I promised to write about the topic Discover a Problem & Design A Product/Service To Solve It today, but as I was on it, I discovered I was almost repeating the same things I wrote the last time. I feel it will be a waste of time and I plead to move to the next topic to save us all the time. So permit me to move on to the topic Product Market Fit (PMF).
If you landed here via search or other means, you may like to check out the previous topic in this series: SME MASTERCLASS: Switching Into The Entrepreneurial Mindset
How do you think it will be to come up with a product or service that people do not need or cannot afford?
After you have come up with what seems to you like a viable business as we looked at in our previous lesson, knowing if it will actually be acceptable by people in your target market is very critical.
Maybe you have seen it work in other climes, (especially seen the cashier counting their money, suddenly you feel you have discovered a viable SME business!)
It’s not as easy as that my dear. You have to wait and do some more homework to find out if such product or service will actually thrive and be acceptable and afforded by the people in your business district.
How do you think a business that sells aeroplane parts will flourish in Aba which has no airport? Will it really make financial sense to site a shop that sells home appliances in a village of less than 500 people who are peasant farmers?
This is where Product/Market Fit (PMF) comes in: Testing to ensure your intended business will succeed in your chosen market.
– What is product/market fit?
Product/market fit (PMF) is being in a profitable market with a product or service that fits people in that market. Fits here includes desirability and affordability.
– Why PMF is important for your business?
No matter how superb your product or service is, if the market for it is not available, it’s no use. The product has to meet the needs of the people it is meant for. If it doesn’t, such business will not make profit and will eventually die. Need I say that the resources invested in setting up and starting the business will go down the drain?
So it means you have to be certain of the PMF of your intended product or service before you jump in. Failure to do so is recipe for disaster!
– How to find the PMF of your business
The first thing to do is to create a small usable sample of such product and have it used and tested by a segment of your target market known as business hypothesis. Where your business will center on service delivery, offer the service to a small segment of the market.
Before you choose the business hypothesis, you have to ask: who are those that need the product, their problems, how your product will solve this problems for them and at what cost to them?
As it’s being tested, to be certain that you are doing the right thing, you will honestly note and answer these questions:
– Do people care about it?
– How regular do they use it?
– How are they using it?
– Hiw affordable is it?
After collating and analyzing your findings, you will know if the business will thrive in such market. If it will, you proceed. If it doesn’t look promising, you make adjustments to the product or move to a different location and repeat the test.
Example, you intend to start up a business to sell food in Diobu (a low income suburb in Port Harcourt). The PMF should center around high end dishes versus basic dishes with single meat (or possibly “without” lol). When you have run it this way for about 1 or 2 weeks, you will likely see that the basic dishes with single meat or without may outsell the high end dishes for obvious reasons.
You don’t need to be told what dishes to focus on when you are fully operational. But if you insist on selling high end dishes, you may need to move the business to places like GRA where more people that can afford it are found.
That should be it for this topic on PMF.
Your questions on Product Market Fit are welcome and I am willing to respond to them asap.
Next we will look at Choosing a Name For Your Small Business. Till then, do have a pleasant week ahead.