What's today's definition of Product Market Fit (PMF)? Here's my take using 10 simple milestones to measure progress towards PMF.
When reviewing the health of a SaaS Company, you need to understand two things:
- What is the quality of the funnel (speed, flow, size, lead quality)
- Can the team grow the funnel? How fast?
These 5 questions can help to get to the bottom fast:
1. When you fill out the contact us form or buy-now button, what happens next?
2. Where is the traffic to the website coming from? Branded or Unbranded Keywords?
3. What % of net new unique visitors are landing on the home page vs. other pages?
4. What % of the marketing budget is going to PPC and Social Ads? Or list buys?
5. Relevance - Are visitors converting or coming back?
Why are these the right questions? What do the answers tell you as an investor?
If the team does not "pick up the phone" or follow up on hot leads like a filled out contact form, they are not ready to generate more demand, let alone get more funding. Easy.
- People who already know you (branded) are a great indicator of brand equity. It's a good metric to track brand awareness over time. Right now you need more people who are not new to your brand though, so ideally a large part of net new unique visitors come from unbranded keywords. Tools like SEMrush can quickly show where most people are coming from.
- You want to serve up content that's relevant for what people are looking for. If the majority of the new visitor's lands on the homepage this will be hard. A homepage has to be optimized for multiple audiences and thus is often not optimized at all. If the team has been able to let a large part of net new traffic land on dedicated content other then the homepage it tells you they have a solid foundation for long term content marketing, and will probably be more successful in converting traffic into actual engagement or leads.
- Dependency on Pay-to-Play demand generation is an opportunity to ask the team how they think about their value proposition. If they can answer the questions "What's it for?" and "Who's it for?" with great answers, they should be able to build great engaging, educational content that should make them less dependent on paid search marketing or buying lists. It's not always bad to "buy attention and clicks", as long as the cost is lower then the net new ARR these channels are driving.
- Traffic Quality Insights - Is traffic converting? How many visitors click through at least once, to a conversion page or to consume content? If everyone bounces of Google will not reward you with high search rankings, and may even penalize you at some point.
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After 15 years of experience in the Software Marketing Industry, Stijn adopted the SaaS model to launch Kalungi, a marketing agency that specializes in assisting B2B SaaS companies.