I helped a SaaS founder this week to think through his tricky questions about the ICP for his growing $2M B2B SaaS business.
Here’s what I told him:
1) The Ideal Customer Profile is usually not simple and not easy, but it is required to grow efficiently to $10M ARR and beyond.
He had a spreadsheet of his top customers, including region, use case, industry, and ACV. He had also sold these customers himself, so he knows their deeper stories.
But it wasn’t clear exactly what the ICP definition was across all these dimensions. This is normal at this stage and he’s on the right track to improving his business.
2) Get your key leaders together for a deep dive meeting to bucketize the important ICP traits into these 4 categories:
- Great Customers – what are the traits we LOVE to see in customers? Clear need for your specific product? Internal champion? Take onboarding and usage seriously? Larger customers? Refer their friends?
- Good Customers – we LIKE to see these traits in customers, but they aren’t raving fans who will never leave and pay more each year. Yet.
- Problem Customers – we DON’T LIKE to see these traits, but we have hope that they will improve over time if we work together on it. Build new product features, put in extra effort in sales or onboarding, very price-sensitive, not very sticky.
- Crappy Customers – we know enough that we DON’T SELL these prospects. We know they won’t be successful, they cost too much to acquire, they won’t stay long, and they drive us crazy. We scare them away and don’t sell them. Their feature requests aren’t on our roadmap this year.
When you do this exercise, founders learn they don’t see everything, and their team members have savvy insights. They also learn that every team member has different definitions of great, good, bad, and crappy customers.
3) Start with a clear NO WAY to your CCP – Crappiest Customer Profile.
Any discussion of “ideal” is worthless unless you are clear that you don’t sell prospects with certain traits. We don’t pay commissions to sales, we don’t market to them, we don’t spend dev time trying to appease them. For now.
4) Create an up-or-out strategy for your Problem Customers.
Can you fix the product or onboarding? Set better expectations? If their CAC is still bigger than their LTV and they are publicly grumpy, you may need to stop selling to them (as CCPs).
5) Start to identify themes in your GREAT and GOOD buckets over the next month.
Sometimes it’s obvious that they need a certain number of employees, or they want a specific feature, or it’s a particular industry and not others.
But most of the time, it’s more complicated. What they have tried before? Is there a clear ROI? Do they want the features we have now?
Create a clear story for your Great, Good, Bad, and CCP customers. This is tricky, but it’s figuroutable.
6) Double down on your Great customers and ignore your CCPs.
This is what creates real leverage to grow faster and more efficiently.
