Introduction to GTMF | Oxx | SaaS Market Primer
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PRODUCT-MARKET FIT

Primary goal of phase: customer retention

 

Product-Market Fit occurs when your value proposition and customers' needs align.

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Whilst there are hundreds of definitions of 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.

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Achieving Go-to-Market Fit 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.

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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, a diversified demand- and lead generation strategy, preserving a strong culture and creating a distinctive brand.
 

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An introduction to Go-To-Market Fit and the different stages of SaaS growth
 

The different stages of SaaS Growth​

The growth journey takes companies through a number of different stages. There are three distinctive phases of SaaS growth popularised by former HubSpot CRO, Mark Roberge. These are: Product-Market fit (PMF), Go-to-Market fit (GTMF) and Growth and Moat.  In this section, we’ll outline these stages and their key characteristics.

Put in context, the various phases can be illustrated by the below diagram. As you can see, the journey toward Go-to-Market Fit is far from linear, but once the fit has been reached, companies are ready to hockey-stick their growth in the scaling phase. 

This guide is focused on the Go-to-Market stage, finding the fit and working on accelerating your strategies to achieve the next stage of company evolution (Growth and Moat). Therefore, we will only briefly touch on the Product Market Fit stage, as achieving PMF is a prerequisite before successfully moving on to the GTMF work. Similarly, the guide won’t get into details around what to do when you have reached Growth and Moat, instead focusing on how to get there. Check out the recommended reading list to find some of our favourite articles on working toward finding your PMF.

FURTHER READING / STAGES OF SaaS GROWTH / MARK ROBERGE

How do you know you’ve hit the elusive Product-Market Fit milestone?​ Looking at indicative metrics.

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 – or if it’s time to head back to the drawing board.  

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 to figure this out, 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. They have bought into what you have created and have made your product an indispensable part of their operations. 

A major issue with tracking retention is that it can take a long time to collect the detailed metrics you would be looking for – in the enterprise software world this can even take years. Companies with high ambitions and that are looking to figure out if they have reached PMF, don’t have time to wait for these detailed metrics to develop. 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, and come up with a list of three to five indicators that might predict propensity to renew, expand, or churn. Sit down with your customer success team and product team and try to gather these indicators for your ten to twenty most recent customers that were up for renewal. If you have insufficient data, make approximations or skip the indicator for now. Can these be improved by the customer success team? By targeting different leads? By qualifying differently in the pipeline?  Measure, test and iterate. 
 

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

Premature scaling off shaky foundations is a common and painful scaleup mistake
Winning early customers and finding PMF is a critical milestone for startups. But simply 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.

Attempting to scale too quickly and immediately jumping from a shaky PMF to the 'Growth' phase despite uncertainties around their PMF can have tough consequences and lead to: poor commercial decisions, missed opportunities, wasted money, unnecessary dilution, and human costs associated with burnout and high employee attrition. In other words, it is not recommended to fast forward and rush through the work of finding your go-to-market fit. 

“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, META

FURTHER READING / PRODUCT-MARKET FIT / RAHUL VOHRA

FURTHER READING / PRODUCT-MARKET FIT / TREN GRIFFIN

FURTHER READING / PRODUCT-MARKET FIT / STEPHEN MILLARD

Go-To-Market (GTM) generally refers to everything around how a product is positioned, packaged, marketed and sold. It works as an amplifier to the underlying product advantage. 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 Go-To-Market Fit to effectively scale from early promise into mainstream success. Put simply, it is the product advantage, plus the efficacy of the go-to-market strategy that generates growth. You want to find the proper fit to unleash the full growth potential.

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  • Product-Market Fit is about proving that there are customers out there who value your product.

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  • Go-to-Market Fit 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.

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 or incomplete GTM machine. Channelling rapid investment into an irreparably leaky funnel will consistently lead to much worse outcomes than preemptively building and iterating a well-functioning engine.​

Many people are familiar with working with a Minimum Viable Product (MVP) when launching a product. In the go-to-market case, it is helpful to start with your Minimum Viable GTM strategy, then test and iterate your way forward. This journey should not begin once at scale; it should represent continuous focused experimentation, iteration and improvement. After investing in this process of finding and ultimately reaching go-to-market fit, then you can be confident that you are ready to scale by doubling down on the things that work, while simultaneously experimenting with your next GTM tactics. You have put in the foundational effort.

After reaching Product-Market Fit, finding Go-To-Market Fit is critical to successful scaling

The different Go-To-Market Strategies or Motions 

As you read through this toolkit, it is helpful to be aware of the various Go-To-Market strategies (or motions) companies use, and keep these top of mind. The strategy – or strategies – you choose will impact everything from the KPIs that are relevant to you (see section 2) to the levers (or accelerators) that will be most impactful for your chosen strategy (section 3). The key growth strategies we refer to are: sales-led (outbound and inbound), product-led, and community led.

 
An outbound sales-led go-to-market approach is a strategy where a company takes a proactive approach to reach out to potential customers and initiate sales conversations. Enterprise software sales fits here, though it's not all old-school anymore: account-based marketing and sophisticated revenue ops tactics are driving innovation at savvy SaaS companies employing this approach. Examples of businesses employing an outbound approach include Salesforce, Veeva, and IBM.

SALES-LED (OUTBOUND)

 
In an inbound sales-led strategy, the focus is on attracting and engaging potential customers who are actively seeking a solution to their problem or need. Marketing attracts inbound leads and sales closes leads, so this can also be referred to as a marketing-led model. Examples of businesses using this model include Hubspot, Atlassian and Zendesk.

SALES-LED (INBOUND)

Product-led growth (PLG) is a go-to-market strategy and business approach where the product itself becomes the primary driver of customer acquisition, adoption, and expansion. Sometimes referred to as a self-service model, it's all about an easy-to-use, intuitive product experience that fosters organic growth. Notable examples of PLG-driven SaaS companies are Slack, Dropbox, Zoom, Trello, and Canva.

PRODUCT-LED GROWTH (PLG)

A community-led sales GTM approach is a strategy that centres around building and leveraging a community to drive sales and business growth. Passionate advocates - customers, users, partners - contribute to the sales process. While not necessarily the same thing, it can be referred to interchangeably with open-source models in the developer tools space. Examples of companies using this approach include Shopify, Wordpress and Twitch. 

COMMUNITY-LED GROWTH 

Section 4 will explore the nuances between the strategies more extensively. 

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

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