How to Achieve Product-Market Fit in a Downturn
Early-stage founders who have yet to achieve product-market fit feel particularly vulnerable during these uncertain economic times. At the same time, the popular press cites examples of companies that started in downturns and have become behemoths since.
But what tactical steps can you apply today while hatching a plan to take over the world when we wake up from this economic slumber?
Here are a few tips to help tide these turbulent times and become stronger:
You cannot (just) engineer your way to product-market fit.
The default position of technical founders is that more product build will help them win more customers faster. While there is a lot of truth to that position as a very early-stage startup, it is also essential to recognize the limitations.
First, customers are not always correct in every feature they ask of your product. History is replete with examples of products that did great by doing away with functionality (e.g., Google’s cleaner Search interface, Twitter’s shorter messaging format, and more).
Second, we have spent more than a decade in an environment where the need to deliver more code and do so faster has been the unquestioned norm. Heck, research shows that humans are wired not to subtract but add. So, be mindful of the natural tendency and ask tough questions.
The best near-term goal is to become 10x-100x better in a niche yet important capability rather than check several boxes in a mediocre way.
With customers, focus on the here and now.
Before the downturn, you might have worked with visionary, fearless, and often crazy early adopters or technology enthusiasts who seemed willing to embrace a product from an unknown and unproven company. However, everybody’s budget is getting tightened and scrutinized, including those of your visionary friends.
This means two important things for you:
- Sell the value your product offers, ideally, in actual cost savings.
- Make it a no-brainer as to why they should adopt your product now and not six months from now.
Keep your customers close (and happy)
It pays to be proactive in monitoring your customer’s health because it is easier to keep a good one than get a new one. Also, don’t assume that you must constantly churn out new features to keep your customers happy, informed, or engaged. Send them content you have created, or better yet, have them co-author content with you. Give them forums to lead and engage their peers. There are many inexpensive and creative ways to keep your customers close.
Hire (and keep) the right people only.
It is possible that you hired people who might have been a good fit when the economy seemed to be only heading up and to the right. With slower company growth, that person(s) might be unable to perform for the here and now, and that too, with limited staff supporting them. If you have such folks on your team, it is time to let them go. If these people are recent senior hires, you might need to do some explaining to the board and your team, but remember that you are in survival mode and need to do every bit to optimize for the here and now, especially in Sales and Marketing.
Don’t stop or slow down learning.
Just because customer adoption has slowed doesn’t mean that you need to slow down the pace of learning. This downturn will have a Darwinian impact on the many me-too early-stage companies that were founded and funded in the past several years. The ones who survive and thrive will have amassed a ton of learning about what works (and doesn’t work), even if they are not visibly becoming a unicorn overnight. When budgets open up, those who invest in the proper marketing, sales, and product efforts will reap the benefits. And there is only one way to figure out what constitutes right versus wrong when it comes to these efforts: learning from real customers or prospects.
So, stay hyper-engaged with the market.
Take some time to look around (and not just at the competition)
It is an excellent time to look at what else is out there, both in the form of competition and alternatives.
Again, a byproduct of the recent over-capitalized environment has been that the market is littered with innumerable me-too products. While I will never advocate focusing on competition, it is valuable to know them. Your potential customer will most likely evaluate you alongside everyone they come across, and so should you.
Alternatives are not only competition but can come from non-state-of-the-art methods involving lots of manual labor. Understanding alternatives can help avoid competition and expand the market.
Be careful where you spend your marketing dollars.
Remember that you never should outspend your well-funded competition to educate your customers. Aside from that, ensure your marketing focuses on serving customer needs and sales teams focused on your company and your product first.
Also, during these times, many startups assume that sales and marketing are the only functions that can be cut unquestionably. Remember that, sometimes, a flower is just a weed with a marketing budget.
So, it’d be a mistake to assume that your product will sell itself. Ensure that your revenue plans are supported by the right level of sales and marketing.
Be specific about your category.
Most companies have budgets for specific categories or departments. Many startups make the mistake of trying to create a category from the get-go or will tell customers that they span multiple categories. This doesn’t necessarily help your case, especially when budgets are constrained.
If creating a new category, align with a department that needs your product the most. Then you will have a chance to secure a budget because someone will go to war to use your product. Be as specific as you can be.
You cannot build a big company by thinking small.
All this talk about the here and now might start making you focus on the day-to-day so much that you forget your big vision when you started out. If you haven’t already done so, it pays to write down your vision for world domination, share it with the team, and remind yourself of it, especially in these times. While it might seem unclear whether you can survive this downturn, or for that matter, the next month or quarter, remember that the future comes but one day at a time. So, focus on the here and now and remind yourself why you started this arduous journey in the first place. Jeff Bezos conceived of Amazon while still working at D.E. Shaw, and his vision was to build the “everything store.” We all know how that has turned out.
If you have just started, revisit your assumptions about the market.
Maybe you just raised money and are buckling down to build a product according to your original plan. Likely, you wouldn’t have to change your product because of the downturn, especially if you are focused on problems that people already have. But along the way, you might learn about some early-stage competitors. Pay attention to these fledglings who might get bought out by larger incumbents. The M&A market will heat up shortly, and it pays to know what the incumbents have their eyes on.
More importantly, it helps to revisit your assumptions about the problem, the adoption journey, the buyer, and user personas. You might have made assumptions that might no longer be true in a capital-constrained environment.