I Obsessed Over Product-Market Fit - Here Are the 5 Stages of PMF

If you're building a SAS product, you've

probably heard everyone talking about

product market fit. That magical point

where your product perfectly solves a

problem people will pay for and the

market recognizes you for it. Most

founders either don't know what product

market fit means at all or they think

it's a binary that you either have it or

you don't. But after two decades in SAS

and investing in more than 220

companies, I can tell you that's not how

it actually works. It's not a switch

that suddenly flips on. Product market

fit is a spectrum. It's more like a

dimmer switch that goes gradually from,

let's say, one to 100. There are a lot

of different gradients in a dimmer

switch. And it gets brighter as you go

up. It gets stronger as you increase

that number. In this video, I've broken

down product market fit into five

distinct stages to try to approximate

how it feels as you grow and move

forward. And here's the thing. Whether

you realize it or not, you're already

somewhere on this spectrum. Maybe you're

stuck between phases. Maybe you're

focusing on the wrong things for where

you actually are. But after watching

this video, you'll know exactly where

you stand and what specific actions will

push you forward. Let's dive into phase

one, pre-product market fit. This is

where founders spend a lot more time

than they think they will. You're

probably wondering what it looks like to

be pre-product market fit. This is where

early adopters start showing some

enthusiasm but are not necessarily

converting to long-term users. You have

a heavy reliance on the founders for

sales, product development, and all

customer interactions. And typical

company metrics is where it gets

difficult. And this is why you don't see

stages of product market fit often

broken down because it really does

depend. But I looked across the more

than 220 investments I have as well as

the tens of thousands of folks in the

micro comp and tiny seed audience and I

came up with my best estimation for each

of these bands. So typical company

metrics include things like your

month-over-month growth being less than

$500. Your monthly revenue turn is high

5 to 10% or more. You can have 15 20

25%. And in this case, your MR is

usually in the 0 to $5,000 range, though

it can be higher if you have an audience

or you're otherwise able to, you know,

kind of artificially juice the early

numbers. In this phase, the things you

should focus on include conducting

customer interviews to understand pain

points, building relationships with

early users and gaining their trust,

prioritizing features that address the

most critical customer needs, refining

core features quickly in response to

customer feedback, identifying your

ideal customer profile if you can,

experimenting with different value

propositions, and testing one or more

marketing channels to find initial

traction. Common pitfalls include not

driving enough new leads or demos and

expecting to build a business with a

small trickle of new customers, ignoring

negative feedback or only seeking

positive reinforcement, underestimating

the importance of customer conversation,

taking your audience's initial usage of

your product as a false sign of product

market fit, and neglecting the

importance of user onboarding and

initial experience. Once you have your

first few customers actually paying you

money, and I mean really paying, not

just promising to pay, you start to

enter phase two, weak product market

fit. And here's the thing, this phase is

called weak for a reason. It's where

most founders get stuck because the

signals are so mixed. What it looks

like, you're in this phase when

customers are using the product

regularly, but with mixed levels of

satisfaction and retention rates. There

are early signs of customer segments

that resonate with the product, and you

have a continued reliance on founders

for product development. sales and

customer support. Typical company

metrics include month-over-month growth

in the $250 to $1,000 a month range. In

this phase, your monthly revenue churn

should be decreasing. So, I'll say it's

moderate, maybe between 3 and 7%. And

your MR can be between 2500 and maybe

$20,000. Things you should be focusing

on here include strengthening customer

retention, enhancing product features

and building new ones based on feedback,

increasing and doubling down on your

marketing and sales efforts, identifying

and targeting your most promising

customer segments, improving your

onboarding to ensure new customers get

value quickly and building relationships

with other founders, potential mentors,

and advisers. Common pitfalls here

include over reliance on a small number

of key customers, failing to

differentiate from competitors in a

meaningful way, underestimating the

importance of a strong value prop and

clear messaging, spreading your

marketing efforts too thin across

multiple channels without mastering any,

focusing too much on acquiring new

customers instead of retaining existing

ones, and neglecting to track and

measure key funnel conversion rates that

drive growth. When you finally crack the

code on retention, when people not only

pay, but stick around month after month,

that's when you hit phase three,

emerging product market fit. This is

where the fog starts to clear and you

can actually see a path forward. This is

where you see consistent inbound

interest and a growing customer base.

Improved conversion rates from trial to

customer and longer retention periods.

Customers regularly using and finding

value in the product. Word of mouth

probably starts here. And ideally, your

product roadmap becomes clearer and a

bit more strategic. In this phase, your

month-over-month growth is ticking up.

Maybe it's still as low as $500, but it

can often be in the $2,2500 range. Your

monthly revenue churn should be

dropping. So, you know, think of it

being 1 to 5%. And your MR starts to get

wider here. The band is probably 15,000

to maybe 40,000. The things you should

be focusing on include growing your team

to scale whatever you need to scale,

marketing, sales, customer support,

investing potentially in customer

success if you run that kind of

business, continuing to reduce churn,

potentially experimenting with pricing

structures, and strengthening your brand

and your messaging to differentiate from

competitors. Common pitfalls include

failing to grow your top of funnel, over

complicating the product with

unnecessary features, neglecting to

maintain a high level of customer

support as the company grows, and losing

sight of your core value proposition in

pursuit of new features. This brings us

to phase four, where many founders feel

like they've made it. And you know what?

In some ways, they have. And for SAS,

especially bootstrappers, this is called

strong product market fit. This is where

you start to see good brand recognition

and word of mouth. probably have low

churn, high customer satisfaction. You

start to establish sales and marketing

processes. You have a predictable number

of inbound leads and organic growth. You

have a loyal customer base with high

engagement. You might even have public

advocates. You'll start to see potential

partners and folks who want to build

integrations with you. And maybe if

you're a vertical SAS, the potential to

expand into other verticals. Typical

metrics here include month- over-month

growth. I'd say $2,500 a month and up.

your monthly revenue churn continues to

tick down. Let's call it very low 0 to

3%. And your MR can be I don't know

between 30,000 and that magical 83 333