PMF — Product-market fit
What is product-market fit?
Product-market fit is the point at which a product solves a problem well enough, for enough people, that growth stops depending on pushing. You recognize it because demand pulls the team along rather than the other way round.
Also: PMF
It is not a switch
People talk about PMF as a state you reach and keep. In practice it is per segment: you can have fit with five-person support teams and none with fifty-person ones, and you can lose it when the market shifts. Asking "do we have PMF?" without saying for whom has no answer.
Why it matters
What it means for a SaaS
Because it decides what gets worked on. Before fit, nearly all effort should go into understanding and adjusting; after it, into growing what already works. Teams that accelerate before they have fit hire salespeople to sell something that does not yet retain, and that is the most expensive way to find out.
Product-market fit in detail
The signals that count
Retention that stops falling over time (it does not have to rise), customers telling other people without being asked, and users complaining when something breaks. The last is the most reliable: nobody gets angry about losing something they did not care about.
The ones that mislead
A spike in signups, a waiting list, and the reaction to a launch. They measure interest, and interest is free. Fit is measured in what people do in week four.
The usual question
"How would you feel if you could not use this tomorrow?" If fewer than 40% say very disappointed, it is not there yet. It is a rough rule and a fairly useful one, especially when you segment the answers.
Frequently asked questions
How do you know you have product-market fit?
From retention, not from growth. If cohorts flatten instead of continuing to fall, there is something. If people also recommend it unprompted, there is quite a lot.
Can it be lost?
Yes, and it happens. The market changes, a better alternative appears, or the segment that fitted stops growing. Which is why it is worth looking at per segment and regularly, not once.
Related terms
These usually come up in the same conversation.
ICP — Ideal customer profile
The ideal customer profile describes the kind of company the product works best for: its size, its sector, how it works and what problem it has. It is who you should be selling to if you could choose, which is not always who you sell to.
Churn
Churn is the percentage of customers, or of revenue, lost in a period. It is the metric that tells you whether a subscription business is growing or just standing still: with high churn, every new customer only fills the hole left by another.
NRR — Net revenue retention
Net revenue retention measures what a group of customers bills today against what they billed a year ago, counting what was lost to cancellations and contractions and what was gained from expansion by those same customers. It excludes new customers: it measures what the existing base does.
TTV — Time to value
The time between a customer signing up and the product solving, for the first time, the problem they paid for. It counts that first result that matters to them, not setup time or the first session, which are earlier steps and do not guarantee a renewal.
Runway
Runway is how many months a company can keep operating on the money it has, at the current rate of spend. It is calculated by dividing available cash by what gets burned each month, and it is the figure that orders every other decision.
LTV — Lifetime value
LTV estimates how much revenue a customer brings across their whole relationship with the company. At a SaaS it is approximated by dividing average monthly revenue per customer by the monthly churn rate: the less people leave, the more each customer is worth.
