Product-Market Fit

The term is widely used in the start-up world, where finding product-market fit is often seen as the most important milestone for a new company. Before reaching it, a start-up is still searching for the right product, customers or business model. After reaching it, the focus shifts towards growth and scaling.

Signs of product-market fit include rapid growth driven by word of mouth, high customer retention, customers who would be very disappointed if the product disappeared, strong demand that outpaces the company's ability to supply it, and sales cycles becoming shorter.

For example, a start-up offering a scheduling tool might find that after several redesigns, customers suddenly begin signing up in large numbers through recommendations, use the product daily and rarely cancel. These are strong signals of product-market fit.

There is no single metric that proves product-market fit, and some companies believe they have it when they do not. Scaling a business before achieving it, by spending heavily on marketing and hiring, is a common reason start-ups fail, because they spend money acquiring customers who do not stay.