Once product-market fit is achieved, the singular obsession must be retention. Before focusing on expansion metrics like NRR or efficient acquisition (CAC), you must first prove you can stop the "leaky bucket" and keep the customers you've already won.
Related Insights
A sale is just the first step. The true measure of product-market fit is high retention, specifically when the product becomes so integrated into a customer's workflow that the idea of canceling their subscription would be bizarre and disruptive. Founders should be designing for this "weird to cancel" status.
Many founders mistakenly define Product-Market Fit by revenue (e.g., "$1M ARR"). The correct measure is the ability to predictably create customer value. This is best quantified by a leading indicator for long-term retention, not sales figures, as revenue can be achieved without true market fit.
Metrics like product utilization, ROI, or customer happiness (NPS) are often correlated with retention but don't cause it. Focusing on these proxies wastes energy. Instead, identify the one specific event (e.g., a team sending 2,000 Slack messages) that causally leads to non-churn.
The true indicator of Product-Market Fit isn't how fast you can sign up new users, but how effectively you can retain them. High growth with high churn is a false signal that leads to a plateau, not compounding growth.
Everyone obsesses over Net Revenue Retention (NRR), but Gross Revenue Retention (GRR) is the real indicator of product health. GRR tells you if customers like your product enough to stay, period. A low GRR signals a core problem that expansion revenue in NRR might be masking.
The current AI hype cycle can create misleading top-of-funnel metrics. The only companies that will survive are those demonstrating strong, above-benchmark user and revenue retention. It has become the ultimate litmus test for whether a product provides real, lasting value beyond the initial curiosity.
True, scalable SaaS growth isn't just an upward line of new user acquisition. It's achieved when the user churn curve flattens out, indicating a core group of users who are activated and never leave. This creates a stable, compounding base upon which new acquisition efforts can build.
Every business has a growth ceiling where new customer acquisition is completely offset by churn. No matter how many new customers you add per month, your business will stop growing once churn equals acquisition. Plugging this 'leaky bucket' is more valuable than pouring more water in.
The ultimate proof of product-market fit isn't just low churn; it's a "smile curve" on a cohort retention chart. This occurs when users who previously canceled later return to the product. This "just kidding, I'm back" behavior is a powerful signal that the product is indispensable.
When facing uncertainty across your entire GTM strategy, prioritize the foundational elements. Begin with the customer experience: decreasing time-to-value and increasing expansion (NRR). If you cannot retain and grow existing customers, acquiring new ones is a futile effort that only masks a deeper problem.
