Introduction: Go-To-Market Fit

There are three distinctive phases of SaaS growth popularised by former HubSpot CRO, Mark Roberge

PRODUCT-MARKET FIT

Primary goal of phase: customer retention

 

PMF occurs when your value proposition and customers needs align.

 

Whilst there are hundreds of definitions for PMF, for B2B software we believe this phase is all about winning strong cohorts of early adopters, and then retaining them.

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GO-TO-MARKET FIT

Primary goal of phase: sustainable unit economics 

 

Once you've achieved PMF, your next challenge is building a predictable and efficient growth engine.

GTMF is about unlocking your company's growth potential by scaling revenue generating activities, in an increasingly predictable way, all underpinned with good emerging unit economics.

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GROWTH AND MOAT

Primary goal of phase: sustainable revenue growth

 

You’ve reached $15m+ ARR and your GTM playbook is working. Now, it’s time to scale.

 

The key elements during this stage are continuous recruiting at pace, preserving a strong culture and creating a distinctive brand.

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FURTHER READING / STAGES OF SaaS GROWTH / MARK ROBERGE

How do you know you’ve hit the elusive Product-Market Fit milestone?​

Product-Market Fit (PMF) is a term named by Andy Rachleff at Benchmark, who said, “When you first start out, the only thing that matters is finding a cohort of customers who truly value what you offer.” PMF is fundamentally about understanding whether you have created something that customers love and need. 

Whether customers truly need something is related to the value they are getting from your product. Looking only at client wins or revenue growth isn’t sufficient. You want to see clients consistently using the product and not churning when given the opportunity to churn. For a SaaS company, excellent retention metrics are compelling evidence that customers love what you’ve built.​

However, one major issue with tracking retention is that it can take a long time to collect the detailed metrics you're looking for. In the enterprise software world this can even take years. The best software businesses create models to track Leading Indicators of Retention (LIR) incorporating key engagement metrics that you believe are correlated with eventual client retention. Eventually, this can be back-tested and refined against actual retention to close the loop on your models and ensure continuous improvement. ​

In addition to both predictive and actual retention metrics, there are several traditional PMF metrics from the consumer world which can also be helpful indicators, such as Net Promoter Scores (NPS) and user sentiment.

 

Our advice to founders is don’t wait for the evidence to fall into your lap. Hypothesise about the right indicators for your business. Measure, test and iterate.

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FURTHER READING / PRODUCT-MARKET FIT / RAHUL VOHRA

FURTHER READING / PRODUCT-MARKET FIT / TREN GRIFFIN

FURTHER READING / PRODUCT-MARKET FIT / STEPHEN MILLARD

As soon as you’ve built conviction that you’ve nailed PMF, it’s time for the next stage.

Go-To-Market (GTM) generally refers to everything around how a product is positioned, packaged, marketed and sold. It works as an amplifier to underlying product advantage.

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While it’s possible to achieve PMF without a well-functioning GTM strategy, once you are in the scaling phase it's critical to iterate towards GTMF to effectively scale from early promise into mainstream success.

  • PMF is about proving that there are customers out there who value your product.

  • GTMF is about how this scales: identifying new customers, reaching them, selling to them, onboarding and upselling to them, all in an economically rational manner. This is when you prove that your unit economics are scalable, and you’re able to break out from early evangelists into mainstream sales.

A helpful analogue is a Minimum Viable Product (MVP) when launching a product – in this case, start with your Minimum Viable GTM then test and iterate. This journey should not begin once at scale; it should represent continuous focused experimentation, iteration and improvement. Once you have invested in perfecting GTMF then you can be confident that you are ready to scale by doubling down on the things that work, while also experimenting with your next GTM tactics. 

After reaching Product-Market Fit, building for Go-To-Market Fit is critical to scaling successfully

Winning early customers and finding PMF is a critical milestone for startups. But finding PMF won't automatically unlock consistent, reliable growth for your company.​

Probably the single most common mistake we see SaaS businesses making is trying to invest heavily in scaling while on shaky foundations.

“The number one problem I’ve seen for startups, is they don’t actually have Product-Market Fit, when they think they do.”

ALEX SCHULTZ | CMO, FACEBOOK

Premature scaling off shaky foundations is a common and painful scale-up mistake

Attempting to scale too quickly and immediately jumping to the 'Growth' phase despite uncertain PMF can lead to tough consequences: poor commercial decisions, missed opportunities, wasted money, unnecessary dilution, and human costs associated with burnout and high employee attrition.

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Companies face a challenging trade off: trying to expand as rapidly as possible and capture the market opportunity, whilst ensuring they don’t pour investment into a broken GTM machine. Channeling rapid investment into an irreparably leaky funnel will consistently lead to much worse outcomes than pre-emptively building and iterating a well-functioning engine.​

As you might expect, the time spent navigating the GTMF stage will vary from company to company. There have been some breakout successes in Europe who have navigated this phase extremely rapidly, but most companies take some time to achieve GTMF. We recommend working towards GTMF in the same way you might do early product testing: create a culture of ownership, experimentation, measurement and iteration when optimising your GTM strategy. This brings us onto measurement, which we'll cover in the next section.

FURTHER READING / PREMATURE SCALING / SUPERTEAM

FURTHER READING / PREMATURE SCALING / C.WARNER & T.WILSON