The second question that you need to address to achieve product/market fit is "can I build a business around my product?" which has to do with finding a business model. There are two ways to examine this question:
- From an external point of view, you might not be able to profitably acquire more customers due to competition. In particular, if your product offers continuous rather than disruptive improvements it might be very difficult for your startup to displace entrenched firms.
- From an internal point of view, you might not be able to profitably acquire more customers because your product or business model is not scalable. For example, your product development or distribution costs might be prohibitively expensive.
Many startups with ambitions to have massive impact and easy access to venture capital postpone such business model questions for quite some time. There are a number of reasons why this can be a good idea including trying to become dominant in a new market before competition comes in and inability to monetize small audiences (especially for ad-based business models). This can be a scary gamble because it exposes the venture to the substantial risk of crumbling under its own weight if there is no sustainable business model. This is an example of one of the many leaps of faith that entrepreneurs sometimes have to make when trying to create a world-changing company.
On the final page of this section, I discuss other common issues that entrepreneurs encounter on the path to achieving product/market fit.