“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
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
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
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 [email protected] 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.