Top-performing entrepreneurs know that the path to product-market fit is paved with good business judgment. But, even so, how do you know when the market is telling you that you’re onto something and that you’re ready to move forward?
This is the most common question we get asked when working with start-ups.
And the earliest step along the path to product-market fit where this question gets asked the most is when founders are developing a clear understanding of the customer profile with the highest likelihood of saying yes and delivering the highest value now.
This customer profile is commonly referred to as your Ideal Customer Profile, or ICP. Two leading reasons why this question is most often asked:
- Developing an ICP requires a lot of time and energy on something that seems intangible, at least for the first few months. That can feel risky and lead even the best founders to second guess their ICP.
- “Shiny object syndrome,” a known “pre-existing condition” suffered by entrepreneurs.We often wonder if there’s a greener pasture that we have not yet examined.
Changing your ICP is a tectonic shift. That’s because your ICP is the foundation of the entire path product-market fit. Your ICP begets your market messaging, customer acquisition strategy, pricing, business model, and more. It’s almost like your company is starting over, which can be a costly decision.
Before changing your ICP, first try these more cost-effective strategies.
Check Your “C” in ICP
The first and most common cause of a stalled go-to-market strategy is confusing the “C” in ICP for Company, when it should be Customer.
Check your ICP to make sure you did not stop at an industry profile or a company profile instead of drilling down to a customer profile (i.e., an actual person and the “keystrokes” of their business workflow). Without an actual customer profile, you’re likely not getting any qualitative signals that you’re on the right or wrong path.
Our Go-to-Market Starter Toolkit includes everything you need to identify the people who are most likely to become a paying customer. Download your free copy here!
Examine Your Market Development Methods
Next, break down each element of your customer acquisition strategy and identify which individual parts will affect the whole outcome. For example, if you change the pricing strategy, will that increase conversion rates? If you offer a pilot, will more people start working with you and eventually convert? If you move from email marketing to LinkedIn, will you see a different result?
We’ve all heard that the definition of insanity is doing the same thing repeatedly and expecting a different result. But that’s what most entrepreneurs do. They’ll have a product, build a feature-based website, and present those features to different markets until their capital runs out.
Instead, you should focus on one solid market. When you get push back, identify that source of friction, correct it, and see if you get a new result.
Let’s get into an example of this with an entrepreneur that we were recently working with in our virtual go-to-market accelerator. He was thinking about hiring a marketing agency and asked us to look at their proposals. The vendors ranged from $5,000-$10,000 per month and wanted to do various social media ads, SEO, SEM, and change the ICP.
This founder already knew his ICP and had a 60% close rate at the bottom of his funnel (i.e., a validated ICP)! Changing it should be the last thing on his mind.
After speaking with him about why he wanted to change the ICP and start spending $5,000- $10,000 a month in runway, it all boiled down to email campaigns. He mentioned that his email response rate was ony 0.4%. We asked him, “What’s more likely? That you’re in the one market that doesn’t use email or that your email method needs attention?”
When we reviewed his email campaign, we found that:
- The campaign copy was extremely text-heavy;
- Emails were being sent a whopping 14 days apart; and
- The emails were all about his product (i.e., what he does), and not about what he does for his customers.
Let’s pause for a second. We need to understand how the founder got to this point.
He thought that he wasn’t in a scalable market because he couldn’t get enough meetings. But remember, when he gets a meeting, he closes the deal 60% of the time. However, he saw his .4% email response rate and thought that the ICP he was already closing needed to change. He was going to give that up and start spending runway on an entirely new and unproven ICP.
This founder was making data-informed decisions. The problem is that data without the context of where it comes from and the method used to acquire it is misleading.
We worked with the founder to revise the emails. We broke them down into an easily digestible campaign, created a sequence with less time in between touches, and focused his copy on the customer, rather than his product. As a result, his reply rates went up within one week.=
That’s why the ICP is the last thing you should change. Once you examine the method, more often than not, the simplest explanation is probably the right one. The knee-jerk reaction of most entrepreneurs is to blame the market, not the method. But the opposite is true. The market wants to do business with you. You need to show them you have the solution they’re looking for.
Identify Friction and Run the Test Again
Finally, map out your customer journey with an eye towards identifying potential points of friction. Three common elements of friction to examine before changing your ICP include:
- Sales Process
Let’s look at another example from one of our entrepreneurs that’s related to messaging. This entrepreneur was pre-revenue and having trouble finding customers. They had a strong working hypothesis about their ICP, but they were starting to doubt it because they couldn’t get anyone to work with them.
Every time this founder spoke to a prospect, he just talked about his company and his products. He never asked potential customers about the problem they were having.
When he realized this was the issue, he called the same people he was talking to before, but this time he asked them questions about their business. The customers then revealed the problems they didn’t communicate previously. That enabled the founder to talk about the solution for that issue in the context of his startup.
He booked four demos in one day and went from pre-revenue to almost $10K MRR in about six weeks. He didn’t change the ICP. He stopped trying to pitch and started to seek fit.
Notice that nobody had to buy or invest in anything new in the two entrepreneur examples we’ve discussed. They took the resources they already had, made minor changes, and saw an immediate impact on revenue.
How Long Should You Hold On?
Say that you’ve examined the method and reduced friction points, but you’re still not getting the results you expect. You’re having excellent conversations, your pipeline is full, and you’ve got a critical mass at the bottom of the funnel, but it’s just not turning over. Is now the time to change your ICP?
The answer may not be what you want to hear, but you need to hold tight. Your customers don’t move on your timeline, they move on theirs, and there’s very little you can do about that. Revenue and customers are always lagging metrics. If all of your other leading metrics are pointing in the right direction, have faith that customer number one will happen.
While you have this patience, keep doing what you’ve been doing. Keep filling up your pipeline with qualified deals, stay close to companies at the bottom of the funnel, and look for ways to remove blockers so you can make the deal.
I Still Want to Change My ICP
If you’ve examined the method, been patient, and still aren’t seeing results, it might be time to change your ICP.
When switching to a new ICP, don’t just rip the band-aid off. Ease the transition. If you’ve done this right, you should already know your next ICPs, so you’re not completely starting over. For the companies that participate in our go-to-market accelerator, we come up with 5-10 ICPs and rank them in order of priority. This way, we don’t waste precious months of runway if the first, second, or third ICP doesn’t work out.
Finally, understand that when you change an ICP, a new clock starts running. It’s going to take a few months before you see a new result. Change the ICP so that you have enough time and resources to conduct the experiment. If you don’t, you’ll get bad data from this ICP and be back at square one.
What’s Next For Your Go-to-Market Strategy?
Your ICP is like your coordinates in Google Maps. If you don’t have the coordinates, you don’t know where to go.
Once you’ve examined your methods, removed friction, and successfully run your experiments, you’ve naturally developed a process to acquire revenue from the ICP — and that’s where scale comes from.
Once you validate that your playbook works, the name of the game is making that playbook as streamlined and optimized as possible so you can scale. In fact, that’s the second most common question we get. How do I scale my business? Look out for answers to that questions soon! Want to be notified? Sign up below for more go-to-market insights.