Updated: Sep 14, 2021
Summary: By looking at which of your customers were easiest to acquire, most profitable and derived the most value from your offering, you can deduce who your ideal customer is.
Typically in early-stage companies, the founders will first sell their offering to people who know them well -- former customers, colleagues and friends. Eventually though, they run out of people who know them, and they need to start selling to people who don’t have an existing relationship with them. This is where identifying their ideal customer profile is essential.
Just because you can sell to someone doesn’t mean you should
When I’m working with a client, and I ask if they know what their ideal customer looks like, they often tell me that anyone can use their product. While this is technically true, in order to start selling to people who don’t know them, their company or their product, they can waste a lot of time, money and effort selling to people outside their ideal customer profile.
The most efficient way to start selling to people outside your network is to very clearly identify who your ideal customer is and then focus narrowly on selling to this audience. But how do you know who this is? If you already have a handful of clients, the best way to approach this is to deduce what your best clients have in common while evaluating them for the definition of an ideal customer.
They are 1) easiest to acquire, 2) most profitable, and 3) derive the most value from your offering, making them great referral sources and repeat customers. Then do an analysis of what they have in common.
Industry, revenue and employee size are the most obvious place to start
The most common and easily identifiable criteria are firmographics like industry, revenue or employee size. Industry is often a great place to start because focusing on a specific industry or two enables you to really speak the customer’s language in your sales and marketing efforts. It’s easy to be seen as the expert.
When I ran an IT services firm, we found that companies with eight to 50 employees were ideal targets for us. Companies with fewer employees either could not afford us or were not as profitable, and companies with more than 50 employees tended to have someone on staff full-time doing the work that was most profitable for us and only used us for special projects, which were less profitable.
Geography may impact their receptiveness to your approach
Is there something about their geography that makes them a great fit? When selling an innovative technology platform to the banking industry, I found banks on the East and West Coast exponentially more receptive to my approach than banks in the South.
Service offerings or other operational criteria may indicate good fit
Is there some other criteria that makes an organization a particularly good fit? I had one client who sold a medical device that could be used by most hospitals, but we found that hospitals with burn centers could be sold as easily as others, but they were much more profitable because they placed much bigger orders.
Technologies deployed may make it easier or hard to sell to them
The technology the company uses might be another consideration when defining your ideal customer profile. If you sell a technology that does not easily integrate with something they are already using, that will impact your ability to sell into that organization. If they already use a product that competes with yours, you will not only have to sell them on yours, you will have to unseat a competitor, which can be harder than making the initial sale. If you’re lucky, you can identity that if a company utilizes a specific technology, they are likely to also be open to buying yours as well.
If they can’t afford it, you’re barking up the wrong tree
Budget is a key piece of information if you sell something that is a sizable purchase. One of my clients had an offering with a minimum $500,000 price tag that they wanted to sell to banks and credit unions. The only organizations with budgets that size for his type of offering needed to have at least $5 billion in assets (another firmographic data point), which seriously limited the market size.
Figuring out what your best customers have in common enables you to go out and find a list of other prospective customers. You already have a great story to tell them about your existing customers, making your story more compelling, which makes it easier to get their attention and close the deal. Starting with companies most similar to your best customers is the fastest way to acquire more customers just like them.
Your ideal customer profile can be deduced from your existing list of customers
They are 1) easiest to acquire, 2) most profitable, and 3) derive the most value from your offering (making them repeat customers and great referral sources)
Look at what your best customers have in common in areas like industry, revenue, number of employees, geography, budget size, service offerings and technology deployed