The journey of starting a small business – part 3

Product market fit

In preparation to starting your own small business, there’s a good chance you’ve picked up a book or four on marketing and come across the term ‘Product Market Fit’ (PMF). While it sounds like a word-salad, it’s one of the most important elements to starting and growing your small business.

What is ‘product market fit’?

Popularised in the mid-2000s by venture capitalist Marc Andeerssen, he stated that: “product market fit means being in a good market with a product that can satisfy that market.”

How? By identifying a need in the market and creating a solution customers want to buy.

While this may seem like an obvious step on the road to starting your small business, you’d be surprised at how few people truly understand the process behind reaching product market fit.

Why is product market fit important?

When you’re building something, it’s important to have good foundations, whether it’s a home or business. Your product or service is that foundation.

Before you look at expanding your business you first need to know if there’s enough people willing to pay for your product/service, and if the market has a potential for growth.

So, how do you reach product market fit? By following these 6 key steps:

6 key steps to achieving product market fit

Define your target audience

Do some research on your customer’s needs, what solutions they use, and how your product fills a gap. With a basic understanding of your customer, you can define your ‘buyer persona’.

Know your customer’s needs

Once you have created a ‘buyer persona’ of your ideal customer you need to discover their pain points and needs. Conduct customer interviews as it’s best to hear from them directly.

Create your value proposition

Also known as your ‘unique selling point’, your value proposition is what separates you from your competitors and gives your customers a strong reason to buy your product or service. Not sure how to create your Value Proposition? Check out SEMrush’s blog here.

Get your Minimum Viable Product (MVP) ready

Once you’ve completed the previous steps it’s time to test your product/service. By building an MVP version of your product with the basic functionality you’ll be able to test your product’s core features, and fix or add to improve it.

Use potential customers to test your MVP

You want real feedback, right? Then what better way to do that then testing your MVP with real customers. This will help determine if your basic product is helping customers, while also finding out where it needs improvement.

Keep improving

No MVP is perfect on launch. Once you’ve collated the feedback you can go back and tweak or fix the core features. This may also lead you to develop new ones you hadn’t thought of initially.

What ‘product market fit’ looks like

While we’ve been able to tell you how product market fit works and the steps involved, it’s better if we showed you what it looks like.

That’s where Hero Packaging comes in.

Cofounder Anaita Sakar (and recent Vodafone Small Business Masterclass speaker) found product market fit for her compostable shipping bags by becoming her own customer. How?

While running a previous business, Anaita first noticed the cost associated with her packaging, and after doing some research realised there were few environmentally friendly options. Looking into paper as an option, she found that it wasn’t waterproof. Which is when she got the idea for a plastic-like mailer that was waterproof, but also compostable.

How did Anaita know she had a good idea? She tested it.

Firstly, she reached out to business owners in her network with similar needs. Once she received a positive enough response validating her idea, she needed to find out if there was enough demand.

Using search engine marketing, Anaita targeted anyone typing ‘sustainable packaging’ in Google and directed them to her landing page where they could get a free sample. Anticipating 30-40 sign-ups at the most, she was overwhelmed when 1,000 people requested a sample within the first week.

This was the first sign from a sizeable audience that her product was the solution people were looking for.

The result? She found a large and growing market of ecommerce businesses that needed shipping materials and increasing concern among consumers around waste. This equated to product market fit for Hero’s compostable bags.

When you’re just starting to build and grow your business there is a lot to consider. Which can sometimes feel a little overwhelming.

If you’re looking for more information on how to grow your small business you can read parts 1 and 2 of our ‘The journey of starting a small business’, or you can visit the Vodafone Small Business Masterclass page and watch our keynote speakers Anaita Sarkar (Hero Packaging) and Simon Chhoeu (Bentleys) share their expertise, knowledge, and insights around finding new customers and managing your cashflow.

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