Business model / founder fit

If you work in technology then I bet you’ve heard the term “product/market fit”, which is often abbreviated PMF.

The idea behind PMF is that it’s the point at which your product has met the need of its targeted subset of the market.

At this hallowed point, everything gets easier and business is amazing. Reality is that PMF is a moving target because markets are not static.

As an example you might be the first to roll out a certain set of features. Someone will in time come along who also builds those features and charges less for them. Businesses always need tweaking over time.

A different concept may be more helpful.

I call that concept Business model/founder fit, or BMFF.

The idea behind BMFF is that different entrepreneurs are best meant to run different types of businesses.

Price and payment schedule affect everything

Business models revolve around two major areas that affect everything else:

  1. Price
  2. Payment schedule (one time or recurring)

These two affect how many customers you need to have, what the product looks like (onboarding etc), type of support, team structure, and more.

This is how I visualize it:

 
 

High ticket price / recurring payment

At the top right we have high ticket price, high value, and a recurring model.

This is often the most profitable model, though is harder to scale as it requires highly trained employees. Sales is 1:1 as is support, usually with account managers. Value provided is higher in this model than the others, because the payment required is an investment for almost anyone.

This model is usually best for an agency or a productized service, though can work for an enterprise SaaS for sure.

Low ticket price / recurring payment

At the bottom right we have a large business with thousands of customers all using their product to do a very specific thing.

Within this model, you need a lot of customers (thousands) but you will not be able to commit much time to any of them profitably. Thusm you will not be able to charge as much as another product. You likely have many tiers, from low to high, where the top tiers get 1:1 support and the lower tiers get 1:many. This business requires operations and teams to think scaleably.

Sales is self-serve (maybe a free trial) for the bottom tiers and likely 1:1 sales on the higher (assuming minimum ~$5k CLTV).

Most companies running this model are low price B2B or B2C SaaS, and often gives a discount for an annual subscription.

High ticket price / one time payment

At the top left we have high price and one time. From a sales perspective this model usually requires 1:1 sales, but ongoing support (if offered) requires a team and is 1:many.

Onboarding is usually self-serve and must be smooth to avoid a lot of refunds after the sale because of a product that doesn’t feel premium. Value has to be high, but not as high as a recurring model.

This model is most often used for infoproducts.

Low ticket price / one time

And finally at the bottom left we have one time low price.

This could be one-off purchases like from Amazon or Etsy (though those of course make most of their money off repeat shoppers).
 

This model requires the most scale and streamlined operations to be profitable. It usually requires capital upfront to survive to the desired scale. My opinion is that this business requires the most skilled operators.


At the end of the day, no model is “better” than another. Each has its own plusses and minuses, challenges and benefits.

But if the founder hates the business, it will never even have time to get to product market fit, much less have a huge impact on the world.

Thus, I argue that business model founder fit is more important to get right from the start.

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