Don’t Chase Vanity Metrics: PagarBook’s Winning Product Market Fit Strategy

IndiaQuotient
7 min readSep 3, 2023

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By Harsh Pamnani

Join us as we embark on PagarBook’s inspiring journey of finding product market fit. Along the way, the founders faced numerous challenges and gained invaluable insights that can inspire and guide entrepreneurs facing similar situations. But before diving into their incredible journey, let’s take a moment to meet the visionary minds behind PagarBook, who have significantly impacted India’s MSME landscape.

PagarBook Founders — Rupesh Mishra, Arya Gautam, and Adarsh Kumar (left to right)

Rupesh Mishra, an alumnus of MNIT Jaipur, met Adarsh Kumar, an alumnus of IIT Bombay, through a common mentor, and they bonded over their shared passion for making an impact on non-English speakers in our country. Later, they were joined by Arya Adarsha Gautam, also a graduate of IIT Bombay, and together they embarked on their entrepreneurial journey with GyanApp. However, due to scale-up challenges, GyanApp had to be closed. Undeterred, they established PagarBook, their next venture.

Discovering the Need for Employee Management Solutions 🔍

Before beginning the journey of PagarBook, the trio created a framework to figure out their product idea. Their primary focus was achieving high user retention, with a minimum target of 80% of users consistently returning. They also aimed to attract users with adequate disposable income to ensure effective monetization. After conducting research, the team identified small business owners as the target audience for their new product.

Amidst their meetings with small business owners, the trio uncovered a prevalent challenge for SMEs: employee management. In India, where small businesses employ most of the workforce, the absence of effective workforce management systems poses a significant obstacle. Tracking accurate attendance, wages, and advances is crucial for businesses operating on narrow profit margins.

The PagarBook team set a clear objective to develop a unique and customized solution precisely catering to the requirements of Indian MSMEs. In pursuit of this goal, they deliberately refrained from imitating American giants such as Salesforce and Gusto.

Rupesh emphasized their commitment to learning from customers directly: “While secondary research offers macro insights through understanding successful companies in other countries, reading reports, and listening to podcasts, it is the micro insights derived from engaging with customers that build great products.”

In December 2019, the team successfully launched the first version of PagarBook, a digital payroll register capable of calculating salaries based on employee attendance. Employing Facebook ads as a marketing strategy, the team achieved a remarkable milestone with 60,000 downloads within a few days. They provided a WhatsApp number to facilitate user communication, leading to an influx of thousands of messages and calls brimming with valuable user feedback.

Through this feedback, the team discerned a notable trend — business owners with 5 to 10 employees exhibited the most interest and engagement. This discovery prompted them to identify this group as their primary target audience. Rupesh emphasized their unwavering commitment to customer-centricity, stating, “We aimed to create precisely what the customers wanted.” As a testament to this dedication, the founders gladly embraced customer feedback, even if it meant receiving calls at odd hours like 2 a.m. or 4 a.m.

The founders set up three teams to fasten the product development: product, technology, and customer support. The customer support team’s main role was gathering first-hand user insights. These insights were then correlated with user data to formulate a feature pipeline. The team designed workflows to accommodate diverse business types with varying payment structures, such as work basis, daily wage, and monthly salary. Additionally, they devised an onboarding process in various Indian languages.

Due to the steadily rising downloads, the founders believed they had achieved product market fit. However, their assumption proved incorrect. After 9 months, they discovered a significant issue: a high churn rate. Approximately 30% to 40% of businesses were discontinuing their app usage. Despite meticulously analyzing the data, they couldn’t pinpoint specific reasons for this churn. In response, the founders personally contacted business owners to gain deeper insights into the situation and understand the underlying reasons.

During discussions with their users, the PagarBook team noticed that initially, small business owners engaged with the app for 2 to 3 days. However, they eventually felt that they already knew their 5 to 6 employees well, which made the app’s usage somewhat unnecessary. Consequently, they began to procrastinate. Unfortunately, if they procrastinate even once, the attendance becomes incorrect, leading to inaccurate salary calculations. Ultimately, this issue resulted in them never returning to the app.

Pivoting Toward the Right Target Audience ➡️

By now, an entire year had passed, and things didn’t go as planned. The team was uncertain about achieving product market fit. However, in February 2021, during a re-evaluation of the data, they made a crucial discovery. Business owners with 10 to 50 employees comprised a small part of their user base but showed strong loyalty to the app. This observation prompted the team to shift their focus to a new target audience: business owners with 10 to 50 employees.

The founders engaged in conversations with business owners and made a noteworthy discovery. Security guards used the app to record employee attendance, while business owners and the administrative department utilized the PC version for attendance tracking. However, business owners expressed their desire for employees to record their attendance directly, eliminating the need for manual entries by security guards. They were also willing to pay for this solution, recognizing its potential to enhance operational efficiency.

Rupesh says, “We are grateful to our investors like India Quotient, who trusted our insights when we were trying to find PMF. They didn’t impose their understanding on us but gave us the freedom to explore.”

By December 2021, the team successfully launched another version of their product, incorporating three main components: attendance capturing through biometric technology, payroll calculation, and online salary transfer. The team believed they had found product market fit, but one problem still remained to be solved.

Achieving Product Market Fit 🏆

Most business owners were from the manufacturing sector, where employees’ hands often became dirty or had cuts, making the biometric device ineffective. Business owners were reluctant to consider whether the problem lay in employees’ hands, believing that PagarBook’s biometric system was at fault. In response to this issue, the PagarBook team launched “Lens” — a facial recognition app serving as an alternative solution.

Rupesh explained, “Retention metrics gave us the signal that product market fit is achieved.” He elaborated on how the metrics evolved with the product’s development. When the free app was first launched, the team prioritized tracking three important metrics: daily active users (DAU), weekly active users (WAU), and monthly active users (MAU). These metrics provided insights into the level of engagement from users actively entering data into the app, going beyond mere app opens.

As the app continued to evolve, additional metrics were introduced to gain a comprehensive understanding of its impact. These included employee size, feature usage, monthly active users utilizing face scanning on Lens, and app usage patterns during employee onboarding.“For an early-stage company like us, two metrics are the most important ones, one is whether user retention is flattening at a certain point or not, and the second is whether customer acquisition cost (CAC) payback is under control. We felt an early signal of PMF when we saw these two things and started scaling,” added Rupesh.

As shared by Rupesh, instead of setting revenue as their north star metric, they prioritized user retention and engagement. They figured out a retention benchmark for their industry and kept on chasing that instead of chasing DAU and MAU vanity. They proactively contacted customers whenever they noticed a user facing a problem or observed abnormal consumer behaviour. Additionally, they prioritized resolving tickets related to existing features rather than solely focusing on developing new ones.

Advice from Rupesh

To aspiring entrepreneurs seeking PMF, Rupesh advises,

“Stay close to your customers. The market, not hypotheses, will tell you what works and what doesn’t. Therefore, shipping products quickly is crucial. If things are not working, accept that they are not working rather than chasing after vanity metrics. If you are building a software product, retention is the primary indicator of whether your product works. Don’t run until you find retention flattening at a point. Instead, keep on iterating. Moreover, finding PMF requires a lot of collaboration. It’s better if the whole team works collectively from the office rather than remotely.”

The journey of the PagarBook team exemplifies the challenges of finding PMF and the importance of perseverance in entrepreneurship. Despite initial setbacks, they demonstrated resilience and stayed focused on creating a seamless product that addresses a huge pain point for small business owners in India. We wish them continued success in their future endeavours!

PagarBook’s current scale

PagarBook’s story is the last in IndiaQuotient’s #findingPMF series, where we took a deep dive into the product market fit journeys of successful startups. If you have missed the previous chapters in the series, you can catch up on them here: Chapter 1 (ShareChat), Chapter 2 (FRND), and Chapter 3 (Lendingkart).

Also, have you checked out our #pivotseries yet? We uncovered inspiring tales of entrepreneurs who have successfully pivoted their businesses: Chapter 1 (PagarBook), Chapter 2 (Oakter), Chapter 3 (SUGAR Cosmetics), and Chapter 4 (WebEngage).

We’ll be back soon; until then, don’t forget to follow us on LinkedIn, Twitter, YouTube, Instagram, and Threads!

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