Understanding product-market fit for tech and SaaS start-ups


Recognising whether your product is well placed in your chosen market.

Knowing whether or not your business has achieved product-market fit is critical. Determining if you’re in the right market with your particular product (or service) that suits or fits the market appropriately and satisfies a need in that marketplace will result in the long-term viability of your company.

But, how do you know? Can you actually measure it effectively? Some say there are ways to measure it, others say the scale of measurement doesn’t quite capture all the right data.

What is product-market fit?

Product-market fit demonstrates that you have a product capable of satisfying a need within a marketplace. It’s where a business knows its target customers are not only buying the product but sharing with others about the company’s product that is positively affecting that product’s growth and profitability.

Methods to measure product-market fit

There are two types of data when looking at measuring product-market fit:


  • When your existing customers spread by word of mouth about your product.
  • Reviews in publications or online about your product.


Measuring product-market fit will vary from business to business. One popular quantitative method of measurement frequently used is the Sean Ellis survey.

Adopting this survey, your customer base is asked to rate “How disappointed would you be if [company] product went away?” Customers are given three options:

  1. very disappointed
  2. a little disappointed, and
  3. not disappointed.

If 40% respond positively, then you’ve most likely achieved product-market fit.

However, others believe there’s a caveat to these results. For example, Brian Casel, founder of ZipMessage, said in a recent podcast in reference to the Shawn Ellis product-market fit survey,  Assessing Product-Market Fit, How to Find a Mastermind and more with Brian Casel, “I always want to stress to be sure to couple pure data [with qualitative] from surveys, especially if you have enough responses with meaningful data from actual conversations…because you are going to find much more data from the customers and the actual language, their body language, than just the data.”

Why is product-market fit important?

In Product-Market Fit (2022) What, Why and How?, Gus de Backer explains that you should “always strive for PMF (product-market fit) first before scaling up your business, otherwise you are just throwing money away…the problem is, if the market doesn’t want your product or service, then all of the money you put into marketing and sales is basically wasted money.”

Understanding how your customers perceive your product before seeking or spending too much investment to further scale is a necessary step, and one that can save money and aggravation further down the growth journey of your business.

How do you achieve product-market fit?

Finding the right way to measure product-market fit will differ for every business. In his book, The Lean Product Playbook, Dan Olsen offers a high-level method that can help get your business started by using the Product-Market Fit Pyramid framework (‘Product-Market Fit’, Product Plan):

  1. Determine your target customer
  2. Identify underserved needs of that customer
  3. Define your value proposition
  4. Specify your minimum viable product (MVP) feature set
  5. Develop your MVP
  6. Test your MVP with customers

Industry Insight

Speaking with Yohan Trougouboff, who runs Early Adopters Hub, an accounting tech hub that helps new apps get product-market fit, he offered this insight:

“I think there is a saying that it’s hard to tell when you have product-market fit, but you definitely know when you don’t have it. You can qualify it when it’s spread organically by word of mouth, for example. There is organic growth - when your growth is not marketing-led, when the users really feel it and it’s not driven by other things. It can be benchmarked against your own history or your industry.

Another way to look at it, as a whole and an overall picture of the business, if you need to raise money because you know exactly where that money is going into the production of your product, and you know what the outcome will be, then you know you’ve achieved product-market fit because you’re filling an exact, defined pipeline. That’s a true indicator.

In theory, you should have product-market fit before you raise too much funding. That’s why it’s important to know and understand. It’s a hard thing to achieve but is fundamental to the business. The business isn’t sustainable unless it has achieved product-market fit. There are some businesses, take B2B for example, where it can be harder to validate because they have a low customer base.

I like the analogy of building a fire. It takes time to build it carefully, balancing to build the fire slowly and safely to see that it will burn. Or, you throw some wood down and add petrol to it and it burns big and bright – it’s not safe or stable and will burn out quickly. That is understanding the stability of your product in the marketplace.

Knowing your customer and the friction points can help you make sure your product answers those needs and the needs in that market…some businesses get pretty far before the product death cycle or spiral kicks in and it’s not a pleasant journey from there. It’s a vicious cycle of reactivity. Understanding if you have product-market fit can avoid all that.”

Yohan goes on to say, “There are a lot of start-ups that shouldn’t have been built in the first place. Founders were maybe not passionate about the solution or their ego got in the way and didn’t listen to feedback and didn’t really offer a real solution – they didn’t have that all important ‘fit’. Ultimately, they failed for that reason.

There are other success stories where they were market disruptors, like Xero for example. They solved a real problem, and their product offering was a leap forward. It got early traction because they listened to customers very closely. They respected customer feedback and solved their problems. And they’ve been able to scale globally because of this.”

Save yourself time and money

Listening to feedback early on in the process as to how much value your product actually provides to your target customer in that market will help you get product-market fit, but asking the right questions will help you get there.

Have you tested your product-market fit using the Sean Ellis survey? How well have you achieved product-market fit?

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