Last week I attended Venture Atlanta and had the chance to spend time with several entrepreneurs. A conversation in particular really stood out to me, and it was around the ideal customer profile (ICP).
One of the entrepreneurs I sat down with was from out of town, and she shared how her business had gone through some ups and downs over the years. In hindsight, the startup had tried to be too many things to too many customers. A new customer would sign up in a particular industry, and then they would start building programs and campaigns to go after more customers in that industry. Rinse and repeat.
After several years, they had quite a few customers, but churn was high and growth was challenging. Then, last year, they inventoried their customers across the different markets and decided to exclusively zero in on one particular ideal customer profile.
Now, a year later, growth has accelerated within that ICP. Customers outside of the ICP have churned dramatically, and overall, the business is in a much better place, growing nicely with high renewal rates and strong net dollar retention.
Only this conversation wasn’t unique to her.
Last year, I was talking to a different entrepreneur who shared that while they had grown fast, it was clear that one direction with a certain set of features was the future of the business. He was struggling with how to address the existing customers who no longer fit that direction.
After much back and forth and many conversations, he decided that the future of the business had to be with a subset of his existing customers. They weren’t going to achieve their potential by trying to serve multiple markets.
He too made the hard call to zero in on a much more specific ideal customer profile and recognize that existing customers outside of it were more likely to churn.
And that’s exactly what happened. The customers who were no longer a fit left, while the customers who were a good fit loved the product even more. Growth accelerated within that much more focused ideal customer profile.
As entrepreneurs, we’re eager to build and sell to anyone who’s interested. The old adage still rings true that more startups die from indigestion than starvation. Entrepreneurs are generally optimistic and eager to please customers, which helps them be successful but also leads them to try to do too much.
Entrepreneurs would do well to sharpen their ideal customer profile and stay laser focused on the long-term mission while constantly asking the question: Does this potential new customer help us achieve our goals?
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