4 Actionable Strategies to Determine Product/Market Fit - Biz Buds Podcast - Tom Ross & Mike Janda4 Actionable Strategies to Determine Product/Market Fit - Biz Buds Podcast - Tom Ross & Mike Janda

How to Determine Product/Market Fit

As an entrepreneur or creative you’re probably focusing on selling a product. But if selling a product feels nearly impossible, like pushing a boulder up a hill, your product may not have the right product/market fit.

The good news is, you’re not alone. Many struggle with this concept. Even the most creative people in the world experience it atleast once in their lifetime: the greatest movie director or producer has probably made films that didn’t make any money. The best author has probably written a book that didn’t sell and got bad reviews. Even a great entrepreneur has experienced dozens of failures in the wake of their success. You’re just one of the many who have tried and failed. 

The first step towards understanding why your product isn’t selling is measuring its product/market fit. Simply put, if you are trying to sell ten different products and nine of them fail, but one flies, that’s the one that has product/market fit. 

Mike and Tom share insights about product/market fit and how you can measure it to sell your product better.

If you are in a rush, here are the key takeaways from this article:

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What is Product/Market Fit?

Let’s lead with an illustrative example: Someone Tom knew sold cute frames, gifts and other such products. While some did well, others didn’t. During the holiday season, she had the idea of spray painting wooden crates, putting fake snow in it and writing a child’s name on the side of the box – she called them Santa’s gift boxes. This product became a huge success. She began selling them faster than she could create them, to the point where she had to enlist her friends to help her. She and her ‘elves’ worked round the clock to produce these boxes. This is a great example of how she found a great product/market fit. 

What Product/Market Fit means for Tom: According to Tom, product/market fit can be described as how much the market you are serving wants whatever it is you are selling. It doesn’t matter how talented you are, or how good at your job you might be, or how much you market your product. If you have terrible product/market fit, you’re just flogging a dead horse.

What Product/Market Fit means for Mike: For Mike, it isn’t just about having a product that fits a certain market, but also about positioning it in a way that somebody is willing to part with their money in order to acquire this service or product.  Even when it comes to social media engagement, if you post something that doesn’t strike a nerve, no one will engage with you. It has to strike a nerve. It has to make someone say “Oh, I need this enough to buy it” or “Oh, I love this post enough to comment.” 

4 Actionable Tips to Determine Product/Market Fit

Validate your product

Tom is an enormous fan of validation. He believes that validation allows you to summarise your product and help you understand if the market wants what it is you’re thinking of selling before you even make it. Use whatever you have at your disposal to validate your next idea or even your current one.

For example: Instead of investing a huge budget into creating a full show, producers create cheap and quick-to-make pilots. If the reaction is favourable and the viewers validate it, it is only then that they get around to actually making it.

Therefore, by validating, you are essentially reducing the risk of what you put out into the market being a failure. You’re going in with a degree of confidence and a reasonable prediction that it’s actually going to perform well. It can also help you figure out your niche: create a test service offering and approach 10 people in that niche. Observe their response to it before restructuring your entire business. 

For example: Before creating a private group on Facebook, Tom sent out an email to all his newsletter subscribers asking if they’d be interested in something like this. In response, his inbox was flooded with his subscribers requesting him to create such a group. Because of this, he knew the group would be well-received even before he created it.

The trick is to create a minimum viable product, much like the aforementioned Santa gift boxes. Before producing the high number of boxes she made leading up to Christmas, she began with producing a single box and selling it. She tested her idea before going all-in with her service. 

Pro tip: To test your product, Tim Ferris suggests running low-scale, cheap Facebook or Instagram ads that point to a landing page or newsletter sign-up. Run a few different ideas and campaigns. The one that beats all the rest is the one the market wants.

Tom’s proven method is testing a piece of content on Twitter with 144 characters before posting a carousel on Instagram which could take a few hours to put together. If you get a good response and a higher level of engagement than the typical tweet, then it is worth converting this content into an Instagram post, video content or something more time-consuming. 

Spend time doing extensive research

Do your research. Ask yourself these questions: How many potential clients or customers are there? How many of those potential customers can you realistically land? What percentage? How many of those potential customers have suffered enough pain for them to purchase something to solve it? 

Many entrepreneurs are passionate about their products, and therefore convince themselves it’s good without putting in the research. It is imperative to do your research before you create a product to determine if it is a viable niche or not. Unless you can fill a gap in the market, your product will be a failure. The more you immerse yourself in learning about the market, the more viable your product will become. Believe the numbers, don’t believe the hype.

Mike attempts to reinforce the importance of research with this example: let’s say you want to be a brand studio and as a part of your assignment, you want to do branding for pizza restaurants. You begin by doing your research and get the total number of pizza restaurants in London. Let’s say this number is 5000. Now you will have to understand how many of these pizza restaurants will need to be rebranded. Out of these, let’s say 5% will need rebranding every year, which gives you 250 potential customers. 

Now, you take a closer look at your potential client pool of 250. How many of those can you realistically land as a client in a sea of competitors? It boils down to 1%. If you need to generate an income of a hundred thousand dollars each year, you have to charge your two-three clients a sum of $50,000 dollars for a rebrand. This process helps you validate and capitalize on your niche too. 

Determine if your product is viable or just a hobby

Just because you’re passionate about something, doesn’t mean the market will be too. Think about commercial viability. Ask yourself: does this thing have any real legs as a business or should it be relegated to a hobby? If after several attempts, your product doesn’t sell, move on and try something else. There is no easy way other than hard work and perseverance. 

For example: Gary Vaynerchuk credits his Youtube channel, Wine Library, for his entire career. When he first started, no one watched his videos. However, he persevered and eventually, he became a viral sensation. 

While perseverance is necessary, learning when to draw the line is just as important. So when do you decide to stop? How long do you push for before you realise it isn’t going to work? While there is no blueprint on how to make that call, Tom relies on his experience and gut feeling.

Mike recommends assessing what you have to risk. If you have time, risk your time for as long as you want. Don’t be afraid to keep pushing because all you are really doing is leveraging your time. But if you’re putting your life or your family’s life on the line because you are obsessed with the belief that this idea is going to work, you are probably going too far. So you have to decide, where do I draw the line? 

Pro tip: Give yourself a milestone or a deadline. If you don’t have traction beyond that date, scrap the idea. If you don’t give yourself a timeline, it could go on forever. Like on Shark Tank or Dragon’s Den when people say they’ve been working on their product for 10 years because they believe in it, but don’t have any sales yet. You don’t want to be that person.

Also, understand that a product/market fit is not a lifetime guarantee. Snapchat was hurt overnight because Instagram stories came along, Similarly, because of Uber, many cab drivers lost their jobs. The market is ruthless and moves very quickly. So you’re going to have to keep adapting, keep fighting, keep innovating, keep adjusting, keep tweaking the dials forever. And if you want to be an entrepreneur, that’s kind of what you’re signing up for. 

Be open to pivoting your business model when your competitor’s offering becomes more valuable to your customers than your own.

Pro Tip: Be careful of comparing your failure to the success of somebody else. Both Tom and Mike have struggled with product/market fit at some point and as a result, experienced failure in their careers. 

You will know when you have achieved product/market fit

If you have the right product/market fit, your problem will change. You will find yourself struggling to keep up with the demand, rather than trying to cram your product or service down the throat of your potential customers.

For Tom, Design Cuts is the perfect example for Product/Market Fit: The website was built on Premise which was a WordPress plug-in at the time. It was the cheapest and quickest way to build something that would work because they didn’t have the time to put it together. So they eventually put out their first product and within the first week, they sold a thousand copies. They managed to find the right product/market fit and it took off like a rocket.

When Mike hit Product/Market Fit, he couldn’t hire fast enough. Similarly, Mike was freelancing for his friends. And then all of a sudden, he began to get referrals. The demand increased two-fold in two or three years and he was burdened with so much work, he could barely keep up. He couldn’t hire fast enough. He couldn’t find talent fast enough to produce it, and he became a slave to this business. It happened because he was able to get the right product/market fit by filling a void in the marketplace of being a cost-effective solution for high profile entertainment brands. He attempted to do it with a customer service mindset of bending over backwards to hit deadlines instead of pushing back on his clients. 

If you haven’t felt that in your business yet where your biggest problem is the growth and expansion of your business, then you have probably not hit product/market fit as tightly as you can.

In conclusion, Will Smith’s movie about Chris Gardner, The Pursuit of Happyness, serves as a great metaphor for this episode.

While he was clearly incredibly intelligent and talented and became prolifically successful as a stockbroker, he drove himself to homelessness trying to sell medical equipment that was obsolete and dated. If he was still trying to sell bone density scanners, he would’ve failed no matter how hard he worked, or how smart he was because it wasn’t the right product/market fit. 

Remind yourself that if your current venture is failing, it isn’t because you’re a failure. It’s probably because your product isn’t the right product/market fit. You just need to keep trying something else.

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