If your B2B startup is struggling to thrive, one of the reasons might be that you haven’t worked out how to define your ideal customer profile.
In this article, we’re taking a look at why this step is one of the most important factors in the growth of your business, and how to go about creating ideal customer profiles for your startup.
Why do you need to define your ideal customer?
Every startup begins with the dream of becoming a success story like Ahrefs, Slack, or Basecamp. The reality is that there are a lot of moving pieces involved in growing to this level, and creating a clear picture of your ideal customer is a fundamental part of this groundwork.
If you’re in a hurry to launch and your startup is targeting “everyone,” or you simply don’t know (or care) who your potential customers are, it’s going to be hard to build out an effective marketing strategy.
Plus, you risk wasting a lot of time, energy, and money targeting prospective companies that aren’t interested in your product.
Lighter Capital spoke to Patrick Campbell, Founder of ProfitWell, about why identifying your ideal customer profile is crucial in the startup phase:
“Everything in your business, from your sales and marketing teams to your product and operations teams, works to drive a customer to a point of conversion or justify the price and product to that customer. If you don’t know who those customers are, what they care about, what they don’t care about, and everything relevant to them, then there’s no way you can effectively build a business, let alone your pricing, marketing, product, or support. Your customer is crucial and you need to know them better than anyone else out there.”
Narrowing down your ideal customer profile makes it a lot easier to build a picture of the companies most likely to be interested in your offers. What are their needs? Do you understand their pain points? What will make their business better? How can you position your product as the perfect solution for them?
Getting clear on how to define your ideal customer should be one of your first tasks when you take your product to market.
What is an ideal customer profile?
Your ideal customer profile, not to be confused with a buyer persona, or a target market, is essentially a set of characteristics that define the type of company (not the individual buyer or end user) that will find the most value in your product. As such, they’re most likely to become a long-term customer who will give significant value back to your business in the form of subscription fees, upsells, and referrals.
Creating an ideal customer profile is easier if you’re established and already have some customers, as you can find out:
Who your current best customers are
The value they are getting from your product
Why they chose you over a competitor
What characteristics these customers have in common
From here, you can create a profile of prospects that you can begin focusing your marketing efforts to reach. This group of prospects is most likely to be interested in your product and engaged with your marketing.
If you’re just starting out, you’ll have to do a bit more guesswork to figure out your ideal buyer.
4 Tips for Building Your Startup's Ideal Customer Profile
Creating an ideal customer profile for your business can be a daunting task. It takes a lot of time to collect the information that you need, and even more time to analyze it and distill it into actionable data.
Once you understand how to gather the data you need and how to use it to create marketing content and campaigns – you’ll realize the value in doing it properly.
Here are our top tips to get you started on the path to define your ideal customer profile.
1. Narrow it down
The best way to start on your ideal customer profile is to zoom in on a very specific group of companies which are likely to find value in your product. When you approach things in this way, it enables you to gain traction by marketing to a hyper-targeted segment of potential buyers who are most likely to be interested in what you’re offering.
Don’t think of this process as excluding anyone else who might be a buyer. Narrowing down your ideal customer profile merely helps to focus your messaging where it has the best chance of making the most impact.
Once you’ve had success with your initial group of customers, you can look at broadening your messaging to appeal to other segments of buyers.
Pinpointing exactly who your ideal customers are can involve factors such as industry, geography, job function, demographics, and customer base – or anything else you feel might apply to the core businesses that would be interested in buying your product to solve their problem.
2. Get clear on your value proposition
Clarifying your value proposition is an important part of your customer profiling. What’s the value you can offer to your key potential buyers? Why will they want what you offer? What tangible way will your product help them (in particular, with relation to their bottom line)?
It’s not unusual for companies to get so wrapped up in the excitement of their new business or product that they neglect to ensure this new thing will actually help their potential audience in measurable ways.
3. Speak to your target company
Now you’ve done the groundwork, you have a clearer idea of the target company you want to sell to and how your solution benefits them – but you need to hear it straight from the horse’s mouth.
John Jantsch at Duct Tape Marketing recommends joining industry associations and groups to develop relationships with people in your target customer profile, or trading sample products or beta access for interview sessions that can provide helpful insights. Facebook and LinkedIn groups can be particularly valuable for validating your customer research.
4. Create a detailed description of the type of customer you want to target
As you speak with your theoretical prospects, ask questions about their demographics, skills, positions, needs, and behaviors. Ask questions that can help you describe what they do and what they need. What pain points do they have? Who do they have to satisfy in their jobs?
What particular tasks do they struggle with the most? Use these answers to develop a bio of a fictitious individual or company that is typical of your ideal customer.
It’s possible your research will lead you to split your potential target company into segments with differing characteristics. You can decide to focus on just one subgroup or target multiple types of companies, each with its own specific description. Each of these is its own ideal customer profile.
How you speak to and engage with each of the customer profiles you identify will depend on their particular characteristics. The idea is to make your messaging more effective by envisioning and marketing to a real and specific audience.
Ideal Customer Profile Template
To build out an ideal customer profile, it’s important to identify specific characteristics shared by the companies that will benefit the most from your product or service.
General customer profile templates such as the one below are a dime a dozen and they intentionally have a broad scope, which means they aren’t designed to apply specifically to your company, and they certainly won’t create the kind of highly targeted customer profile you need.
To create your own ideal customer profile, you will need to think critically and identify your own unique set of characteristics that make up your ideal customer.
Using the ideal customer profile template below, we will use each question to think about how they apply to us here at Lighter Capital, and we will fill out the template to develop an example profile for our ideal customer.
What industry does your ideal customer serve?
Example: Here at Lighter Capital, our non-dilutive debt funding model is best suited for software, SaaS, tech services, and digital media startups.
Where are they located?
Example: Currently, Lighter Capital provides loans to U.S. companies only. In the future, we plan to begin offering funding to companies based outside of the United States.
What is their budget?
Example: We’re currently offering $50K to $3M in growth capital to qualified companies, up to 33% of their annualized revenue run-rate. In return, we ask for a percentage of revenue (usually between 2% and 8%, never more than 10%) until the total repayment cap is reached.
What are the most important factors that go into their decision-making process?
Example: Startups often turn to us for financing when they are non-VC compatible, looking for fast funding to meet near term growth opportunities, want to grow their valuation before raising VC, or they simply want to acquire funding without giving up equity or board seats to investors.
What are their pain points?
Example: We provide alternative startup financing solutions to startups who are seeking funding to scale their companies without diluting equity, and in many cases, for those looking to earn better term sheets from prospective investors down the road when raising VC funding.
What are their business objectives?
Example: Startups that come to us for financing are looking to grow their business and increase the value of their company – while also maintaining ownership and control of the business.
Your Ideal Customer Will Evolve
There is no shortcut to creating an ideal customer profile, but it’s something that’s crucial to the growth of your business and the success of your marketing initiatives. Take the time to talk to your existing customers and spend time getting to know potential buyers.
Getting clear on your target customer means you can better understand which companies will find value in your product, what their needs are, and how to connect with them.
Remember that your ideal customer profiles aren’t a “once and done” solution for your business. As your startup grows and changes, your ideal customer will evolve as well.
Make sure you revisit your profiling regularly to reflect shifts in your audience, changes to your products or strategies, or any external trends that might affect your buyers.