Product market fit is critical for any successful SaaS business.
It's a measure of how well your product solves an existing customer need and whether or not there is demand for it.
When you have a strong product market fit, customers are more likely to purchase and use your product, leading to steady growth and profitability.
One of the biggest risks of not getting your product market fit right in a SaaS company is that you end up with a product that doesn't meet customer needs.
This can lead to lacklustre customer acquisition, lower customer satisfaction, decreased revenue, and high customer churn — all which are critical to a successful business.
Without proper product market fit, you risk becoming one of the statistics in the 75% failure rate of SaaS company startups.
This is why you need to build something absolutely remarkable!
Defining your ideal customer profile is an important part of finding product market fit. It helps you identify the target audience for your product, so that you can focus your efforts on marketing and selling to them.
Start by researching the people who are already using a similar product or service - even if they’re not using yours!
All this information will help inform how you define your ideal customer profile.
Knowing who you’re targeting will help you to build a product that meets their needs and focuses on their wants. Identifying and understanding your target customers helps you to craft messaging that speaks directly to them and ensures both your product and marketing strategy is set up for success.
Make sure you have a clearly documented ICP that your team intimately understands.
To accelerate your growth, and minimise massive potential cash burn, it’s critical that you create something remarkable that your ICP needs and wants.
The common path for a founder today, is to establish their idea; then build their product;
and then assume if they hire amazing sales and marketing talent; the business will just take off.
This is a sure-fire way to burn through your capital and risk going to zero.
Today, you need to literally do the opposite!
Start off by identifying the market you want to go after. Then find out exactly what problems they need solved.
To do this, start by creating a database of contacts that represent your perfect customer.
There are loads of tools and platforms that can easily help you create a list of target accounts.
You can subscribe to data platforms such as ZoomInfo, Cognism, Lead Genius, UpLead, Lusha, etc.
Once you’ve identified your target customers you can easily connect with them by LinkedIn and email.
Tools like Dux-Soup connect to your LinkedIn account; then by uploading your target accounts, will systematically and automatically start creating connection requests.
Now that you have a database of you target accounts, you need to build some relationships with at least 20 prospects initially and start spending hours chair-siding with those prospects; learning every intimate detail about their problems; and how your solution will result in something they’d pay for.
This is essentially like conducting a highly engaged, long-duration and qualitive focus group.
You’ll be surprised at how willing many business owners will gladly support you during this research phase.
Especially if you offer them future incentives to use your product and beta test.
If you skip the above steps prior to building your MPV, proceed at your own peril 😊
In essence, an MVP is the first version of a software product that contains only the necessary features to test customer demand and validate whether or not there is a fit for your market.
The idea behind an MVP is to quickly create a prototype of your product before investing too much money in development, so you can determine if there’s a market need and avoid wasting time and resources on something that won’t take off.
Many people debate whether an MVP is just a prototype that’s not fully customer ready; or something that you can actually start selling and creates actual value for a customer to start using right away in their business, albeit in a limited use case.
In my opinion, an MVP needs to be something you can actually start selling!
Make your investment into your MVP as small as possible.
Don’t try to over-complicate or over-develop just yet.
Focus on a small set of use cases that represent the biggest problems your customer needs solving.
This gives you an opportunity to start collecting valuable customer feedback early, meaning you can course-correct sooner and increase your chances at achieving customer value, with the smallest possible investment.
By the way, don’t ignore the importance of great UI design. It’s not enough to just have a product that people find useful - you need to make sure the user experience (UX) is enjoyable and easy to use.
This can be done through thoughtful and intuitive design, as well as paying attention to how users interact with your product.
With a good understanding of what makes your customers tick, you can create a UX that they love and keep coming back for more! Ultimately, having an effective user interface will help enhance product adoption.
You don’t necessarily need to hire a gun UX designer full time at first. Get onto UpWork and hire a contractor.
Ok – now you have an MVP that was purpose built to solve some very specific problems and use cases your prospects communicated need to be solved (as opposed to having worked off assumptions that may have been way off the mark).
It’s time to now go back and visit those prospects that so generously invested their time in helping you define what should be in your MVP.
Demonstrate your solution and try to sell them!
Offer them a discounted subscription for being so helpful during the initial stages of research.
Remind them (and re-validate) the specific problems they needed solved, and how your platform was purpose built to help them become more successful in their own business.
Many will likely say something like, “it’s good, but I just need this one extra feature”.
That’s ok. They’ve just given you a strong buying signal or agreement to purchase, subject to making some minor modifications.
You’re on the home run now and are super close to monetising all your hard work and investment.
Keep iterating and keep going back to your prospects; and continue this process until they eventually pay something for your product.
Once you’ve signed up 50 paying customers, you’ve achieved a base line of product market fit, and are well on your way to building a lean, capital efficient SaaS platform.
Give yourself and your team a huge congratulations and celebrate this incredible milestone!
Moving forward, your innovation pathway needs to become more sophisticated as you scale up and execute on product market fit best practice.
By the way, innovating your Product Market Fit never stops. Trust me, it’s a journey, not a destination!
Acquiring new customers via paid advertising is so expensive that your unit economics will unlikely never stack up.
That’s why your product needs to be so remarkable, that your customers will help promote and sell for you; and bring your blended customer acquisition costs down to a viable level.
Unit economics in marketing and customer acquisition is a concept that relates to understanding the cost-benefit of different strategies for acquiring customers.
It helps you figure out how much you can spend, and on which channels, to generate new customers or retain existing ones; and to do so profitably.
The unit economics formula looks at the total costs associated with acquiring a customer (such as paid advertising, marketing, promotions, sales development reps, etc.), subtracts those from the revenue generated by the customer over time, and then divides that by the number of customers acquired.
This can be measured via LTV/CAC ratios, CAC payback periods; and there are benchmark guidelines for different industries and growth strategies.
This gives you an indication of whether or not your overall spending is worth it based on what you earn back in return.
To maximize profits, companies should focus their efforts on setting up campaigns that have high returns relative to their investment.
Successful SaaS companies have a common trait – they build a massively loyal customer base that love promoting your platform to other business owners in their network; and will gladly participate in case studies that are absolutely gold for driving organic sales growth.
Do this well, and you’ll spend far less on customer acquisition costs versus your competitors; and create an extended cash runway that will keep you operating super lean.
Lastly, don’t deliver big new Epics and features in waterfall.
You might be practising Agile, however product teams often focus on delivering big bang features that take way too long to deliver.
Agile software development is a method of developing software that emphasizes on iterative and incremental development, with the ability to respond to change quickly. It promotes adaptive planning, evolutionary delivery and evolutionary development.
Agile methodology encourages collaboration between self-organizing, cross-functional teams throughout the entire project. The Agile Manifesto was established in 2001 as a set of values and principles for developing software that prioritize customer satisfaction by delivering working solutions early and often.
It also highlights other key aspects such as communication, technology advancements, quality assurance, simplicity and business value.
All these factors create an environment where everyone involved in the process can successfully reach product market fit faster than ever before.
Whilst agile development is well understood by most founders and CTO’s – Product Owners often get caught up in scoping Epics and releases that are far larger than they need to be.
I highly recommend breaking down your Epics into the smallest possible components.
Identify small customer use cases, horizontally, that deliver value quickly!
A small feature released in 6 weeks, that delivers some value; is far better than waiting six months to ship a large package of features!