500 Startups Growth Handbook

Ideal Customer Profile (ICP)

How do you build an ICP

To build your first ICP you’ll want to start with a framework that includes at least the following:

- - Prospect company size
  - Prospect vertical
  - Prospect funding / revenue
  - Target buyer within this company

Its tempting for some founders to start with a list of their first customers and define their ideal customer from the mean of all of the current customers. This is the tail wagging the dog and will present a lot of bias. Start instead thinking about 1-2 really successful customers and figure out what other customers will be equally as successful have in common. Then answer the firmographics above by who you want to

Sell to based on who will be the best fit for not just your product, but also your sales process.

Ideally, you have enough of a handle on your ICP to start with a small corner of your market doing outreach or qualification for companies that are a great fit. If you’re still looking for inspiration, think about products like Yelp, the popular business listing service that started in just a handful of geographies. Or think about Craigslist, that is free to most users, but focuses on selling in the vertical that brings the most value to businesses (hiring). What you don’t want, is allow yourself to be too distracted by companies that catch your eye, but don’t fit your ICP. If you’re running down the highway and every billboard or advertisement you pass look like a great business for you to call today, then your ICP isn’t tight enough. Once you have a big team that can focus on a lot of industries, verticals, geographies and company size you’ll be able to go after them all. For now, focus.

Common Mistakes Founders Make

The biggest risk in not having an ICP (beyond catching a false positive about your market) is that founding teams will be spread too thin, building a business case for the product in too many verticals (you can’t learn them all) or geographies (if you gotta sell in person, make sure your first few clients are easy to travel to). The other reason founders need to have a tight ICP is that you will often have people suggesting leads (or better making intros) of companies they think can use your product. If you can be specific about the companies that are a good fit, you can ask for better introductions for you to practice your sales process on.

Examples

The reason that setting up your ICP is the key is that so you won’t false identify a pattern that’s not there from selling three companies that don’t look alike. Take an example of a founder who sells graphic design software telling you that he sold subscriptions to these three companies: Apple, Kimpton Hotels, and John’s Florist. You would probably, at first response, be tempted to compliment the founder on selling into Apple and proving that his software can work for three very different companies. But before you pop the champagne, take note that just three examples doesn’t prove the pattern that this software works for all companies. It just proves that three times it was sold. If you ignored geography, industry, and revenue and just focused on company size, it wouldn’t take long to realize that these three companies are very different sizes. Different sizes mean that it’s probably a different selling process (if you are selling to the business, not just the individual, which would be more like a B2C process).

If the founder in the example above had a more focused ICP, honed in on say mid-sized independent hotel management companies, they might focus on selling into the design team of five hotel companies the same size as Kimpton hotels. If successful, they would have a wealth of information on how mid-sized hospitality organizations buy software. They might notice that software that is a capital purchase is bought in October in the hotel business, but if seen as a consumable expense their software can be bought without a budget hearing in October and fall under a “petty cash” limit for purchase in the spring, or whenever the need occurs.

Related Keywords:

Ideal Customer Profile, ICP, Target Customers