Rocket GTM 🚀 - The Surf Index 🏄♂️
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The Surf index 🏄♂️
There are two types of companies. Those where growth feels effortless, like surfing a wave. And those where growth feel like swimming against the tide, a constant struggle.
If you're swimming against the tide it's going to be slow, painful, and drain your energy. Even with an awesome product customers seem to ask for more. You add feature after feature yet no one is wiling to pay for them. It's not a pleasant place to be.
Surfing, on the other hand, is effortless. Deals close easily. Customers are happy. Growth seems inevitable. Most problems here come from not being able to keep up with growth rather than the absence of it.
Every company can be mapped along The Surf Index. Somewhere in between; swimming agains the tide and riding a mighty wave.
There are two factors that determine where you sit:
The impact of pain on your customers
How well developed you product is
Pain is irrelevant. Impact is everything.
"Pain is certain. Suffering is optional." - Buddha
Your product solves a pain. But not everyone who experiences pain suffers. If there is no material impact to the business, the pain is irrelevant.
Here's an example. At Spendesk we released a product called "e-Receipts", it helps finance teams capture and store receipts for over ten years in case they need it for audit purposes.
Due to regulation, almost every company needs to capture and store receipts. But most finance teams struggle to do this because employees suck at keeping them.
Every company has the pain. But not every company suffers from it.
In Germany, people follow the rules. The consequences are harsh for those who don't. In the UK, the attitude is different. People are more relaxed about receipts.
The fine is small enough in the UK that many SME's prefer to take the risk of getting fined over paying for a tool to prevent it. Both the UK and Germany experience the pain of capturing and storing receipts, but the impact is significantly more important for German companies.
Selling this product in the UK would feel like swimming against the tide.
Selling this product in Germany would feel like surfing a beautiful wave in Hawaii.
The pain is the same. The product is the same. But the impact of solving the pain is different.
Key takeaway: Pain is irrelevant. Impact is everything.
Unideal vs Ideal Customer Profiles
Aligning all of your resources towards your ideal customer profile will help your team feel like they're surfing. The moment you target customers with a low business impact it'll start to feel like you're swimming upstream.
Unideal customers may experience your pain, but if the impact of that pain is negligible then you'll likely experience:
Lower customer satisfaction
Lower contract sizes
Tougher sales cycles
The only way to turn these people into ideal customers is to invest in product and address a wider set of problems. Although this can work later on when your addressable market becomes saturated, it's often a distraction in the early days.
Ideal customers, on the other hand, will face higher consequences of not solving their pain. Ironically, your best customers often require the least product development. They tend to pay more. Close more easily. Be less fussy about feature development. Stay for longer. And more likely to promote your product to their peers.
PayPal Catches a Wave 🌊
In David Sack's article he explains the moment PayPal found product-market fit by focusing on their most desperate customer segment; eBay auction sellers.
David Sack's received a message on November 1999 from an eBay power seller.
The eBay seller had turned the PayPal logo into a nice-looking button for her auctions and was asking our permission to use it...Ironically I was forwarded the message not for product reasons but because I was temporarily handling the company’s legal affairs, owing to a law degree I’ve hardly ever used. It was a potential trademark infringement question.
This serendipitous email revealed a use-case that would put PayPal on a trajectory towards a $300bn valuation.
At the time, we were vaguely aware of the auction use case but it was discussed along with splitting dinner tabs, student allowances, and a bunch of other nebulous value props. The truth is that we thought “emailing money” was a terrific product idea but we had no idea who would actually use it or what the market would be.
It seemed extraordinary that an eBay seller had taken the time to create her own PayPal auction button. If she cared that much, how many others did too?
We went to the eBay website and searched for ‘paypal’. Hundreds of auctions appeared in the search results because PayPal was mentioned in the item description as a possible method of payment. Our minds were blown!
Ebay auction sellers currently had to wait for a check to arrive in the mail from buyers, and wait for it to clear. This was a slow process and had a big impact on their business. Using PayPal to instantly receive money safely and securely was a game changer. So much so that auction sellers were actively seeking out ways to make it easier to adopt PayPal.
These users didn't need a ton of product bells and whistles. They could deal with a crappy product, an MVP, because it had such a large positive impact on their business.
They went all-in on this ideal customer profile. Laser focused, they didn't spend a second building out features for poor fit use-cases like splitting dinner tabs. This strategy, along with the now famous $10 referral scheme, worked incredibly well:
At the end of 1999, PayPal had less than 10,000 users.
By the end of January 2000, they hit 100,000 users.
A few months after that, 1,000,000 users.
By the summer of 2000, 5,000,000 users.
Wrapping it up 🌯
To get your company surfing a wave all the way to IPO you need to focus on customers who are impacted the most. Double down on those acute use-cases and go all-in.
Whether it's focusing on a small sub-set of customers, or going up market, when you find customers who benefit the most from solving your pain the tide will turn.
I've experienced first hand doubling prices and doubling win rates at the same time. Not a single piece of product changed. Just the customer.