The life of a startup can be divided into before and after product market fit and within these two phases there a few questions you must answer.
- Do you have a problem worth solving? (Must have!)
- Will customers pay for this problem being solved? (viable)
- Can it be solved? (feasible)
2. Product Market fit:
Product market fit indicates that your startup is in a good market with a product that can satisfy that market.
• Once PMF is achieved then the growth, scaling and optimizations of your business can begin in earnest.
The Leading Indicator Survey
The Leading Indicator Survey is a Product Market Fit Survey Created by Sean Ellis (who popularised the term product market fit) that measures how ‘sticky’ your customers are.
The survey asks users “How would you feel if you could no longer use [product]?”
The measure of success is if 40% or more respond “Very Disappointed.”
The Net Promoter Score
The Net Promoter Score is then used to gauge a customer’s overall satisfaction with a company’s product or service and the customer’s loyalty to the brand.
• “How likely is it that you would recommend our company/product/service to a friend or colleague?”
Scoring works on a scale from 0 – 10: 9 to 10 indicates a “Promoter”, 7 and 8 are labelled
“Passives”, 0 to 6 are labelled “Detractors”.
The combination of these two questions in the leading indicator survey data tells you what people say they would do.
The next step is to support that with data about what they are actually doing!
Leading Indicator Engagement Data
Engagement data (typically at a small scale) that tells a story that the user is getting meaningful value out of the product
This data must align with:
a. Events or actions, not viewsb. The core purpose of the product
b. The core purpose of the product
Did you reach Product Market Fit?
There are various methods for measuring PMF but we believe that Retention is the only metric that matters.
You can use the retention curve to plot whether you’ve achieved Product Market fit.
• Plot the % active over time (for various cohorts) to create your retention curve.
After Product Market Fit
Once you have a steady stream of users coming in the front door you can begin to run experiments and understand product market fit and optimise for scaling and growth.
Investors will begin to stand up and take notice of you at this point when you can demonstrate a substantial market size and a product that fits then you will be primed for investment. You’re now entering the growth phase of idea creation, testing & validation.