90% of startups fail! What can help?
Purchases from early adopters. How can early adopters buy from you? Well, know who they are first and this is where defining your ideal customer profile comes in.
What is ideal customer profile (ICP) and why does it matter?
In its simplest form, ICP is the niche group of buyers you are building your initial product for. It is NOT your TAM but it is a group of buyers that is part of the initial subset of your TAM. Businesses don’t buy your products, individuals do. Zero in on that type of individual that is going to buy your product.
Why it matters:
• Gaining feedback: When you define your ICP, it is easier to gain feedback from this subset of buyers and then iterate
• Initial traction: By defining your ICP and iterating to their needs, you will be able to gain initial purchases that will put you on a path to success.
Without knowing your ICP, your product/service is going to fail.
How do you define your ICP?
Let’s take an example of an ICP: Founder of a SaaS business (1-50 EE) in USA/ Canada at the seed stage that does not have a background in sales and has a challenge to position their product.
Here are the components:
• Title: Who is the buyer of your product? NOT the business, but the person at the business that is making the purchasing decision. In this example, it is a founder.
• Type of business / Industry: You need to know the overall industry at the onset that you are targeting. In this case, you are going ‘kind of’ broad but this will help you to niche further down as you have conversations.
• Location: Where are your buyers located? In this example it is USA/Canada.
• Funding/Revenue: Do they have the money to buy your product? In this example based on my business model; pre-seed/seed stage companies could have the money to buy my product.
• Head count: If you are selling a typical SaaS product then identifying the company size is particularly important. The need for a 50-100 employee count company is HUGELY different from a 200+ employee size organization. In this example, it is a company that has 1-50 employees.
• Background: Who are these buyers, what type of a background do they have, are they someone who is a technical person or a person who is good with numbers? By defining certain characteristics, you will be able to further niche down. In this example it is a founder that does not have a background in sales.
• Problem they ‘could’ have: What are you really solving for? Is it a vitamin (nice to have) or is it a pain killer (must have)? In this example it is the challenge founders face to sell their product.
• Sales cycle: This is what a lot of founders don’t think off when starting up. If you are building a product that is focused on an enterprise then their sales cycle is fairly long. Depending on the product, it could take 9-12 months to get your first sale. Do you have that type of bandwidth and funding to wait for a year? If you do, then great, but if you don’t, then try and sell to someone who can buy your product quickly if possible, to gain your initial traction.