Product market fit doesn’t equal profitability. Here are two ways to secure both.

• 65% of startups fail despite achieving product market fit.
• Focus on users who need your product the most to forge a path to profitability.
• Put positive news under the microscope to set yourself up for sustainable growth.

According to a study of why startups fail by CB Insights, these are the top reasons given by founders:

• Ran out of cash or failed to raise new capital (38%)
• No market need (35%)
• Got outcompeted (20%)
• Flawed business model (19%)
• Regulatory or legal challenges (18%)
• Pricing or cost issues (15%)

This shows that product market fit is the second most common reason that startups fold. But on the flip side, we can see that 65% of startups that fail did find product market fit. Which begs the question: where did it all go wrong?

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What I find most interesting here is that, when product market fit isn’t the problem, it’s almost always about money. Running out of cash, flawed business model, pricing or cost issues. These problems come up again and again in startup post-mortems, suggesting that product market fit doesn’t always mean a happy balance sheet.

I recently ran a webinar with Jim Morris (highlight reel), a serial Silicon Valley entrepreneur with IPO and buyout experience. And this is something he backed up during our conversation.

“Product market fit is getting penetration into their market,” says

Jim Morris

. “And then the hard part is, does that market pay enough money for them to be a successful business?”

This question is the key to building a profitable and sustainable business — especially in today’s economic climate. Companies can’t go for hyper-growth any more and make profit a problem for the future. Product market fit and profitability need to be your goals from the start.

Let’s look at two ways you can do exactly that.

1. Ask the disappointment question to focus on the right users

“On a scale of 0 to 10, how likely are you to recommend our business to a friend or colleague?”

This is the classic question startups ask users to work out their Net Promoter Score (NPS). You’ve probably used it yourself. I know I have. But while some product leaders love it, others have suggested that it’s time to retire NPS altogether.

One of the biggest reasons for this argument is that NPS doesn’t tell you why someone would recommend your business. And, to continue that line of thinking, it doesn’t tell you who they would recommend your business to either.

Enter the disappointment question.

“In the beginning,” says Morris, “when you don’t have $20 million in revenue, what I’m looking for in my clients is to ask them a very simple question. I call it the disappointment question.”

Here’s how it works:

How disappointed would you be if you didn’t have access to this product/feature?

• Very disappointed
• Somewhat disappointed
• Not disappointed

“When you hear ‘very disappointed’, you lean in and you try to figure out why,” says Morris.

Unlike NPS, the disappointment question gives you an immediate pool of users who need your product. If someone from finance suggested getting rid of it to cut costs, they would fight your corner. And if they moved to another company, your tool would be the first one they request.

By asking the disappointment question, you can hone in on the people who need your product the most, work out how scalable they are as a market, and target them for future growth.

2. Create a culture of caution around positive feedback

When you work in a startup, everything is new and exciting. The team is young and hungry for growth — both personally and on a company level. So, when good things happen, they want to shout about it.

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“People in your company will take any positive news, blow it up, and it will cover up any negativity,” says Morris. “And that works for three months, six months. You might convince investors to give you money. But you’ve got to be in this for the long run.”

That’s not to say positivity doesn’t have its place. Recognizing performance is an important part of a healthy company culture, with 72% saying it has a significant impact on employee engagement. And, as research from Gallup shows, companies with a highly-engaged workforce are 22% more profitable.

The key, then, is to be cautious. “Being intellectually honest,” says Morris, “I find companies like positive news and they’re not skeptical enough about it. If you can, as a founder, put all your energy into this product but, at the same time, maintain that it’s probably not the right fit yet. That skepticism is how you tease apart the inbound information you’re getting.”

Let’s look at a quick example:

1. You launch an MVP for a new feature and get positive feedback from a handful of users.
2. Your team shouts about it on Slack, explaining that the feature achieved 40% adoption within its first week. They’re already putting new improvements on the roadmap.
3. But, as the cautious product leader that you are, you decide to dig a little deeper.
4. On further investigation, you discover that, while first-use adoption is at 40%, only 6% have used the feature more than once.
5. You ask the team to pause work on any improvements so you can wait for more data. But, after another week, this number hasn’t budged.
6. Together, you come to the conclusion that the improvements should be scrapped so you can focus on features with more impact.

By exercising caution and acting as the voice of reason when everything looks rosy, you’ll help drive efficient and sustainable growth for your business.

Final thoughts

Product market fit doesn’t automatically equal profitability, as many startups have learned the hard way. In today’s economic climate, founders and product leaders need to target both of these goals from the start.

Ask the disappointment question to find users who need your product the most, then target more people like them. And by challenging positive feedback, you can make sure your resources are used in the most efficient and impactful way possible.