Jason Lemkin posted a story about this over the weekend. The root cause? Companies fall out of product market fit.
Jason describes these companies as ones that have a stable revenue base but struggle to attract new customers.
Having witnessed this firsthand, here are some observations that can help revenue leaders get their beloved SaaS companies back on track.
If you are a scale-up SaaS company, you have different degrees of product market fit (PMF) within specific segments in your business. Have you ever noticed that 90% of your growth comes from 10% of your customers? Do you typically go back to the same small group of customers for reference checks, customer advisory boards, analyst interviews
The problem we have today is that we are not even attempting to measure PMF. If you can’t measure it, how can you manage and improve it?
The key to solving this problem is to quantify PMF across each segment of your business. Metrics to lean into are logo retention, CLV, NPS/CSAT, and feature adoption (by use case).
As you do the analysis you will see massive variations across the customer base.
Once you understand who these ideal customers are, the next step is to determine the total addressable market (TAM) for these prospects. If there is a material TAM, you simply need to double and triple down on these segments.
You can also leverage the analysis to see how to improve product market fit in different customer segments. We typically see SMB customers wanting more vertical integration (more layers of the solution), while enterprise customers want the opposite: less layers because they need your solution to integrate into their existing tech stack.
Let us know if we can help!
