Product Market Fit

How do you know when you have product-market fit? The classic answer is that, if you’re asking, you don’t have it. What tends to happen when you have product-market fit is that people start using your product so much that you almost all of your time will be spent on just trying to keep it online. You stop thinking about new features. You stop thinking about your conversion through funnels. You stop thinking about how to get better distribution. And you are saying to yourself: “I have no idea how I’m going to serve the people who are coming to my product tomorrow, and I’m pretty sure that we’re going to die because we have too many users.” The difficult reality of this is that almost no one achieves product-market fit.

However, there are some important metrics you can follow to help you figure out if you’re on the right path:

  1. Cohort retention curves that flatten (stickiness)
  2. Actives/reg > 25% (validates TAM)
  3. Power user curve showing a smile – with a big concentration of engaged users (you grow out from this strong core)
  4. Viral factor > 0.5 (enough to amplify other channels)
  5. DAU/MAU > 50% (it’s part of a daily habit)
  6. Market-by-market (or logo-by-logo, if SaaS) comparison where denser/older networks have higher engagement over time (network effects)
  7. D1/D7/D30 that exceeds 60/30/15 (daily frequency)
  8. Revenue or activity expansion on a per user basis over time – indicates deeper engagement / habit formation
  9. 60% organic acquisition – CAC doesn’t even matter!
  10. More than 40% of your users would be “extremely disappointed” if they could no longer use your product
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