Identifying Product Market Fit Signals in the US Market

Navigating Product Market Fit Signals for US Expansion

A common and costly mistake companies expanding to the US market often make is assuming that the positive product market fit signals they have uncovered in their home market will translate into PMF in the US market as well. In most cases, this couldn’t be further from the truth. Companies entering the US for the first time will find the market has many unique attributes and is very, very competitive.

Identifying product market fit is an ongoing process and there are rarely black and white signals to judge. Before launching your first sales organization in the US market here are some considerations to consider:

Home country PMF
Do you really have product market fit in your home country? Trying to figure out product market fit in your home country while simultaneously trying to figure out product market fit in a country thousands of miles away will only end in disaster. Be honest with your assessment of key metrics across sales, marketing, and product domains to gauge the level of PMF. Understanding your PMF at home provides a solid foundation for expansion. Go-to-market motion specific metrics to assess include:

Sales metrics:

• CAGR of Sales over the Past 12 Months
• Target vs. Actual Sales YTD
• SQL to Sales Conversion %
• Average Sales Cycle (days)
• % of Sales Reps Over Target YTD

Marketing metrics:

• Inbound Lead Velocity
• Lead to Pipeline %
• Lead to Close %
• Customer Acquisition Costs (CAC)

Product metrics:

• Churn Rate
• Net Promoter Score (NPS)
• Long Term Value of Clients (LTV
• CAC:LTV Ratio
• Customer Expansion Rate

If you’re not familiar with these terms, how these metrics are calculated, or how to benchmark your company against them, you can find quite a bit of information online through a quick Google search or via your AI tool of choice. Once you’re reasonably confident that your product has strong product market fit signals in your home country the next step is to start thinking about how to approach the US market.

Starting Over in the US Market
When a company is in its infancy the Founder is the Chief Sales Officer (and most likely Chief Everything Else Officer). As painful and slow going as those initial sales calls were with potential customers, they were extremely valuable in understanding the customers pain points and ultimately determining the early product market fit path for the company’s product. By the time a startup from the UK or EU is ready to expand to the US market they have often grown accustomed to having their salespeople (no longer the Founder) leading sales engagements.

The best path to success in the US market is to travel the exact same path that the company traveled in its earliest days. This means the Founder should be personally leading the first sales engagements in the US market. Only the company Founder has the unique market insights and detailed product understanding needed to uncover initial product market fit. No salesperson, no matter how accomplished, will be able to determine the appropriate product market fit path for the US market. Of course, this means that if the company is truly committed to success in the US market that their US expansion planning should be inclusive of time and budget for the Founder to be in the US market for a considerable amount of time during the first year or more.

Leveraging Early US Customers
If your company is fortunate enough to already have a few customers in the US market before opening an office the US, you have tremendous head start towards determining product market fit. If you don’t already have US customers, you should put real effort into finding some initial US customers. These efforts may include creating demand generation campaigns specifically for the US market, allocating sales development reps for scheduling appointments, and traveling to the US for sales meetings and industry events. Build relationships with your initial US customers, get to know them, their business, their industry, their challenges, and how they use your product. Building strong relationships with early US customers facilitates a deeper understanding of their needs and challenges, paving the way for PMF discovery.

US Partners Require Product Market Fit First
Partnering with US resellers or distributors may seem like a shortcut to revenue, but it requires PMF validation beforehand. Partners will only champion your product when there is tangible customer and market demand. The best technical product rarely wins in the US market. This fact is difficult for technically minded Founders and companies to accept. Early on, you might find a partner who will sign an agreement with your company but it’s important to understand that they will not sell with any gusto unless you have already secured US customers and demonstrated market demand.

Embracing Repeat Sales
The best product market fit signal is repeat sales. Repeat sales can come in the form of new customers, expanded use of your product by existing customers or ideally, both. Repeat sales indicates that you have done the hard work of figuring out the right feature set, pricing model, onboarding and support methods, and competitive positioning. Once a consistent pattern of repeat sales emerges, it’s a key signal to expand and scale in the US.

There are very few things in the business world as painful (and expensive) as scaling up a sales organization before there are strong product market fit indicators and a repeatable sales process. By meticulously assessing PMF metrics, engaging with early customers, and validating demand in advance, European tech companies can materially increase their chances of successfully launching and scaling in the US market.

If you have questions about the US market or US expansion best practices feel free to contact us. We are always happy to talk.