“What Changes to Make After Finding Product-Market Fit (Part 5)”
For all startups, finding product-market fit is far from the end of the journey. In fact, product-market fit is when things only start to get interesting. But after achieving product-market fit, there are several key changes that all startups must make to get to the next stage of development. If those changes are made effectively, a startup can go from product-market fit to product-market dominance.
On this week’s episode of the Midstage Startup Momentum Podcast, startup coach Roland Siebelink reviews all of the necessary changes following product-market fit. Being proactive in making these changes once you’re sure you’ve found product-market fit is what will make your startup attractive to investors and put you on the road to finding product-market dominance.
- Redefine your challenge to mastering distribution.
- Conquer your market by being able to capture latent demand.
- Design your product in a way that has automatic, no-brainer upgrades.
- Ensure healthy margins but don’t yet optimize for profitability.
- Use marketing effectively to drive down the sales payback time.
Hello and welcome back. You have shown a lot of stamina if you’ve reached this section, number seven, in our workshop of what to change after product-markets-fit. You ooze stamina as some of my favorite podcast presenters tend to say. Here, we just pull together our conclusions from the six previous sections.
After product-market-fit, what are the key changes you need to make? Well, first and foremost, start redefining your new key challenge as mastering distribution on the way to product-market dominance. Mastering distribution has a few elements that we went through. First, before you even start changing things, ask yourself, have you really reached product-market-fit? If you apply these prescriptions that we had here too early, your startup will fail.
Assuming that you have reached product-market-fit, you start working towards product-market dominance. One, you redefine your mission around product-market dominance. It’s all about conquering that market before someone else does. How do you do that? By capturing latent demand, not just waiting for people to come to you. Design your product for upgrades and upselling. Ensure healthy, gross margins so that this is a sustainable business over time that is attractive for investors. And first and foremost, drive down the payback time for your sales with more effective marketing techniques. What this brings together is that you’re in a situation moving from a lab or a research project to a full company.
Going through these conclusions once more: Do not start scaling until product-market-fit overwhelms you with demand. So many founders we work with tell us they have product-market-fit. And when we asked them what tells you, you have product market fit, they cannot say; it’s more of a fake-it-until-you-make-it thing. Product-market-fit is not something you fake until you make it; it’s something that you know you’ll have because demand is overwhelming you. If you’re not in that situation yet, then this workshop does not yet apply to you. In that case, please stick with getting to product-market-fit because the prescriptions in this workshop will not help you yet.
If you are overwhelmed with demand, now is the time to start boosting your company toward product-market dominance. It’s about getting in that race - and before anyone else can conquer that market. Anyone else can be other startups in your field or it can also be incumbents that can figure out your product faster than you can figure out the distribution. That’s why mastering distribution is so important because that helps you gain the edge over incumbent competitors.
What that means is that you don’t just look and wait for the customers to come to you. You have to proactively go out and target, capturing latent demand. People who don’t not yet know about your product. People who might not be interested unless you subject them to some marketing. This is a key part in mastering distribution, being proactive about reaching your target customers.
Then design your product for no-brainer upgrades so that when you get them in, even if they don’t pay you that much yet, there’s an automatic upgrade path for when they use it more, when they want to use more features, when they want to have more seats. And this is what drives more and more revenue from your happy customers.
Grow with healthy gross margins but do not yet optimize for full profitability. You have to optimize for growth in order to remain attractive to investors, in order to conquer that whole market. And you cannot yet optimize all the way for profitability, no matter what your finance person tells you.
Finally, use marketing, not just sales. Marketing will help you drive down the payback time, make the time shorter before you can reinvest that money in yet another batch of acquiring more customers. But only if you also focus your marketing people on driving down that payback time, among all the other cool things that they could be doing.
That’s just a conclusion, a summary of the slides that we had. In total, I would say that this brings your company from a pure experiment - from a research proposition - to a full-throated company. But of course, we still want to keep that zeal alive of the startup, make it a cool company to work for. The last thing we want is to turn this into a boring, mature, and mediocre large company. We can wait a long time before we have to get there. And that’s what we try to do at the Midstage Institute: guide startups through this whole journey between full startup stage, then the scale up stage - we talked about mastering distribution in this workshop, but if you grow further, you master your distribution, you’re going to have to master deepening, master disruption, and master defense, and those will be other workshops that we will make available from the Midstage Institute.
In our offerings, we also have several books available, self-help tools. Of course, we offer CEO coaching and cofounder deep dives, team assessments, and most importantly, offsite facilitation so that we can help you and your entire team use these new concepts and learn together so that you don’t have to take care of your team being aligned; that is something that the team can pick up together. If you want more information about the Midstage Institute, then contact us. We have an email at firstname.lastname@example.org or our phone numbers and our website is here and we’re based in San Francisco. But we do have coaches all over the world. Please feel free to reach out and we can match you with the best coach possible for your startup. Thank you for your attention.
Roland Siebelink talks all things tech startup and bring you interviews with tech cofounders across the world.