Identifying your ICP: a guide for startups

An ideal customer profile (ICP) defines the target audience for your product or service. A startup’s ICP is the buyer (whether a company or an individual) that is most likely to buy and stay loyal over time.

Startups don't simply discover their ICP through a workshop or brainstorming. This profile becomes clearer over time through interactions with leads and sales data. So, defining an ICP isn't a step a startup can (or should) rush.

Learn when to define your ICP, how to determine it, and common mistakes startups make in the process.

Why identifying an ICP is difficult as an early stage company

When it comes to ICP definition, startups are faced with a double-edged sword: they want to know who their ideal consumer is so that they can focus on this audience, but at the same time, narrowing the profile too soon can prevent them from learning who their real customer base is.

That's because early-stage sales data doesn't often provide consistent, legible trends. Here’s why

• Small sample sizes: It's difficult to determine patterns in a small subset of buyers, whose choices are not necessarily indicative of those of larger groups. Just because your product resonates with the members of this limited sample, doesn't mean you would get the same results when interacting with a wider audience.
• Inconsistent feedback: Data consistency is tough to achieve at an early stage because users may employ the product in different use cases, having diverse experiences with it. Or you could be interacting with the wrong ICP altogether, gathering negative feedback that doesn't reflect a poor product but a bad match.
• Deals that fall through for unexpected reasons: If a promising lead pulls out of a deal, new organizations can read too deeply into this move, considering it a predictor of how other sales will go or an indicator of an insufficient product. But there could be unseen internal drivers that prevent the prospect from buying, like a last-minute lack of funding or the need to prioritize another purchase.

How founders learn who their ideal customers are

Determining your ICP is a process, one that homes in on this profile through:

• Sales conversations: Sales conversations will eventually lead to good data on what wins and loses deals. They also provide qualitative insights to analyze. What was the consumer's reason for not purchasing? Did they give any feedback on what the product lacked? What can the buyer's context (purchasing power, pain points) tell you?
• Repeated objections: If you continually hear the same objections, like that the product is too expensive or lacks a crucial feature, you can take this feedback at face value—especially if it comes from a range of prospects. Either the audience you're targeting isn't a good match, or your product is genuinely overpriced or lacking functionality users want.
• Customers who onboard faster or stick longer: High-retention and fast-onboarding customers are likely your ICP, especially if you can identify a series of shared traits these consumers share. You can learn more about this group by identifying your longest-standing or quickest-to-onboard customers and surveying them on what made them buy and how your offering solves their pain points.
• Deals that close with little friction: A string of easy sales could be a strong indicator that you're getting closer to identifying your ICP. This subset of your audience is able to promptly see the value of your value proposition and doesn’t question the cost—meaning that the product or service is properly tailored to it.

Central to all of these key indicators are patterns. Without consistent data, startups can't reasonably derive who their audience is.

You should still define an ICP

While defining an ICP can be tricky, that shouldn't prevent startups from trying when the time is right. Here's how to know if you're ready to take this step.

• The same types of customers keep closing: Consider the Pareto Principle, a 20/80 input-output rule that means 20% of your consumer base drives 80% of your sales. If you're noticing this type of pattern, these customers are likely your ICP. Eliminate the guesswork by researching what these consumers have in common, as these indicators can prove the similarities between them.
• Messaging resonates predictably with certain buyers: When consumers start buying your product because of a specific message, you know that the feature, solution, or framing resonates with them. You can infer that this group is your ICP, or at least part of it.
• Sales cycles shorten for specific segments: Customers who are motivated to buy (that is, they buy quickly) are likely in your ICP—especially if you detect a pattern of fast sales in a particular group.

Common mistakes startups face when defining their ICP

Defining the wrong ICP could lead to sales and marketing strategies that target the incorrect audience. In turn, you can miss out on sales. Here are a few common ICP mistakes startups make and that you can avoid.

• Locking into an ICP after too few data points: Startups can sometimes base their ICP on assumptions gathered from a few sales, but this information isn't likely a comprehensive indicator of what resonates with their audience.
• Copying ICPs from competitors or investors: Startups have their own, unique value proposition. It's what allows them to compete. So, an ICP modeled on a competitor's or that takes advice from investors who've worked with similar companies (especially those of another company size altogether) is unlikely to be accurate.
• Confusing who buys with who uses: In some cases, like when selling a tech solution to another company, startups deal with a C-level leader or the purchasing department during the sale, but never interact directly with end users. So, startups must be careful not to over-tailor their sales and marketing strategies to end users when the actual buyer is the company and has a different list of priorities and pain points.
• Treating ICP as permanent instead of provisional: Startups with good data on what their ideal customer profile is can set it in stone too soon. It's smarter, instead, to keep the ICP flexible and modify it over time as the company grows and acquires even more data on successful sales.

How your ICP evolves as sales and product matures

In the beginning, startups are looking for first buyers, and wins don't necessarily provide patterns or prove the success of a sales or marketing strategy. But as time goes on, companies gather more data on their customer base, what sales tactics work, and how well their product solves consumers' pain points. This data not only helps them define their ICP but modify their product for the better. And as the product changes, the ICP may evolve as a result.

As startups gather data and start discovering what works, they need a centralized place to house data and processes. What once were the intuitions of the founder or an early sales team are now defined patterns: functional marketing and sales strategies that resonate with an ICP. So, founders and early teams must document workflows, centralize leads, and enter consumer data into a secure single source of truth like a CRM.

How Clarify helps startups find their ICP

As startups determine their ICP, founders must define this target customer in a clear, visible way for the whole organization to reference. This implies documenting and centralizing context scattered across notes, tools, and memory.

Clarify transforms dispersed data from sales conversations into clear summaries that help startups visualize emerging patterns and processes. Clarify also helps teams cut out the busywork so they can focus on closing deals. Clarify takes notes, enters leads, manages pipelines, and answers questions.

With Clarify, sales teams can move faster and interpret information more accurately, discovering their working ICP and sales strategies.

FAQs

When should you start defining ICP examples for startups?

Startups can begin defining their ICP on day one, knowing that this is a flexible concept and that they don't have enough data to accurately determine their target audience. But tracking data from the start will provide the company with robust information to analyze for patterns, a necessary step in pinpointing an ICP.

What’s the difference between an ICP vs. a buyer persona at a startup?

An ideal customer profile (ICP) refers to an individual buyer who’s a perfect match for your products, either in a B2B or B2C context. A buyer persona is a model of an individual consumer that exists who can benefit from your product or service because it solves their pain points.

Does defining an ICP too early hurt growth?

Locking down an ICP too early can curtail growth because, without enough data to prove that this is the company's real target audience, the ICP can create a false narrative. If the startup then generates messaging around that ICP or works too hard to interact with it, these efforts will fall flat.

How does ICP affect sales and messaging early on?

As startups gain a clearer vision of their ICP, they can begin tailoring resonant messaging to this group, addressing how the product or service solves pain points.