In principle, you can measure product-market fit with surveys that identify what percentage of your users think your new product is a ‘must-have’.
But more often than not, product-market fit is less about hypothetical numbers and percentages, and more about an in-depth and tangible understanding of who your customers are, and how they feel about you and your product.
Is it creating organic growth, where people spread the word on their own? Are people willing to pay for your product? If they are, you have product-market fit.
In this article, I'm going to explore:
- What to do once you achieve product-market fit
- Four steps to finding go-to-market fit (or GTM fit)
- How to tell if you've achieved GTM fit
The road to product-market fit is often driven by finding customers via word-of-mouth before you build a marketing engine to scale user acquisition.
After you achieve product-market fit
Creating a good product that serves a substantial market is difficult, and only the first of many steps to becoming a successful startup.
Reaching product-market fit is a significant milestone in the life of every startup.
The next and last step is the scale (or growth) stage. During this period, teams start to think about processes and optimization.
When many enterprise startups get to product-market fit, they feel they’re ready to take off.
“We have product-market fit! Let’s grow! Hire sales! Invest in marketing! Spend!”
The unfortunate, frequent reality then kicks in...
Instead of sales taking off, sales just bump along. The number of new customers grows sporadically, painfully disproportionate to the rapid increase in sales and marketing.
Many enterprise startups get to product-market fit but don’t achieve growth and acceleration. Why? Because there’s a 'missing link' between product-market fit and accelerated growth for the enterprise startup journey.
The missing link is go-to-market fit, or GTM fit.
4 steps to finding go-to-market fit
Understand the customer journey
Start by identifying the urgent pain for the Ideal Customer Profile that drives customers to buy now. The GTM fit begins with understanding the entire customer journey (CJ) and starts with the urgent pain for the Ideal Customer Profile and ends when your company becomes strategic to the customer.
This is especially critical for SaaS startups, since signing the contract is only the beginning of the relationship with the customer, and so much of the business is based on renewals and upsells.
The customer journey is the backbone of your entire go-to-market. Everything else is built on top of it.
Fully comprehending the customer journey entails:
- Understanding the customer mindset
- Starting with the urgent pain
- Working out the full customer journey
- Ending by becoming strategic to the customer
Watch on-demand: Be the voice of your customer >
Build the go-to-market playbook
Once you’ve found the urgent pain for your Ideal Customer Profile (ICP) and understand the customer journey, how do you repeatedly find and win ICPs that have the urgent pain?
This is where the go-to-market playbook comes in.
The GTM playbook is a step-by-step, repeatable recipe to find and win deals over and over again. It becomes the blueprint for your marketing and sales teams. It becomes the bible for every new sales or marketing person to ramp. It becomes a powerful tool to align the rest of the team behind a go-to-market plan.
The GTM playbook is the backbone for repeatable sales, and is the core of GTM Fit and unlocking growth.
It’s that important.
What does a GTM playbook look like?
As we've established, the GTM playbook is a recipe to find and win customers over and over again. It has three main components:
- Customer journey stages: From urgent pain, to initial engagement, to win, to hero.
- GTM actions (for each stage): What’s done/said? Who’s involved? Exit criteria?
- GTM deliverables (for each stage): What does the rest of the company do/build to support that stage of the playbook?
Operationalize the Playbook
Unfortunately, the Go-to-Market Playbook doesn’t execute by itself. The GTM playbook needs an owner: the CEO.
Why the CEO? The GTM Playbook cuts across marketing, sales, product, and customer success. It’s the most cross-functional project there is in a startup. The CEO is the only person with the visibility to see across the company — and the authority to get the whole company behind it.
Report download: PMM Perceptions Among the C-Suite >
Moving through the stages of the GTM playbook is like a relay race — passing the baton from one leader/team to the next. Identify which department or function takes the baton for each stage of the playbook.
Like a relay race, the handoffs are where races are won or lost: the baton is either smoothly handed to the next stage, or it’s fumbled.
End-to-end metrics: growth & efficiency
Here’s how you’ll know you’ve achieved go-to-market fit: you’ll just feel it. It feels like pure momentum — like you are surfing on a wave.
You can also see it in the numbers. The two key metrics are net new ARR (which measures the growth) and the magic number (which measures the efficiency of the growth).
Analytically, the magic number measures your go-to-market fit. Your magic number (new ARR divided by your marketing and sales spend) answers the question: how much do you grow for every dollar spent on sales and marketing (S&M)?
If every dollar of S&M spend brings in more than one dollar of revenue, you’ve achieved GTM fit.
But keep in mind that the magic number is a lagging indicator, and it may take you a few quarters to see a positive result.
The end-to-end SaaS metrics give you the big picture about your go-to-market, and they’re main criteria when investors evaluate your GTM:
Net New ARR - How much ARR has increased/decreased from the period? It is the sum of all new ARR (such as lands, expands and upsells) minus the sum of all lost ARR (such as churn or contraction). In other words, how much are you growing?
Magic Number - For every dollar spent on sales and marketing, how much new revenue did you generate? In other words, how efficient is your lead and land system? If this number is greater than 1, things are going well.
The end-to-end SaaS GTM metrics are lagging indicators. They are the outcome of the GTM process — not tools to improve it. That’s why it’s important to remember: to tune up the playbook into a well-oiled machine, you need to look under the hood.