I’ve lost count of how many times I’ve heard this from founders:
“We have product-market fit.”
Me: “Oh awesome! How many customers do you have?”
Them: “Three.”
Me: “…”
I’m not saying you don’t have product-market fit with three customers. I’m saying you can’t actually know yet. And that distinction? It matters more than you think.
Here’s the thing: you could probably find three or four people to pay for almost any product out there—even a bad one. But that doesn’t mean you have product-market fit.
Most founders are measuring product-market fit on vibes instead of metrics. They feel like they’re there, so they assume they are. And I get it—when you’re in the thick of building something, it’s easy to mistake early enthusiasm for true alignment between your product and market.
But there are actual, quantitative ways to measure this. And understanding them can save you from making expensive mistakes that could have been avoided.
The old-school ways (that everyone still uses)
Let’s talk about the two OG methods for measuring product-market fit that most people know about. They’re not terrible, but they’re also not the whole picture.
Method #1: Net Promoter Score (NPS)
You’ve probably seen this before: “How likely are you to recommend this product to a friend?” on a scale of 0-10.
Scores of 9-10 are promoters. 7-8 are passives (who you completely ignore in the calculation). Anything 6 or below are detractors. You subtract detractors from promoters, and boom—that’s your NPS.
The problem? NPS measures sentiment, not behavior. It’s asking people how they feel about your product, not what they actually do. And how someone feels in one moment can be vastly different from how they feel six months later—or whether they’re still a customer at all.
I’ve talked to several customer success professionals who are pretty critical of NPS because it can feel like a vanity metric. It’s nice to see high scores, but it doesn’t always correlate with actual retention or expansion. It’s a feel-good number that might not be grounded in reality.
Method #2: The product-market fit survey
This approach was popularized by Superhuman’s CEO Rahul Vohra, building on work by Sean Ellis who discovered that companies with strong growth almost always had more than 40% of users answer “very disappointed” when asked how they’d feel if they could no longer use the product.
The survey typically includes three to four questions:
- How disappointed would you be if you couldn’t use this product anymore? (Very disappointed / Somewhat disappointed / Not disappointed)
- What type of people do you think would benefit most from this product?
- What is the main benefit you receive from this product?
- What would you want to see us add or improve?
The goal is to filter responses by people who describe your ideal customer profile (ICP), then measure what percentage say “very disappointed.” If 40%+ of your ICP says they’d be very disappointed, you’re getting closer to product-market fit.
I’ve used this survey a ton in my work with SaaS companies. It’s genuinely helpful. But here’s my issue: it’s still based on what people imagine they would feel, not what they actually do. Someone could say they’d be “very disappointed” to lose your product, but six months later, they’ve churned for reasons that have nothing to do with the product itself.
That’s why I think these are leading indicators at best. They give you hints, but they don’t tell you the full story—especially long-term.
The better ways to measure product-market fit
If you really want to know whether you have product-market fit, you need to look at metrics that are grounded in actual customer behavior, not aspirations or feelings.
The metric I actually like: Gross Customer Retention (GCR)
Also called Gross Logo Retention (GLR), this one is simple: out of all the customers you’ve ever had, what percentage do you still have today?
The benchmark? More than 60%.
This isn’t based on vibes. It’s based on who’s actually sticking around. And unlike NPS or the PMF survey, it’s measuring real behavior over time.
Now, if you’re just starting out, your GCR might look sad—like, really sad. In the first six months, you might be well below 60%. And that’s okay! That’s actually normal. You’re still figuring things out. You’re still iterating.
But if you’re a year or two in and your GCR is still below 60%? You probably don’t have strong product-market fit yet. Maybe you targeted the wrong people. Maybe you had the right people but the wrong product. Maybe your product just didn’t have enough features to keep them around long-term.
It would be more accurate to say “we’re working toward product-market fit” rather than “we’re there.”
And here’s what I love about GCR: it compounds over time. Even if people drop off early on, as you improve your activation rates and reduce churn, you’ll see that percentage climb. You might lose some of those early customers from three years ago, but if you’re picking up more business that stays with you for multiple years, your GCR will reflect that.
The metric you absolutely need to track: Net Revenue Retention (NRR)
If you’ve been following my work for a while, you know I talk about NRR constantly. It’s one of the most critical KPIs for understanding the health of your SaaS business.
Here’s what it measures: of all the revenue you acquired 12 months ago, how much of it do you still have today from that specific cohort?
The benchmark? At least 80% average at 12 months.
If you’re above 80%, you’re going to have a much healthier, easier-to-grow business. If you’re at 60%, growth is going to feel like crawling. If you’re below 50%, you might actually see declining MRR—you’re losing money.
Why is this so important for measuring product-market fit? Because NRR tells you if customers who aren’t good fits are churning. It tells you if your product strategy, go-to-market strategy, or pricing is misaligned. It tells you if people are actually getting value long-term, not just in the honeymoon phase.
Best-in-class, high-growth companies typically have revenue cohort retention of 95% or higher after 12 months. When you get to that level, growth feels almost effortless because you’re not constantly replacing half your revenue every year.
If you’re using ProfitWell, Baremetrics, or ChartMogul, you have this number available right now. Go look at it. If you have annual plans, look at your 13th month instead of 12th month.
And here’s the thing: GCR and NRR can tell different stories depending on where you are. Your net revenue retention might be strong for recent cohorts (because you just launched new pricing that’s working), but your gross customer retention might still be recovering because it’s looking at all customers you’ve ever had. That’s why you need both.
The softer indicators (that still matter)
There are other metrics worth watching, even if they’re not definitive on their own:
Monthly churn rate: Ideally less than 5% month-over-month. Some experts like Ramli John say less than 3% is best.
Sales close rates: If you’re sales-led, aim for at least 30%. This could say more about your sales process than product-market fit, but it’s still a signal that you can reliably sell this thing.
Trial or freemium conversion rates: If you’re product-led, strong conversion rates (20%+ for free trial to paid, 3%+ for freemium to paid) suggest there’s something compelling here.
But here’s what’s critical: don’t just look at these numbers in aggregate. Segment them.
When Ben Chestnut—founder and CEO of Mailchimp—heard my talk at MicroConf, he called it “cheating” because he had to calculate things like NRR manually by spreadsheet, and then segment it by customer type, plan, buyer, and region. He didn’t have the tools we have today.
But he knew that looking at everything in aggregate would be misleading. You need to understand which segments perform differently. Maybe one segment has terrible NRR because they go out of business (not your fault), while another segment has 112% NRR because they’re expanding like crazy. That tells you where to focus your growth efforts.
When you don’t actually have product-market fit (and how to tell)
Here’s the uncomfortable truth: if companies come to me saying “we have product-market fit” with a handful of customers, I’m going to set expectations.
I’ll say: “It sounds like you have feelings of early product-market fit. And that’s great! But our work together might reveal that there’s more work to be done than you think.”
Because here’s what I’ve seen happen:
Founders assume they have PMF → They start scaling marketing and sales → Nothing flies off the shelves like they expected → They’re confused because they felt so sure → Turns out their GCR is below 40% and their NRR is at 55%.
True product-market fit feels different. It feels like things are flying off the shelves. You hear it in sales conversations: “Where have you been all my life?” or “This was a no-brainer for me.” Now, some markets are just more reserved—you might never hear that even if your product is incredible. But in most cases, you’ll feel the pull.
The danger isn’t in being optimistic. Optimism is great! Founder mojo is essential! The danger is in skipping steps because you think you’re further along than you are.
The hard truth about those first few customers
If you have five customers, you might have early signals. But you don’t know yet.
If you’ve never charged anyone, you definitely don’t know.
If your only “customers” are design partners getting free access in exchange for feedback? You don’t know.
Until you’ve sold to strangers—people who are making real trade-offs with their money, not getting something for free—you can’t say you have product-market fit.
And even when you do start charging, you won’t fully know until you’re a year or two in and can look at retention data.
That doesn’t mean you don’t market. It doesn’t mean you don’t prepare. It just means you’re honest about where you are. It’s more accurate to say: “I have initial feelings of product-market fit, but I don’t know yet” than to say “We’re there” when your GCR is 35%.
So what should you do?
If you’re early-stage and trying to figure out if you have product-market fit:
- Start tracking GCR and NRR now. Even if the numbers are rough at first, you need baseline data.
- Set proper benchmarks. GCR above 60%. NRR above 80% at 12 months. Monthly churn below 5% (ideally below 3%).
- Segment your data immediately. Don’t just look at aggregate numbers. Understand which customer segments perform differently and why.
- Use surveys and NPS as supplementary data, not as your primary indicators. They’re helpful for understanding sentiment, but don’t mistake sentiment for retention.
- Be honest about where you are. If you’re working toward product-market fit, say that. If your numbers suggest you’re not there yet, own it and figure out what needs to change.
The good news? Once you actually have product-market fit—the kind backed by strong retention numbers—growth becomes so much easier. You’re not constantly replacing lost revenue. You’re not struggling to figure out why nothing’s working. You’re building on a foundation that’s actually solid.
And that’s worth the wait.
Not sure where you stand with product-market fit? We can help you dig into your numbers and figure out what’s really going on. Book a discovery call and let’s take a look at your metrics together.