Product-Market fit is the point where a developed product is attractive, and has a market for it, making it possible to grow successfully.
For a company, product-market fit is the thin line between failure and success. If you sink money into developing a product but cannot attain a viable market, then you cannot get a return on your investment, no matter how great your product is. Your product is only as good as its performance in the market. If your product succeeds in its targeted market place, is creating increasing demand and good returns on investment, then you have achieved product-market fit.
What happens to startups is that if there is no product-market fit, that is, the product is available but the response is minimal – then the startup will flounder. If a new company lingers for too long in the pre-product-market fit, it may fail all together.
There is no magical formula for attaining product-market fit. When introducing a new product to the market; there are three variables that determine whether the startup will succeed or fail: the team, the product itself and the market.
The team develops the product. If you have a mediocre team, then you will most likely have a mediocre product. So it is imperative to have a great team to get a viable product. If the product is viable, then the next question is whether there is a market for this product. A product may be great but without a market for it, it does not matter how great the product is because it will not perform as expected.
It has been argued that the most important aspect of product-market fit is the market itself. As long as you have a minimum viable product and a ready market, the startup will succeed. If you have a great product and a poor market, the product will fail. When you combine a great product and a great market, the results are spectacular.
Before you launch your product, you must ensure that it attains a minimum viable standard. This means that the product functions and can provide value to the intended customer. You must also define a minimum viable customer base. This will be a guideline to determine product-market fit. For example if your minimum viable customer base is 1000 customers purchasing the product within the first three months, if you make 200 sales in the first three months, you are way below the threshold and have not attained a good product-market fit. On the other hand, if you make 1500 sales in the first two months you have achieved and surpassed your projected product-market fit.
When you attain product-market fit, it means the product you have developed has a ready market and you are actually making money. There is good turnover in terms of production, an increasing customer base, great feedback from the customers; shorter sales cycles and you have money in the bank because the product is performing so well.