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Andrew Chen has a great presentation on what product market fit looks like, along with some key metrics to judge whether you've reached the optimal stage.

Here are some highlights:

  • Product market fit takes years, not months, to reach.
  • Ideally, there's lots of successful competition with traction (but hopefully they're fragmented, incompetent or on a different platform)
  • Easiest path to P/M fit: clone 80% of an existing product and create something innovative on the remaining 20%

For Saas products, P/M Fit looks like:

  • 5% conversion from free to paid
  • 3X Cost Per Acquisition (CPA) to Lifetime Value (LTV) ratio
  • <2% monthly churn
  • Clear path to $100k Monthly Recurring Revenue (MRR)
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