an entrepreneur with a convincing business plan obtains money from investors, they begin developing said product in a similarly isolated fashion. Developers spend thousands of hours getting the product ready for launch with little – if any – customer input. Only after launch does the product get any feedback – that says they don’t want or need many of the features a product has.
What we can learn from this cycle are the following 3 things:
1. Business plans rarely survive first contact with customers
As soon as you start getting feedback, everything can change. Your product can shift dramatically and your company should pivot in order to achieve what the market wants.
2. No one besides VCs and the late Soviet Union require five-year plans
5 year plans are generally fiction and writing them is a waste of time.
3. Start-ups are not large companies and do not unfold in accordance with master plans
The ones that succeed go quickly from failure to failure, all the while adapting, iterating and improving.
The key to winning is to find your market fit before you run out of money. That is all.
Half the Battle in Marketing is the Product
If nobody wants the product, it doesn’t matter how effective a marketer is, you’re going to have a really hard time being successful. And if people want the product, you don’t have to be that great a marketer – the product is just that much easier to market. So half the battle, is just finding the right company with a product that people actually need, and that there’s a big enough market that can support growth for that business.
How to Figure Out Product/Market Fit
Talk to your users. The most important thing you need to ask is what percentage of your users say they would be very disappointed if they could no longer use it. You can get a read on your users pretty quickly. In a interviewon Venture hacks, Sean Ellis describes how he would approach surveying for market fit. He suggests pulling money off the table and offering your service for free to remove the money barrier that a paid service could create, and survey those returning customers that have been back at least once. That pool is a more accurate representation of satisfied users that have feedback to contribute, and you can get a strong signal from those users on what it is about your product that is working.
You Can’t Set a Deadline on Product/Market Fit
Too many companies set a date on everything. They say, “we’re going to have our launch on January 14th”. Two months away from that and they’re working towards towards the deadline and the reality is, that its either time, or not time. You can’t set a deadline on product/market fit. All you’re going to do is make the mistake of being too aggressive too early, or miss the deadline.
Set Clear Objectives
Instead of setting deadlines, set clear objectives. The next milestone that you need to get to before you can do anything else is: to make sure that enough people love your product. As soon as you get there, then you can figure out why and be sure that you’re building the business to reflect what people love. Follow that recipe and all else will come.
For more how-to’s, see our post dedicated to identifying and testing your target market.
References, Footnotes & Highly Recommended Resources: