Measuring Product/Market Fit

Chapter 3 Measuring Product/Market Fit By Sean Jacobsohn Sean started his career in enterprise software as a service (SaaS) in 1999 and held positions in business development, sales, and alliances before joining the venture community in 2012. Sean is now a partner at Norwest Venture Partners and has been a frequent speaker at Dreamforce and other industry events. In the Founders Forum track at Dreamforce ’14, Sean interviewed Godard Abel, CEO of Big Machines at the time, on the topic of product/market fit. In that talk, as in this chapter, Sean postulates that there are five key measures to determining your product/market fit. As you read along, be sure to score your product to see where you rank in market readiness. Most of us can probably recall a time when we haven’t been prepared for a test, interview, or meeting. What we learn from these unpleasant experiences is that being unprepared comes with consequences. The same is true for your startup. Before you launch, you must be prepared. You must be sure that you’re serving a real market need, not tackling a problem only because it’s interesting to solve. In the world of cloud startups today, there is a tremendous amount of confusion about how to define product/market fit. Many entrepreneurs think they understand it, so they forge ahead only to discover that they’ve been wrong. Time is wasted, money is wasted. I know one company that raised $10 million at a $100 million valuation and thought it had achieved a strong product/market fit. After spending all of that money on sales and marketing over the course of a year, the company discovered it had not achieved strong product/market fit and promptly went out of business. 3939

Chapter Chapter 3 3 NonetheleNonetheless, wess, s houlwe sdhouln’t bden ’toot be h tooard hoanr dthi osn c thioms paconmypa orn they or man the y many othersothers like itli. kAefter it. A allfter, a chieviall, achieving andng maandin mataininintagi nproingduc prot/ducmart/kmetar fitk etin fit in todaytod’s faasyt-gro’s fast-growingw, ever-ing, ever-chancgihangn gitechng ntechologynology sector sector is ha rid.s h Raercd.e nRtlecy ently CB InsightsCB Insights polled polled faile df asiletartd usptarts andups andfound fo undthat tha42t % 42bl%am bledam theied r their failurefa ilureon l aonck oflack mar of kmaret neeketd nee, md aki, nmgaki itn theg it numbthe number onere causone ecaus of e of startup startup demidseemi. se. Here areHere are a few a m feorew m cooremm coommn reaon soreans wsohyns w prohyduc prots ducfailt:s fail: • There is low customer adoption or use.• There is low customer adoption or use. • The product does not work as intended.• The product does not work as intended. • The product does not address a key problem for target • The product does not address a key problem for target customers.customers. In myIn e mxperieny experience, imcme, erimsminger yosinugr syoelfu irnself yo iunr yocusutor cusmerto’sm worler’s dworl is thde is the best bestway towa gy atoin gtheain aw theare awnearess nneeessd neeed tode dspot to srepotal opportreal opportunitieuns foitier s for markmaret disruptionket disruption. For i.ns Fortan inscet,an it’sc eu,nli it’sk elyunli thkelyat M thaartc M Beanrcioff Be nwioffoul wd ohuavlde have confiden confidence, andce, visioand nvisio to nmove to move custo cusmerto relmeratio relnatio-n - had thehad inspiratio the inspiration, n, ship mashipn agemanmageentm (CeRM)nt (C iRM)nto theinto c theloud c louwithd wtheith fo theund foinundg ofin Sag ofles Saforlece sforce withoutwithout his yearshis years of s uccof esssucc aetss O raact lOe.r acAsle .Be Asn ioffBe ncioffouns coelunss inel shi is n his BehindBehind the Clo theu dClo, “uDdo, n “’tD boen ’afrt baeid afr toa iigd ntoore ig nrulesore rulesof your of yourindu sindtry ustry that have bethat have becomec oombsolete ore obsolete or that defythat c defyomm coommn senon sse.en” se.” To helpTo helpyou nyoavigateu navigate the pitf thea llspitf caollsmm coommn too nclo toud c lostudart usptas,rt I’uveps, pI’uvet put togethertogether a frame a frwameorkw thorkat wthilla tas wseillss as thesess a thelignm aligentnm ofent yo ofur yostaurtr uspta wrtuitph with a marak metar neeketd nee. Whiled. W I hiledes igneI desdigne thed fr theam efrwamorkew workith wtheith soft thewa softrewa as rea as a serviceservice (SaaS ()S maraaS)k maret ink etm iind,n m itind, ca nit alcason bales ou sbeed ubsye dst barty ustpasrt inup othes in r other sectors to asectors to assesss theirsess their prod ucprodt/maucrt/kmaet fitrk.et fit. ThereThere are fiveare bafivesi cba elemesic elements younts youshou sldho usuled tous eme toasu mereasu youre r your startustartup’s prop’sd uproct/dmaucrt/kmaet rfitket: afit d: ivera dsityiver ofsity c uofsto cmusertosm, eernsg, aegengmaegentm, ent, churn, commitmechurn, commitment, and nt,vir and alitviry, aorlit wy, orord wofor md oofu mth.outh. 1. Diversity of Customers1. Diversity of Customers You mYou must haveust have a diver a diverse bassee bof ascuse of tomercustomers who s wusho e the prouse the product. ducYou t. You begin begin by being by b einghone host andnest to andugh to mughind medind aboedu at boyouutr yocuustor cmusertosm. ers. shoushold uld For examplFor example, aske yo, auskrs yoelfu wrshelfat w perhacte perntacgeen oftage yo uofr cuyostour cumstoersm areer peopls are people e you didyoun ’tdid knno’tw k nwohenw w yohenu s yotarteu sd tarteyourd cyourom cpaonmy.pany. 4040 4040

MeasuriMeansurig Prodng Product/Muct/Market Fiarktet Fit ManyM calonyu dc lostartud usptarts meaups sumeare sutheirre theirprod uproct/dmuarct/kmet arfitket b afitse db aosned th oe n the reactioreanc oftio theirn of theirSilico Silin Vcaolley–ban Valley–based colleagsed colleagues, frieuesn,d fries, anndds ,f amandil yfam. Suilrye., Sure, this isthi a slegitim is a legitimate waayte toway begi to nbegi figuringn figuring out if o yourut if yourprod ucprodt wucortk sw, orbukts ,i t but it isn’t goiisn’nt ggoi ton beg to a beway a yowayu cayonu truly can trulytest yoteustr yoprodur ucprodt’s ucmart’sk met arviaketbilit viay. bility. This reThialitys re isality ec hoeis edchoe in HdB iOn ’sH hitBO ’ssho hitw s ho“Siliwc o“Silin Vcalleon yV,”alle wherey,” where the Pie thed Pied PiperPiper team tea realizem realizes theirs theirprod ucprodt has ucto hnas ly boeenlyn bteeesten d tebyste fried byn dfries. nds. You neeYoud nee to tda ktoe yourtake yourprod uproct dthroughuct through a more a m rigoroore rigorous asseus sasssemensst ment of itsof vi abits ilitviaby. Iilit likye. I tolik telle to st tellartups startups that ifth itat w ifor itk ws orfork ss oform eosonmeeo inn De eins Des MoinesMoines, Iowa,, I othenwa, thenit’s lik itely’s li solvingkely solving a rea la pro reabl leprom.b Tlem. To o judge ju thedge i mthepac imt pact of yourof yourprodu proct,du yoctu ,nee youd nee to knod tow kno thawt itth waillt it a wttrillac atttr maceatningful meaningful comm coitmm- it - ment fromenm t frocum stocumserstom wersho w neehod nee thed t thearget pro target problemb filexemd fi. xed. Don’tD geton’ tm gete w mronge w;rong you ;ca youn st caartn stwaithrt wfrienith dfriens andds f andamily fam as ilyea arlys epiloarlyt pilot custocmuserstom. Terso re. Taolly re saepllya rsaeptea therate wthehe awt hefroamt frothem chtheaff ,ch hoaffw, evehowr, eveyou r, you needn toee sdee to c sueesto cmuserstom youers a yound yourand yourinner i ncirclener circle don’ td knoon’tw kno usiwng u yosinugr your product prodanduct likingand liking it. it. 2. Engagement2. Engagement I’m callingI’m calling this engagement,this engagement, but we but could we could call it call marriag it marriage. Aree .your Are your customerscustomers so wedded so wedded to your to yourproduct product that its that absence its absence would would cause cause real real problemproblems? Thinks? Think of Salesforce of Salesforce as an as example an example here .her Whene. When it’s removed it’s removed fromfrom a custome a customer, its rabsence, its absence creates creates major major business business disruption. disruption. The The productproduct has becomehas become a system a system of record of record for salespeopl for salespeople, whoe, whooften often spend severalspend several hours a hours a day using day using it. That it. ’Thats the’ sdefinition the definition of an of essential an essential product.product. SomeSo ofm ethe of ktheey questionkey questions to as skto yourselfask yourself in in reg regard toar de ntogag enegage- - ment ment are: are: • How core is your product to your customer’s business?• How core is your product to your customer’s business? • How much pain would the customer experience if the product • How much pain would the customer experience if the product were removed?were removed? • Will customers care if your site goes down?• Will customers care if your site goes down? • Are customers engaged (happy) with the product?• Are customers engaged (happy) with the product? ProduProct/dumact/rkmaet rfitket i s fitb estis bthoughtest thought of a sof a acontis a continuumn uruamther ra therthan than a discretea discrete endpoi enndtpoi. It’ns tn. otIt’s abnotou abt hoouwt hooftewn ofte custon cmustoersm logers i nlogto youintor your produproct,du buctt , rbuathert ra hotherw homisws ionmis scritiionca critil it cais l toit itheirs to theirbusi nbeuss.sin Leikss.e thLike e the 4141 4141

Chapter Chapter 3 3 famousfamous saying saying goes, goe “Ros,m “eR owasmen was’t bunilt’t buin ilta dain ya,” daandy,” sandimil asrlimy,il itarl wy,il itl will take taa kreasone a reasonable aambleo unamt oofun tit mofe titom bue toild bu yoiludr yovisuionr vi sandion getand toget thi tos this missiomisn-s criticalion- critical point point. If you. If’re you cre’reati cnrega ati nngew a nmaewrk maet, rtheketn, theit cnou itld c otauklde take eveneve longen longer. Ther. iThemportant important poin tpoi ton ret mtoe rembmeremb hereer hereis th aist athlla sttart all usptarts ups are differentare different, as are, a stheir are theirproc eprossesce forsses bu forildi bungildi a prodng a ucprodt foruc thet for m theark meta. rket. ThereThere is a ifis nae filinene toline toe to itoen the in dtheevelop developmentm proentc epross cofess yo ofu r your application.application. It’s one It’s thoneat lethadsat le toads either to either mark maet succrket esuccss ore ssfa iloru rfea. ilEuarrley . Early in yoiunr yoprodur uprodct developmeuct development lifencty lifeclec, ycuclstoe, cumstoersm werills liwkelyill li holkelyd holontdo onto productsprod thuctsat aretha itn aretuitive intu anitived e anasdy toeas usy eto, and use ,w andait forwa itn eforw fnuncewtio f nality unctionality to beto in betro dinutroceddu. Aces dyo. Ausr yoprouducr prot ducmattu mreats, uyoreus, nyoeeud n toee eds ttoab elissthab highlish -high- impaimpct fuanctioct functionalityn alitythat thcanat dcoan the do satheme sa (orme b (oretter) better) as c oasm pcaoremdp atreo d to other productsother products that athat re finaree t fiunnee dtun toe md toeet m useeter usneeerds nee. ds. In su mIn, sau prom, ad uproct dshoucut sldho lookuld blookeau btifeuaul, wtiforkul, w workell, wandell ,i dandeall iyd,e acallhievy, ace hieve both, but itboth, but it shou shold nuever ld nbever e mbeed miocreediocre in either in either of the ofse thecategoriese categories. s. 3. Churn3. Churn It’s vitIta’sl vitfora youl for toyou m easto mureeas theure r athete arat tew hiatc hw hiyocuh loyoseu cusloseto cusmertos.m In ers. In additionaddition, you ,n youeed n toee kdn toow k nwhyow yowhyu’re yo lous’rein glo cussingto cusmertos.m Iser thes. Is pro theb leprom blem pricing,pri cserviing, cservie, cocme, copetitiompetition, uptin, umepti, orm seomethi, or something elnseg? else? In theI nearly the earlydays ofdays lau ofnc lahingunc yohingur proyoudur proct,du it’sct n,ot it’ sn neceot ssneceary sstoary me toas meure asure churnc huras youn as’re you still’re trying still trying to deter to determinem wihinec hw cushichto cusmertos mareer sthe are i dtheeal ifidt eal fit for yoforur yobuusiner buss.sine Butss. a Bs utyo ausr yocomurp canomy pgrowany grows revesnu revees,nu highes, highchurn c hrauterns rates can mcaakne m ita impossibleke it impossible to ac hieveto achieve a hea althy he ablthyusin beusss imneossd el.m oFordel. e xaFormpl exaempl, e, if yourif yourstartup sta getsrtup togets $10 to m $10illion m illionin reve inn reveue, an u4%e, am 4%onthly monthly reven reveue cnhurue n churn transltranatess to nearly hlates to nearly half youralf byourusin beuss sibeiness ngbei lostng ea lostch eayecahr. year. That Thatkind kindof ch ofur nc hcuanrn macank ema it kverye it verydifficu diffilt forcu lta forcomp a canompy toan groy tow gro. w. CompanieCompanies focuss foced usoned sm onall sm andall manded imum-edsiuizem-ds busizedin busessiense ssshoesu sldho aium ld aim for 2%for or 2% lower or lower gros sgros mons thlymon reventhly revenue churue n,chur whilen, w enterprihile enterprise-focusse-foed cused businebusinesses sshouldses should aspire a stopire 1% to or 1% lower or lower gross gro mossn thlymon revethly nurevee cnuhuern c. hurn. It’s importaIt’s important to ndetermit to determine chnuer nch rautesrn rwatesitho wuithot incultud incinlgud aninyg uanpsyells up osellsf of your yourprodu product, becctaus, bece austheye theycan often can often mask m aandsk uandndere undstimate erestima thete re theal real rate of rate of churnc.hurn. WhenWhe youn youmea smeurea scuhreu rnc,h uyornu’, reyo u’alreso amlseoasu mrienasug riyourng yourlevel levelof of customercustomer satis fsaactiotisfnactio. Thnat. Thsaiad,t saithered, there are a laware yaslwa thoyss etho cusseto cmusertosm werho s who 4242 4242

MeasuriMeansurig Prodng Product/Muct/Market Fiarktet Fit becomebec omeunsa tisfieunsadtisfie overnightd overnight. To .s aTfego suaafegrd uayourrd syourelf asgelfa instag atheinstm the, m, estabelishstab alishnnua annl contraual contracts rathercts rather than thmaonth-to-n month-to-monthm onthdeals. d Iena lits.s Iena itrlsy early days,d Saaylesforces, Salesforce almo astlmo wentst w oentut of o ubut ofsines business dues todu thee to i nstheta bilityinstability of its of its month-to-month-to-month month subscriptiosubscription mond elm.odel. AgainAg, amine,a suringmeasuring churn churn helps helps your yourstartup sta rtupmak ema akne oabnjectiv objective e measmureeasmureentm ofent your of yourbusines business ands hoandw hoit’sw evolving it’s evolving. Som. eS ocmhuer nc his urn is healthhey,a espelthy, cespeiallyc ifia thelly if c theusto cmuserstom youers lose you alosere n aore longer no longer a goo ad goo fit fod r fit for your proyoudur proct duor fctu tor fureu roaturedma roapdma. p. 4. Commitment4. Commitment Here’Hers a seriee’s a sserie of qsu of qestionsuestions to as stoess as cosessmm coitmmmentitm: ent: • Are your customers involved in pilot programs?• Are your customers involved in pilot programs? • Are the pilot programs paid or free?• Are the pilot programs paid or free? • What are the terms of these programs • What are the terms of these programs — month to month, one — month to month, one year, or three years?year, or three years? Let’s Lciret’csle cir bcaclek btoac kthe to ithemport imaportnce aofnc es eofcuring securing ann uaannl couanl trcoacntstr. acts. BottoBmotto linme, theyline, theytransl traatensl inatote strongerinto stronger produ proct ducommct coitmmmenittm froenmt froyoumr your custocmuserstom. ers. MostMo custost cmustoersm woersn ’wot mnove’t m toove an to an anun anal nusubasl csriptionubscription until until they theyknow k nyoouwr yoproudr uproct dsolvesuct solves a key a p kaeyin ppointain point that wthatill m wostill m likostely li cokelyn co-n - tinueti bneingue b eingtroub trolesoubmlesoe. Som eif. youSo if c youan se cancure se ctheseure these contr contracts, aitcts show, it ss hows your yoproudr uproct dhuasc tlong-ter has long-term valmue v. aBetterlue. Better still, upfront still, upfront recurri rencgurri panygm pentayms ents are grearea t forgrea yot forur yostaurtr uspta’srt cuapsh flo’s cash flow andw revenue pre and revenue predictabdiilitctaby. ility. OnceO younce’ve you compile’ve compiled sucdces susc storiecess stories or cas seor stucasedie stus thdieats w thilla tregiste will register r with wneithw neprospew prospects, ucsets, the usem the to mencour to encourage naegew ncuestow cmustoersm toers pa toy fopar y for an anannu aanl nsubuascriptiol subscription soonn sooer, andner, toand migr to amigrte maorete m ofore your of yourcusto cmusertos mers to antonua anl ncouanltr coactsntr asacts yo asu gyoo.u O gnoe. Opotentialne potential migration migration path pmathight m bighte be month-to-month-to-monthm onthcomm coitmemmnitmets fornt sthe for firthest 10firs tc u10sto cmustoersm, 3+9ers, d3+9 d eals (ea als (a three-three-monthm onthcomm coitmmmentitm thentat rethnaet wresn forew sni forne nimnonthse months if not if c notancele candcele) d) for thefor n theext 10–next2 10–0 cu2sto0 cmustoers,m theners, thenswitch sw toitch an tonu anal-onlynual-only contr coacntstr foracts al forl all custocmuserstom beyoers beyond thndat ththresholat threshold. d. SomeSo mmarek metars aketres very are verycrow cdrowed, daend,d poteand npotetial ncutiastol cumserstom wersill swigilln sign up forup pro fordu proct dupilotct spilot froms frommany ma differentny different startup stas.rtup It’s s.co Itmm’s coonmm toon se toe see the stheame s acmuseto cmuserto logosmer logos on the on refere the reference linscets oflis tdifferes of different stanrtupt stasrtup in s in 4343 4343

Chapter Chapter 3 3 a marak maret. Inveket. sInvetors satorres awarea reaw thareat ththeseat these early earlycusto cusmertosm aerres testiare ntestig ng your yourprod uctpro danuctd th anadt nthoneat n ofone the of s ttheartu sptasrt proviups providing dproingduc prot ducare mat areki nmag king much monemuch money. y. A crowA crowded mdeadrk meta lerkadset le toads a rotou agh ro ruughle ofru leth ofumb th umbto apply to a pplywhe nw ihet n it comescomes to su tobs criptionsubscription price pris. Evecesn. tuEveallnytu, eanllterpriy, enterprises shoulses sdhoul be dp abyien pg aying at leastat leastsix fig sixure figs uanrensu anallyn uforally a forprod a ucprodt, wuchilet, w smahilell sma to mll etod imumed-siumized -sized businebusinesses shossesu shold bue pld bayie pnga ayitn legas att lefivase.t five. 5. V5. iralitVirality, or y, oWord of Mouthr Word of Mouth WordW oford mouth of mouth tells yotellus ho yowu hoyouwr yocompur canompy acanqyu acireqs unireews cusnewtomer customers. s. Ask yoAskur syoelfu:rself: • Does all of your prospect generation require outbound sales • Does all of your prospect generation require outbound sales and marketing efforts?and marketing efforts? • Is prospect generation created by a mix of outbound sales and • Is prospect generation created by a mix of outbound sales and marketing efforts, as well as customer referrals?marketing efforts, as well as customer referrals? • Are people starting to search for solutions in your market?• Are people starting to search for solutions in your market? OnceOnce a high a highperc entagepercentage of sa ofles saisle ges inser geatenerd afrotedm froeitherm either organ orgic anic inbouninbound leadd sle, acusdstomer, customer referr referrals, oral s,b othor ,b itoth’s ,a its’sig an syoigun mayouy mahavye have achievedachieved prod uproct/mduacrt/mketa fitrket. Bu fitt. But this oftethis nofte mena nms eyoanusr yocoumr pcoanmyp wanilyl will neednee to rampd to ramp up it sup go-to- its go-to-markmetar effortsket efforts to han todle han thedle vol theum vole.ume. IndustryIndu cloustry dclou solutiod solutions canns oftecan nofte genn ergeatener waorte dw-of-ormd-of-outhm oviralituth virality y quickquier cthakern thahorizon horizontal clontaudl clo solutioud solutions. Forns . insFortan inscet,an Veevce, aV eevSysate Smyss tems quicklyqui beccklya mebec aanme ind anu sindtry-ussttry-andastardn daCRMrd CforRM the for la therge lsatrge phastrm phacarmeutiacceal utical companiecompanies, sinces, si bunceyer bus inyer thats in sthatpac es pofteacen ofte comnp caorem pnoteare sn onote ssol onutio solnus tions to ustoe. Vuseeve. aV eevSysate Smysste’ promsdu’ proct duroactd maroapd mahasp bheeasn b greeena tlygre iantlyflu einncflued enced by otherby other prod uproctsd duecstsire dde sbirey thod byse i thonitialse in buitialyers bu ofyers their of CtheirRM C solRMutio solnsutio. ns. Putting ItPutting It All TAll ogetherTogether AfterA yofteru’ve yo wu’veork wedor throkedu throgh theugh five the poi fiven tpois ountlits noeudtli abneovd abe, itov’s eim, itpor’s imt por- t - ant toant identify to identify where where your yocoumr pcoanmyp santany dsst anond sthe on follothe wfolloingw proingduc prot duct continuucontinuum: m: 1. You’re at the product-testing stage and you’re still defining 1. You’re at the product-testing stage and you’re still defining your core business.your core business. 4444 4444

MeasuriMeansurig Prodng Product/Muct/Market Fiarktet Fit 2. You’re getting early validation that your product solves a 2. You’re getting early validation that your product solves a potential pain point for a defined period of time.potential pain point for a defined period of time. 3. In all likelihood, you have achieved product/market fit.3. In all likelihood, you have achieved product/market fit. It’s criticIt’s acriticl thaatl yothuat ho yonuestly hon estlyscore s wherecore where your yocompur company isa nyin reg is ina rdreg to ard to thesethe threese three prod uproct dstuacgest st.ages. Stage 1: Product TestingStage 1: Product Testing If youIf syocoreu s cloorew olonw m oons tm ofo sthet of fivethe poifiven tpois inn tthiss in athisrticl aerticl, theen, theyounr your productpro disuct in the is in pro thed uct-teproduct-testings sttingage st aanged you and’re you still’re d stillefini dnefinig yonugr yocorue r core businesbusiness. You’s. reYo uu’singre u singthe labtheor laabtoryora oftory your of yourlocal loctechal techcomm counitymmunity to to test yourtest youridea ibdeforeea before it’s re itad’s yre toad solvey to solve any neeanyds nee ofds co ofm pcoanmiespan yoiesu you don’t daolren’t adyalre kandyow k.now. Your Ynourext nstepext stepwill bweill to b est atort stwaorkingrt working with withcusto cmustoersm outsideers outside your your immediimmateedi naettew norketw toork va tolida vteali dayourte yourprod uproct danucdt getand real get mrealark metar feeketd fee-d - back. Dbaockn. D’t hireon’t s hirealespeople salespeople at thi as tpoi thins tpoi. It snhoult. It sd houlonlyd bonlye the be fo theun derfouns ders w. After. A afterll, the all , fotheun dfoersun dhersave hthavee the tryingtrying to sec tou resec cuuresto cmuserstom righters rightno now best perspectivebest perspective on the on pro thed uproct danudct the and pro theb lepromb alenmd s ahoulnd sdhouln’t hdanve’t htoao ve too muchmu difficch duifficlty auttrltyac atingttrac etingarly- eadarly-opteradopter custo cumserstom if ersthe if p theain pointpain point is rea il s real enoughenough. You .ma Youy eventumay eventually daecillyd deeci yodue nee youd nee to chd toange cha yongeur yoproudur proct duor ct or the mtheark metar youket’re t youa’cklingre tackling. . Stage 2: Early ValidationStage 2: Early Validation If youIf scoreyou score high highon o nolyn otwnoly ortw threeo or three of the of five the points five points in this in a thisrticl aerticl, e, then theyourn yourprod uproct dsolveuct solves a psa ian ppoiainn tpoi forn ta fordefine a defined period period. Spend. Spend as d as muchmu timche tiams youe as cayoun wcaithn wpoteith npotetial ncustotial cmustoers,m geters, fee getdba feeckdba onck you onr your productpro,d auctnd, tweanda twek it aukntil it uitntil solve it ssolve a mse aa nimnegfaniuln pgfauinl ppointain point for w forhic h which therethere is not i sa not satisf a sacatisftoryac atoryltern aalterntive asolutiontive solution avail abavleail onab lethe on ma therk maet. Irtk’s et. It’s also tiamlso tie to hire tme to hire two sawleso sarepsles. reps. perforperform wellm, wtheelln, theyourn yourprod uproct disu cresont is resonatinga itin ng in If yourIf yoursales peoplesalespeople your yomaurrk maet arnketd yoanud syohoulu sdhoul considerd consider hiring hiring more m soreales srepsales . repsIf neithe. If neither r rep perforrep performs wellms, wellthen, thenit’s prob it’s abprobly aab signly a thsignat yothautr yoproudur proct/dumact/rkmaet firkt et fit isn’t quiteisn’t quite there there yet. I fyet on. eIf repone perfor rep performs wmells awnelld oanned dooesne nd’oest, thenn’t, thenit’s it’s likelyli ak elysales rep perfor a sales rep performancmae isnscuee is. Msuaek.e Ma aquick chke a quick changea. nge. 4545 4545

Chapter Chapter 3 3 Stage 3: Product/Market FitStage 3: Product/Market Fit If yourIf yourproduct product scores scores high highon the on four the fouror five or pointsfive points in this in articlthis article, e, then thenin all in lik allelihood, likelihood, you haveyou have achieved achieved product/mar product/market fit.ket As fit. w Ase’ve we’ve discusseddiscussed abov above, thise, meansthis means your yourproduct product is solving is solving an important an important recurringrecurring pain painpoint point for five for orfive six or customers six customers who whodidn ’tdid previously n’t previously knowknow you, andyou, who and whoare spending are spending real money real money to use to it. use Annual it. Annual contract contract valuesvalues are meaningful are meaningful for the for type of the type of customer you’re customer you’re targeting, which targeting, which breakbreas downks down this way:this way:at least at least$100 $10,0000 ,000for enterprise for enterprise customers, customers, at at least least$25,000 $25,000 for midmar for midmarket customers,ket customers, and atand least at least$10,000 $10 for,000 small for small business customers.business customers. At thisAt stagthis estag, yoeu’, reyo alsou’re realsoad yre toad yin tove sitn vein sgo-to-mt in go-to-marketa effortrket efforts to s to accelerateaccelerate grow groth. wCthom. mCounmimcatiounincatio is funn isd amfunednamtale tont theal to e thentire e nprotirec epross. cess. At NorweAt Norwest Venstt uVreen Ptuarertn Peras,rt nweres,’ve w foe’veund fo thundat itth’sa ct ritiit’sca clriti forca el nforterpri enterprise se cloudclo coumd paniescompanies to st atort stbyart c rebya tingcrea ating cu sato cmuserto amdervi saorydvi sbooryar dbo anard d and involvinginvolving the b theoard b oina rdthe in d theevelop developmentm ofe netac ofh ene acwh pronewduc prot ducor prot orduc prot duct iteratioiteration. Testn. aTnestd obtanda iobtn feedain bacfeedk bacfromk frothems ethe easrlye ecuarlysto cumstoersm aser thes asy they use theuse pro thed uproct danucdt teansdt oteust tyo ouutr yodemour dsemo in res ainl tiremael .ti Dmoe a. Dweeklyo a weekly gut gut checkche toc evk toalu evatealu hoatew hosentiw msentientm ise ntret insdi trengn.di Sntartg. Ssmatartll sma andll wandork w oorkut out the kintheks kinbeforeks before scalin scgali up tong u yop tour yooverur aoverll cusallto cusmerto basmere bas. e. MostMost succes successful sstartful usptarts areup sfou arend fouednd bye dso bmy eosonmeeo wnhoe wis hoobs ise ssobsed essed with withcreati cnreatig an gb ettera b ettercusto cusmerto mexerperie experience, nwhoce, whounder unstderandsst andsthe the industryindu’sstry pain’s ppoiainn tpois andnts da andily dachilyalle cnhgealles ninsgeides ins andide o andut. Iof yout.u If c yoanu t acanp tap into theinto the prob lemprobs thlemats a threa tdrivi aren drivig yonug yor cusutor cmuserstom crersazy c arand szy aolve thend solve them, m, the marthek maret isk ripe foret is ripe for your yotakiunr tga.king. At theAt begithe nnbegiingnn ofin gthis of cthishapte chapter, I mr,e nI tiomennetiod ntheed rithesks riassskoc s assiateod ciated with withnot properly not properly prep aprepringa forrin ga fortes ta, itenterviest, interview, or wm, eetior mneetig. Itn’sg c.riti It’sca cllritiy cally importimportant forant startup for startups to tas ktoe thitakse c thionsc eptcon ctoept he toart he andart aandpply a pplythe rigo ther rigo- r - ous asousses assmesesnstme ountlinet oudtline aboved above to deter to determinem winhethere whether or not or there not there is a is a goodgoo proddu proct/marduct/market fitk.et fit. You canYou ma canke ma ank uen ansuit unabsuitle proableduc prot ducfit thet fit ma therk maet, burkett ,yo buut c yoanu n cevean nr ever makema theke m theark meta fitrk etan fit u nsanu uitnsabuleit proableduc prot.duc Thit.s isThi wshy is lwargehy l acrgeom pcaoniemps anies spendspe mnilliod mnsillio ofn sR &ofD Rd&ollarD dsollar on s eoxtenn esxiveten smaiver kmaet raknaetly asnais, lyussis,in g using methodologiemethodologies rangis rnagngi fromng fromsurvey susrvey ands oandnlin oen anlinalytie ancsalyti placstfor plms,atfor tms,o to analyst analyst meetimneetigs andngs fo andcus fogrocus upgros. ups. 4646 4646

MeasuriMeansurig Prodng Product/Muct/Market Fiarktet Fit RemeRmbemeremb thaert mthostat m coostmp coanmiespan haiesve hbauvedgets bud forgets pro fordu proctsdu thctats solvthate solve their theirtop p topain pointspain points. Often. O sftentartup stasrtup builsd b produild uprodcts prioructs priorto asse toss asseingss thinge the targetta crgetusto cmustoers’m poteers’ npotetial nneetiald nees. Spends. Spending dtiimnge tiwmithe wcuithsto cumserstom wersho who representrepresent a ma ark maet wrkithet wsuithfficient sufficient size shoulsize should be dd obnee d priorone priorto buil tod binuilg ding productpro.duct. You dYooun’ td hoanve’t hmaveillion msillion of Rs &ofD Rd&ollarsD dollars, but , yobuut dyoo,u hopef do, hopefully, huallvy,e have your yoeaurlyr ecaurlysto cmuserstom. Inersvolve. Involve them the in myour in yourprodu proct duitercta tioiternsatio annsd theandy they will bwecillo bmeec ommoree m inorevested invested in your in yoursucc esssucc. Iness turn. In, turnthat, mthatea nms etheyans ’theyre ’re morem liorekely li tokely give to yougive the you level the levelof rich of fee richd bfeeacdk byoacuk n yoeeud n toee tda ktoe yotakuer your product toproduct to the n the ext levelnext alevelnd w anind your win your markmaet. rket. 4747 4747