Strategy

Product-Market Fit is the degree to which your product satisfies a strong market demand. When you have PMF, customers are actively pulling your product from you rather than you pushing it onto them. Marc Andreessen defined it as 'being in a good market with a product that can satisfy that market.' The Sean Ellis test quantifies it: if 40%+ of users say they'd be 'very disappointed' without your product, you have PMF. Before PMF, nothing else matters — marketing spend is wasted, hiring is premature, and features are guesses. After PMF, everything gets easier: organic growth appears, retention improves, and word-of-mouth starts compounding.

PMF Score = % of users who'd be 'very disappointed' without your product (target: ≥40%)

Pricing strategy determines how much you charge customers and directly impacts revenue, positioning, and perceived value. The three primary approaches: (1) Cost-Plus: price = cost + margin (lazy, leaves money on the table). (2) Competitor-Based: match or undercut competitors (race to the bottom). (3) Value-Based: charge 10-20% of the value you create for the customer (optimal). If your product saves a customer $50,000/year, charging $5,000/year (10% of value) is the sweet spot. The customer gets 10x ROI, and you capture meaningful revenue. Pricing is the fastest lever for revenue growth — a 1% price increase typically adds 11% to profits.

Optimal Price ≈ 10–20% of the $ value your product creates for the customer

A competitive moat is a durable advantage that protects your business from competitors, just like a castle moat keeps invaders out. Warren Buffett popularized the term: he only invests in companies with 'wide moats.' The 5 types are: network effects, switching costs, brand, cost advantages, and proprietary technology. Companies with strong moats earn 20%+ returns on capital vs 8-10% for those without.

Moat Strength = Switching Cost ÷ Annual Subscription Value

Total Addressable Market is the total revenue opportunity for your product if you achieved 100% market share. It's broken into three layers: TAM (total market), SAM (Serviceable Addressable Market — the segment you can reach), and SOM (Serviceable Obtainable Market — what you can realistically capture). Investors use TAM to assess if a market is worth entering. VCs typically want a $1B+ TAM to justify their fund economics.

Bottom-Up TAM = Number of Target Customers × Annual Contract Value

A Go-To-Market (GTM) strategy is the plan for how you'll reach, acquire, and serve customers profitably. It answers three questions: WHO is your ideal customer? HOW will you reach them? WHY will they choose you over alternatives? There are three dominant GTM motions: Sales-Led (Salesforce, $80K+ ACV), Product-Led (Slack, Figma, <$1K ACV self-serve), and Channel-Led (Microsoft through resellers). Choosing the wrong motion for your price point and buyer is the #1 reason startups stall at $1-5M ARR.

GTM Efficiency = Net New ARR ÷ (Sales + Marketing Spend)

A network effect occurs when a product becomes more valuable as more people use it. Metcalfe's Law states that the value of a network grows proportional to the square of its users (V ∝ n²). A phone network with 10 users has 45 possible connections; with 100 users, it has 4,950. This creates a virtuous cycle: more users → more value → more users. Facebook, Uber, Airbnb, and LinkedIn all built trillion-dollar businesses primarily through network effects. There are 4 types: Direct (WhatsApp — more users = more people to message), Indirect/Two-Sided (Uber — more riders attract more drivers and vice versa), Data (Google — more searches = better results), and Platform (iOS — more users attract more app developers).

Metcalfe's Law: Network Value ∝ n² (where n = number of users)

The Flywheel Effect, coined by Jim Collins in 'Good to Great,' describes a self-reinforcing growth loop where each component accelerates the next, building unstoppable momentum over time. Amazon's flywheel: lower prices → more customers → more sellers → greater scale → lower costs → even lower prices. Each turn of the flywheel makes the next turn easier. Amazon grew 27% annually for 20 years not from any single initiative, but because every investment strengthened the flywheel. The key insight: flywheels are HARD to start (the first few turns require enormous effort) but nearly impossible to stop once spinning.

Switching costs are the barriers (financial, procedural, emotional) that make it expensive or difficult for a customer to switch to a competitor. Higher switching costs = higher retention and pricing power. There are 4 types: Financial (Salesforce's $10K+ migration cost), Procedural (retraining 200 employees on a new CRM takes 6 months), Data (your 5 years of Slack messages are trapped), and Emotional (brand loyalty, familiarity). Apple's ecosystem has all four: $2,000+ in repurchased apps, learning a new OS, losing iMessage/AirDrop interoperability, and identity attachment. This is why Apple's iPhone retention rate exceeds 92%.

Total Switching Cost = Migration Cost + Retraining Cost + Productivity Loss + Data Migration Risk