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How to know if you've got product-market fit

by
Lenny Rachitsky
Lenny's Newsletter
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Product-market fit (PMF): The definitions of PMF are broken into pre-product and post-product: - Pre-product, look for:  - Visible excitement - People who are eager to spend money for it now are a better signal of interest and PMF - Post-product, look for:  - Retention: If the product-market fit flattens off at some point, it means that there is product/market fit for some market or audience.  - Surveys: You have PMF if over 40% of your users would be very disappointed if your product went away. - Exponential organic growth: If major brands get in contact with you organically and your users spontaneously market your app to other people, you are close to PMF. - Cost-efficient growth:  - Burn Multiple = Net Burn / Net New ARR - “The higher the Burn Multiple, the more the startup is burning to achieve each unit of growth. The lower the Burn Multiple, the more efficient the growth is.” - A sales yield of greater than 1.0 also indicates PMF. - CAC < LTV - Acquisition cost of a customer is less than the lifetime value of one.  - Sustainable acquisition is a better signal of interest and PMF. - Customers are excited for your product: Customers are willing to pay for your product just as fast as you launch it. - People are using your product even if it is not working properly sometimes. - If a company gets larger despite poor execution and management, it is a great measure of product/market fit.  PMF isn’t a one-time, discrete point in time. The factors that determine PMF are subject to change because of the volatility of competitors and market segments.

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