A Product Market Fit Show | Startup Podcast for Founders
00:27:12 · Rob
[00:27:12] S1: You know, I , it's, it summarize like I was thinking about it . Product market fit is hard to find. It's very hard to find , uh, like you really have to, there's a lot of maneuvering , uh, to determine true product market fit. But it's really easy to give up on finding, like, you can get really lazy with product market fit where you say like, oh, I got it , I got a good enough and , and I've been in businesses where , uh, like I come into the business and that business is in seven or eight markets and flailing like different cities and uh, and haven't found product market fit. And it's all over the place. And, and the only logical thing to do is, is pull back to one city to figure it out before you expand with the , with the proper playbook. But, but it's really easy to , to trick yourself into thinking that you've got
00:27:59 · Pablo Srugo
[00:27:59] S0: It. So let me jump to to the next one, find value, not growth. The idea of being here, I think in the early days, because here's the thing, like every founder wants to grow. Like that's just, that's the whole point, right? You wanna get, you wanna get big, you wanna get to a hundred million a r and beyond. But interestingly, what I found is, like in the early days, obsessing overgrowth, and I mean specifically before product market fit, thinking about growth and obsessing over it and making it like a KPI is meaningless, right? Like financial forecasts before PMF are meaningless. Um, and there's a few errors that come out of that. I'll give you two very concrete examples that I've dealt with really recently. The first one is take a company that's growing that's got like 30 K or so in MRR , right? Kind of still getting traction obviously, but still not true product market fit. What a company like this that's focused on growth is gonna do is they're gonna look at how much they've been growing over the last few months. And what they realize is a growing 10% month over month. And so they think 10% month over month, if you extrapolate, that means you're tripling, right? Which means you start focusing on how you're gonna go from 300 k to a million in a RR 330 KMRR, let's say to a hundred k in MRR in a year. The reality is a lot of these companies are not growing at a rate, they're actually growing linearly. So what this company's actually doing is it's growing $3,000 per month, but for them 3000 on 30 k, it looks like 10% MRR because you're not focused on actually delivering value in a true product market fit . You miss this and you start to extrapolate it out. And I've seen this play out to the point that companies like this will go on to raise meaningful dollars because they could tell this story and now they're sitting on this huge prep stack because they've raised all this money, they never delivered meaningful value, they never actually delivered true product market fit. They were never growing compound. Which by the way, that I would say is a great sign of product market fit if you're actually compounding at whatever rate, but probably, you know, you're doubling, that's a sign that you actually have product market fit because the market's actually pulling you when you're growing linearly.
00:29:58 · Pablo Srugo
That's a sign that, that maybe your market's small but more likely that you're pushing exactly. And that you don't have that sort of market pull. And, and trying to understand that is really important, but it gets solved if you're not even focused on growth. If you're focused on value in those early days. That's the first thing. And then the second thing, actually, I just had this because you know, we're end of the year, people are forecasting next year, and I had this one company who's at like a million in a RR and they were trying to forecast next year, and they're like, you know, the forecast to hit like 3 million in a RR and then, you know, you forecast all your leads and you forecast all these things. And, and when we looked and I , I, you know, said, look , look , let's look at 2023. Let's actually analyze the business. We realize there's actually no engines. Like there is nothing proven, there's nothing you can dial up. I said to him, did you for example try to dial up inbound leads this year and see if that worked ? No, I haven't. I just, I've gone, what? I've gone, okay, so you actually, in order to hit three x, you need to three x your inbound leads, but you have not tested anything that actually does that. You therefore have no way of knowing whether you can do that, which means it's all effectively garbage, right? The other one was on outbound sales . This often happens, it's like, you know , you've gone there with the , the one or two people that you have, have you hired someone and trained them? Well, I did it once this year. Okay, so your sales leader is still selling and they had to hire and onboard one person, but now you gotta do it four times over. Do you have an idea of what it actually takes to onboard? Do you have an idea of what success rate you're gonna, you don't. So my point is, when you focus on growth before you have true value, you're making things up because you haven't figured out any of the engines that actually drive growth, that make growth a meaningful KPI after product market fit
00:31:44 · Rob, Pablo Srugo
[00:31:44] S1: Way to crush that guy's spirit 100%. He's down in the dumps. Now he is like, well , he's , he's [00:31:48] S0: At , but I , I said, look, I said, look, forecasting works, do this. Figure out if you just keep growing at your rate, at your rate of not rate of growth at you added a million a hour last year, let's assume you add one more million this year and just figure out what your runway is because that's gonna help you sleep at night to understand what your runway is. It's really important as a founder, what I'm not so interested in is you trying to predict 12 months out what revenue's gonna be. Who cares? Let's just do it quarter by quarter . What do we need to test this quarter to see if it improves inbound leads to see if it improves conversion, to see if it imp improves outbound, whatever. And if it works, great, we double down and if it doesn't, it doesn't, the next quarter we try it something new versus trying to say, this is where I'm gonna be a year from now. Like, public companies have trouble with this. Like for sure if you're at a millennia or you have not ,
00:32:32 · Rob
[00:32:32] S1: Like it's a very, it's , it's a refreshing approach simply, but, but it , it's , it's a very founder approach, right? Because you know the , you know, the , uh, the trap that you get into by trying to project one year. Now, what if somebody asked you for three year revenue growth? Like, it's just, you can't, nobody, like I I , nobody predicted this mobile world that we're in, right? So like, there was the web and then everybody had their predictions on the web and nobody really saw this handheld device that BlackBerry came out with or that the iPhone came out with. Like nobody saw that coming down the road like, or the implications of that. And so you're smack dab in there, it's 2007 Steve Jobs is up there releasing the iPhone, and, and you've got this plan, a three year plan. You can't be held accountable from that day forward because the world changed on that day. Same thing is happening today with ai and like , you just can't do that. We did this revenue without any of that. Now imagine if we had it. Like that's the thinking, right? Is that okay? I just need , I have four salespeople and it's done.
00:33:35 · Pablo Srugo
[00:33:35] S0: It's funny, it's funny, Rob, you know, here's, here's an example actually , concrete example, bootstrap business crew , a 2 million a RR and, and it was like, and we're bootstrapped and we're profitable and we're nine people and I've been doing all the sales. So imagine what happens when I hire , uh, a bunch of salespeople, which honestly legit a year later. So they started 2 million a RRA year later, you know how much a r they had 2 million, man. 'cause what happens when this founder doesn't sell is you don't sell <laugh>. That's what happened. And I , and I say that because there's a lesson there, which is like, you, you can't assume things without testing them .