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Not all growth is good growth

Updated: Jan 30, 2023

Developing Your ICP Statement

Revenue growth is required for 99.9% of startups and cash is still king. But not all growth is good growth.

What does that mean? And how can we tell good growth from bad growth?

Telling the difference is tough when you need a sale and you need the cash to fund your company (hiring, development, marketing, etc). We all need a guide to make our decisions about which potential customers to work with.

When someone or some company becomes your customer, both parties are making promises. The customer agrees to pay you money. You (the seller) promise to provide a working product and support. Failure to provide a working product or support will quickly lead to customer loss and bad reputation, so don’t take the promises lightly. Even a small customer that isn’t a good customer, will cost you time and reputation.

To decide if this a “good” customer, you’ll answer 3 basic questions:

  1. Is my product build for them? Will they be asking for features that you don’t plan to build?

  2. Can you support them? Will they be over-using support services?

  3. Will they be unhappy, resulting in future loss of revenue and a potential bad mark on your customer-facing reputation?

As most start-ups look for an eventual exit (most commonly an acquisition by another, larger company), you also need to know if this customer will create value with the acquirer. If not, you are exchanging short-term revenue (with the potential problems above) for no value in the exit.

How do you judge? You certainly don’t want to run through the above list for each and every potential new relationship.

The answer is your Ideal Customer Profile or “ICP”. Every business needs to understand their customer and the most effective way to align your business is to codify your ICP in an “ICP Statement”. The ICP Statement is then use by Sales and Marketing to keep watch that only the right customers come through the front door. And all departments must be empowered and encouraged to openly sound the alarm when new customers are not a match.

Here is a sample ICP Statement:

"My Ideal Customer is a mid-sized U.S-based janitorial company that needs to improve their cleaning supply acquisition process to reduce frustration and save money."

You can quickly see how the above statement aligns your company. But before you can create the ICP Statement, you’ll need to look at the characteristics of your Ideal Customer.

Whether you intend to market your product to other businesses (B2B), or direct to consumers (B2C), it’s critical that your ICP:

  1. Is not overly broad

  2. 100% resides within your SAM

  3. Aligns with the customer base of companies that may acquire you in the future.

You’ll create your ICP by answering specific questions about your potential customers. This culminates in an ICP statement - a single sentence that narrowly describes the most important characteristics of your ICP

First, you'll accomplish a SWOT (strengths, weaknesses, opportunities, and threats) analysis of your Ideal Customer”

Strengths are characteristics internal or unique to your Ideal Customer. For example, if developing an ICP for a B2B company, then strengths of an Ideal Customer business may be, “experienced," "cash-rich," and "dedicated customers.” For a B2C company, strengths for an Ideal consumer Customer may be “tech-savvy," "confident," and "motivated to buy.”

Weaknesses are also internal to your Ideal Customer. For a B2B company, Ideal Customer company weaknesses may be, “aging equipment," and "slow processes.” A B2C Ideal consumer Customer’s weaknesses may be, “easily distracted," and "highly reliant on customer support.”

Opportunities and Threats are external to your ideal customer.

For a B2B Ideal customer, opportunities could be “expanding market," and "new technologies.” For an B2C ideal customer, opportunities could be “new mobile device," and "successful investments.”

Finally, threats for a B2B ideal customer may be something like “new competitors," and "new regulations.” And for a B2C ideal customer, “potential job loss" and "risky investments.”

With our SWOT analysis complete, we’ve started to piece together an initial image of our Ideal Customer. Now, let’s more narrowly define your Ideal Customer.

If you'll sell directly to consumers as a B2C, then you’ll list Ideal Customer demographic characteristics like:

  • Age

  • Income

  • Sex and Gender

  • Location

If you’ll sell your product to companies as a B2B, then you’ll identify facts about your Ideal Customer company like:

  • What’s their industry?

  • How many employees do they have?

  • What’s their annual revenue?

  • Are they a global company? Or limited to one country or region?

  • Where do they go to learn about new solutions?

The picture of your Ideal Customer is becoming clearer. Now, you’ll tie your ideal customer to your products and services.

By purchasing your product, does your ideal customer seek to make money or save money? Sometimes it’s tough to quickly answer this question, especially when selling direct to consumers. But motivations nearly always resolve to those two options.

If your product or service appears to save your customers time, then carry that outcome one step further. What will they do with that extra time as it relates to making or saving money?

Next, how specifically will they use your product to achieve their goal? Maybe your product helps a business streamline a process which saves them money. Maybe your new software helps end-users commute faster... saving them time, increasing their productivity, and therefore making them money.

Finally, let’s list the primary problems your ideal customer faces that your product addresses. Like, a company having an outdated warehouse management software, or an end-user always losing their public transportation tickets.

You've gathered a lot of information about your ideal customer. You'll consolidate your answers into a single, brief Ideal Customer Profile Statement that summarizes who they are and what they’re looking for in the context of your product.

Now, let’s revisit that sample ICP Statement:

"My Ideal Customer is a mid-sized U.S-based janitorial company that needs to improve their cleaning supply acquisition process to reduce frustration and save money."

Remember, your ideal customer profile will focus your entire company’s efforts towards beneficial customer growth. So be methodical and confident in developing your ICP statement. ICP is about being obsessed with growing the right customer base.

Not all growth is good growth.

While it may seem counterintuitive, not all growth for a company is necessarily good growth. An exceedingly broad customer base can be very costly to service. And if your goal is to sell your company, customer growth not aligned with your potential acquirer’s customer base is wasted effort. This is because an acquirer will only value growth that aligns with their own customers. This is called attachment. Your acquirer has an Ideal Customer Profile. If your growth doesn't align with your acquirer’s ICP, then you’re likely lowering your company’s value.

Take the time to create your ICP statement. Share it with company to align Product, Marketing, Sales, Service, and everyone else to build products and services aligned to that specific customer. This will save you money, stop you from signing short-term and short-sighted revenue.

As your company grows, you can make a conscious decision to expand product and support to new customer types. But like with everything in BOSS, this should be done with intention to grow the value of your business the right way.

If you want to learn more about building your ICP, register here and use the code BCP123 for access to our ICP course "Build Your Ideal Customer Profile".

If you would like to watch our webinar about ICP and how it impact functional areas, exit strategy and more, click here.



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