Revealing The Most Awesome Means To Discover Product Market Fit

After assembling the right founding team, discovering product market fit is the most critical aspect of a startup.

Do this correctly, and you will thrive. Make one or two mistakes, and it is over.

Band-aid

The scary truth is that most new companies have no idea how to find their product market fit. For example, a graduate of a famous accelerator program with a few million dollars in seed funding will spend most of that buying ads to mask the fact that they have no real market.

Fake vs. real growth

Most investors of SaaS companies give a model where sales are generated by website traffic. For example, some percent of website visitors will subscribe to the service, a smaller percentage will churn, and the others will become marketing leads. This doesn't seem right.

Old ideas made new

Imagine if you opened a running shoe company in 1964. Who are your target customers, and how do you reach them? Department stores will not carry your shoes because the incumbent shoe companies will not allow it. So you must load up your car with shoes and go where your customers are.

Nike

Phil Knight did precisely that when he launched Nike. After being rejected from department stores, he visited high school track meets and sold shoes from the trunk of his car. Why? Because that is where his customers were. Later, he used mail-order and eventually had retail outlets. However, product market fit was discovered with long days of hard work.

Reach

The most critical part of product market fit is reaching customers where they are. For example, landscaping services canvas upper-middle-class neighborhoods, while payday loan providers open in low-income areas. However, most software companies with early funding believe they can bypass this fundamental truth of business.

Discovery

Product market fit for a B2B SaaS company is best discovered after hundreds of cold calls to potential markets. For example, offering an improved version of the spreadsheet may appeal best to accountants, financial personnel, or business leaders. Instead of guessing with ads or website copy, pick up the phone and call 100 prospects from each field with a sales pitch.

Voting with dollars

When you make these calls, ask for some money in exchange for discounted access to the future product. You cannot trust people telling you it is a good idea or that they would love a product like that unless they pay you something first. Then, the group that voted with the most dollars is your market.

In the early days, Phil Knight took pre-orders for all sales. This not only solidified the market for the shoe but also paid for the production cost.

The product side

Once you discover your market, you must frame the product to suit the customer. For example, Phil Knight added navy blue to the shoe colors once they learned that non-athletes were also wearing their shoes. He discovered that it went better with blue jeans, the preferred clothing choice of young people at the time.

Framing not changing

Notice that Phil did not redesign a shoe made for athletes to suit the public. Instead, he made a small change to better frame it for this most profitable customer base. Later, he discovered that athletes were never the customers. Instead, they were the promoters. When fans saw their favorite track star, quarterback, or soccer player wearing the Swoosh, they, too, wanted a pair.

Conclusion

The proof of product market fit is knowing who your customers admire. Once you know that, sales, marketing, and growth become a linear equation solved with money. Until then, you are in the experimentation phase.