A Product Manager’s job is to help the business make more money than it spends.
The Product Manager (PM) does this by developing new products that provide value for the business’s customers, which in turn generates revenue for the business.
The PM develops new and valuable products for customers by performing two kinds of tasks:
- Identifying which products and services provide value for customers
- Building the products and services that provide enough value to customers that they will part with their money to buy your stuff.
In the software startup context, what these two kinds of tasks entail will differ based on the stage of the company where you work as a PM.
Your startup is born! Aww!
Similar to caring for an actual newborn (so I’m told), these are hard days full of sleepless nights and your top priority is to ensure that your startup survives.
Your main goal as a PM here is to achieve Product Market Fit. You will do this by shipping MVPs, learning, and iterating.
How do you know you’ve achieved Product Market Fit?
- You can look at qualitative and quantitative metrics like Customer Dependency, User engagement, and Referrals.
- You can measure Net Promoter Score, i.e. NPS, to see if your users like your stuff.
- You can check if at least 40% of your users say they’d be “very disappointed” without your product.
- Some people think Revenue = Product Market Fit, whereas other people think Revenue ≠ Product Market Fit.
If you are struggling to achieve Product Market Fit, the problem is in either the identification of the right value to your customers, the delivering of the right value to your customers, or some of both.
You’ve made it through the birth and you have achieved Product Market Fit. Good job!!
It is now time to build a profitable business.
There are historical precedents for how businesses grow, and it is possible for some businesses to grow astronomically and break these precedents, but it is more plausible for some businesses to set realistic (i.e. closer to normal) targets for growth.
“Growth” here can mean an increase in users, an increase in revenue, or both.
As the PM, you will want to track metrics to help you identify whether or not you are delivering the right value to your customers, and to help you build more things that deliver value.
The point of tracking metrics is to eventually suss out how your company will make more money than it spends.
Metrics here include:
Revenue adds up to things like:
- Gross Revenue
- Gross Margins
- Contributing Margins
- Operating Margins
- At the customer level, you will want to attend to the CAC (Cost to Acquire Customer)
Opinions abound as to what the values of these metrics should be during the lifecycle of your startup:
- For example, the “40% rule” is that your growth rate and profit should sum up to 40%.
- CLTV should be about 3 times CAC for a viable SaaS company, and you should recover your CAC in less than 12 months to prevent your business requiring too much capital to grow. (Kissmetrics blog)
- It is hard though, to have CAC be lower than LTV.
Dave McClure’s “Pirate Metrics: AARRR!” is a comprehensive framework for growth metrics for startups.
This breaks down to some of these easy-to-remember acronyms:
- DAU / WAU / MAU
- Activation rate
- CCR: Customer Churn Rate i.e. Attrition Rate (i.e. how much are you hemorrhaging customers)
- MRR: Monthly Recurring Revenue — a function of retained users that don’t hate or may even like your product 😉
- ARPU (Average Revenue Per User)
- LTV (Lifetime Value)
- RPP (Repeat Purchase Probability)
As you track metrics, build features that favorably influence your metrics. You can:
- A/B test variations of your product to increase conversions
- Run Design Sprints to launch new verticals
- Remember that the needs of the buyer can be different from the needs of the end user, especially in the enterprise context
If you’ve gotten to this stage, congratulations! You have grown into a profitable business, which is no small achievement.
At this stage, your priorities as a PM have drastically changed. You will now be thinking about how to:
- Optimize (reduce operational inefficiencies).
- Scale sustainably.
- Hire the nicest people who are also highly-skilled.
- Be a market leader
- Keep up with the competition: Disrupt! Innovate! Constant Vigilance!
- Create the workstreams and systems you need to make ambitious things in the world.
- Build an ethical company: This is not just a PM’s job, this is everyone’s job, which means it’s also the PM’s job.
- Create a good culture — be good to your people.
- Engage with the community.
- Ramp up your Diversity & Inclusion initiatives.
- Make the world better.