4 ms·

The original context is more nuanced. The quote was responding to "Can you have product market fit without monetization?" > It depends your product. My defini

The original context is more nuanced. The quote was responding to "Can you have product market fit without monetization?" > It depends your product. My definition of product-market fit is: you are drowning in demand—your product is being used by so many customers that you cannot handle all the new people knocking at your door! > Absent that you do not have product market fit. Most people use the term too loosely. It's easy to sell a dollar for 90 cents and be "drowning in demand". The answer seems to indicate that demand is a pre-requisite, but not necessarily sufficient.

edanm 9y ago
This is an incredibly important point that often gets overlooked. Not only are many businesses actually selling a dollar for 90 cents and therefore think they have product-market fit, but even if you aren't one of these, your competitors might be behaving this way. For example, when doing freelance/consulting work, you can try to match the rates of cheap freelancers, but that's usually not smart- they might be doing the equivalent of selling a dollar for 90 cents. Always worth remembering that 90% of new businesses die within a year (or something like that). That means there's always a significant amount of competition that is doing things that don't make business sense.
- Retric 9y ago
  That's way off base. ~1/2 of small businesses survive for 5 years. ~1/3 of small businesses survive for 10 years.
  - scarface74 9y ago
    Just to provide a reference.... https://www.washingtonpost.com/news/fact-checker/wp/2014/01/27/do-9-out-of-10-new-businesses-fail-as-rand-paul-claims/?utm_term=.bca4a756b60e https://www.washingtonpost.com/news/fact-checker/wp/2014/01/...
    - edanm 9y ago
      Thanks for the reference! I didn't really dig into this too deeply, but I'm not sure how accurate these numbers are. Or at least, they're very open to interpretation. For example, see my other comment regarding which businesses we're talking about. But even taking the Bureau of Labor Statistics data, my immediate questions are: 1. What constitutes a small business? LLCs? Are sole proprietarships also counted? (Definitely relevant when thinking about freelance work, after all). 2. What consitutes failure? Sure, there's bankruptcy. But there are lots of businesses that continue to exist, but are not active. You might very well start a company for doing freelance work, stop doing the work and start work as an employee (which is also a question - failure or personal choice?), and keep the company in operation. Just to dig even deeper into this example from a freelance dev perspective (what I know most about): Let's say Sarah starts work as a freelance dev through her own LLC. She charges a very low rate. This is the kind of competition I refer to in my original comment. After a year and a half, she realizes that she isn't making enough money for her trouble, and decides to start working as an employee for a company. The LLC sticks around for another 5 years for various reasons. How should we count this? Is this a case of a business failure? She certainly didn't go bankrupt or anything. The LLC is still around, so she probably counts for governmental purposes. And arguably, she shouldn't count as a "failed business". On the other hand, if I'm a freelance dev in the area who knows that you need to charge twice what she's charging to get anywhere near a decent salary as compared to working as an employee. From my perspective, this is definitely a business failure, in the sense that if someone tells me "your rates are too high, look at Sarah's rates, why don't you charge less", my answer to them would be "she doesn't realize it, but she's selling 1 dollars' worth of value for 80 cents".
      - smogcutter 9y ago
        Your questions are answered in great detail in the link at the bottom of the BLS page: https://www.bls.gov/opub/mlr/2008/12/art1full.pdf https://www.bls.gov/opub/mlr/2008/12/art1full.pdf
- sp332 9y ago
  This is a very common thing to hear, but Fortune couldn't even find an original source let alone actual data to back it up. http://fortune.com/2017/06/27/startup-advice-data-failure/ http://fortune.com/2017/06/27/startup-advice-data-failure/
  - edanm 9y ago
    Well, it really depends on what you think I meant. You're interpreting me as talking about startups (which I explicitly wasn't, since I was talking about freelance work). Even assuming we're talking about startups, the article is looking at venture-backed startups, and defining failure as returning less than 1x. This gets two things "wrong": 1. If talking about startups, most people (founders, investors) will consider a return of 2x to be a failure as well. 2. You're already limiting the discussion to startups that have been venture backed. IIRC in venture-land, the number of startups that are considered to be returning a meaningful return is around %10-%20 for the best funds.
    - sp332 9y ago
      I went with startups because I thought they were even more likely than average businesses to fail. Do you think that's a bad assumption?
      - edanm 9y ago
        No, I think that's a great assumption. Well, startups vs. general businesses - I think specific things like restaurants might fail at a pretty high rate too. I think the rest of my comment stands though. And especially, if you're singling out specifically VC-backed startups, I'm guessing their 1-year failure rate is practically zero, since they usually raise enough money to survive at least 18 months. That's why the details of what exactly we're talking about matter a lot here. I think, for all VC-backed startups, there are statistics that show a more-or-less 90% rate of startups "failing" in the sense that VC's care about. But it's really more-or-less- I'm assuming it's a made up statistic that is in the area of the truth.
- HeyLaughingBoy 9y ago
  There's a very good book about pricing called How Much Should I Charge? that warns about exactly this. Her advice is to make sure that you base your "absolute minimum" price on what it takes to sustain your business and not just on what your competitors are charging because the competition could be going out of business and just don't know it yet.
deleted 9y ago
[deleted]
pcarolan 9y ago
I’ve even seen companies struggle to sell a dollar for 90 cents. Great point.
- cableshaft 9y ago
  I've even seen companies struggle to sell a dollar for zero cents. I worked in video games. Even making your game free didn't always translate into downloads for some of these products.

edanm 9y ago

This is an incredibly important point that often gets overlooked. Not only are many businesses actually selling a dollar for 90 cents and therefore think they have product-market fit, but even if you aren't one of these, your competitors might be behaving this way. For example, when doing freelance/consulting work, you can try to match the rates of cheap freelancers, but that's usually not smart- they might be doing the equivalent of selling a dollar for 90 cents. Always worth remembering that 90% of new businesses die within a year (or something like that). That means there's always a significant amount of competition that is doing things that don't make business sense.

Retric 9y ago
That's way off base. ~1/2 of small businesses survive for 5 years. ~1/3 of small businesses survive for 10 years.
- scarface74 9y ago
  Just to provide a reference.... https://www.washingtonpost.com/news/fact-checker/wp/2014/01/27/do-9-out-of-10-new-businesses-fail-as-rand-paul-claims/?utm_term=.bca4a756b60e https://www.washingtonpost.com/news/fact-checker/wp/2014/01/...
  - edanm 9y ago
    Thanks for the reference! I didn't really dig into this too deeply, but I'm not sure how accurate these numbers are. Or at least, they're very open to interpretation. For example, see my other comment regarding which businesses we're talking about. But even taking the Bureau of Labor Statistics data, my immediate questions are: 1. What constitutes a small business? LLCs? Are sole proprietarships also counted? (Definitely relevant when thinking about freelance work, after all). 2. What consitutes failure? Sure, there's bankruptcy. But there are lots of businesses that continue to exist, but are not active. You might very well start a company for doing freelance work, stop doing the work and start work as an employee (which is also a question - failure or personal choice?), and keep the company in operation. Just to dig even deeper into this example from a freelance dev perspective (what I know most about): Let's say Sarah starts work as a freelance dev through her own LLC. She charges a very low rate. This is the kind of competition I refer to in my original comment. After a year and a half, she realizes that she isn't making enough money for her trouble, and decides to start working as an employee for a company. The LLC sticks around for another 5 years for various reasons. How should we count this? Is this a case of a business failure? She certainly didn't go bankrupt or anything. The LLC is still around, so she probably counts for governmental purposes. And arguably, she shouldn't count as a "failed business". On the other hand, if I'm a freelance dev in the area who knows that you need to charge twice what she's charging to get anywhere near a decent salary as compared to working as an employee. From my perspective, this is definitely a business failure, in the sense that if someone tells me "your rates are too high, look at Sarah's rates, why don't you charge less", my answer to them would be "she doesn't realize it, but she's selling 1 dollars' worth of value for 80 cents".
    - smogcutter 9y ago
      Your questions are answered in great detail in the link at the bottom of the BLS page: https://www.bls.gov/opub/mlr/2008/12/art1full.pdf https://www.bls.gov/opub/mlr/2008/12/art1full.pdf
sp332 9y ago
This is a very common thing to hear, but Fortune couldn't even find an original source let alone actual data to back it up. http://fortune.com/2017/06/27/startup-advice-data-failure/ http://fortune.com/2017/06/27/startup-advice-data-failure/
- edanm 9y ago
  Well, it really depends on what you think I meant. You're interpreting me as talking about startups (which I explicitly wasn't, since I was talking about freelance work). Even assuming we're talking about startups, the article is looking at venture-backed startups, and defining failure as returning less than 1x. This gets two things "wrong": 1. If talking about startups, most people (founders, investors) will consider a return of 2x to be a failure as well. 2. You're already limiting the discussion to startups that have been venture backed. IIRC in venture-land, the number of startups that are considered to be returning a meaningful return is around %10-%20 for the best funds.
  - sp332 9y ago
    I went with startups because I thought they were even more likely than average businesses to fail. Do you think that's a bad assumption?
    - edanm 9y ago
      No, I think that's a great assumption. Well, startups vs. general businesses - I think specific things like restaurants might fail at a pretty high rate too. I think the rest of my comment stands though. And especially, if you're singling out specifically VC-backed startups, I'm guessing their 1-year failure rate is practically zero, since they usually raise enough money to survive at least 18 months. That's why the details of what exactly we're talking about matter a lot here. I think, for all VC-backed startups, there are statistics that show a more-or-less 90% rate of startups "failing" in the sense that VC's care about. But it's really more-or-less- I'm assuming it's a made up statistic that is in the area of the truth.
HeyLaughingBoy 9y ago
There's a very good book about pricing called How Much Should I Charge? that warns about exactly this. Her advice is to make sure that you base your "absolute minimum" price on what it takes to sustain your business and not just on what your competitors are charging because the competition could be going out of business and just don't know it yet.

deleted 9y ago

[deleted]

pcarolan 9y ago

I’ve even seen companies struggle to sell a dollar for 90 cents. Great point.

cableshaft 9y ago
I've even seen companies struggle to sell a dollar for zero cents. I worked in video games. Even making your game free didn't always translate into downloads for some of these products.