There are 3 kinds of startups:
> those that make money
> those that pretend to make money
> and those that make it bigggg

Our startup has graduated into making good money. Before we make it big we’ll need to dial in who our ideal customer is and isn’t. The second part at this stage is the kicker; defining the customer were not building for.

Saying yes to ‘anyone who will pay’ can actually be the correct strategy at zero customers while you’re still validating. But it stops being correct around the the 10th or 20th paying customer; by then you’ve proven you can sell it, and you begin notice some prospects will inevitably take up more time than they’re worth.

In this sense, it becomes exceedingly important to understand who is NOT your ideal customer. As the business matures you can afford to be pickier with who you spend time on because you have the experience to know which deals are most likely to convert. Most of the time this is a matter of customer-product fit.

Here are some rules of thumb I’ve used in my own businesses to define who isnt our customer. I call this our anti-ICP list, you can use this framework to define your list of non-ideal prospects to avoid spending your precious time and effort on:

You wouldn't want 100 more of them. This is the simplest gut check. If the answer is “this is nice to have but cant see myself doing more business with customers like this” then there is your answer: they're revenue, not a customer. Revenue is rent (it leaves).

The asks don't compound. customers will invariably ask for new features/services. A customer who asks for something that is already on the roadmap is a gift. The customer who asks for a one-off feature is a red flag; building one-offs is a favor you'll pay for twice: once to build, once in the opportunity cost of what you didn't build.

They can't commit in 30 days. High-fit buyers move quickly. Most salesmen underestimate timing and intent. If they dont have the budget, the authority, and the conviction to buy in under a month (ideally under 2 weeks) youre better off checking back in next quarter [caveat = enterprise deals, where ‘commit’ is differently defined]

Their budget is below your floor. At YTsponsorDB we run YouTube creator partnerships for brands. By now we’ve found if a brand’s whole YouTube budget is $5K a month, we are the wrong partner no matter how much they like us. So we refer them out. The only exception is a logo worth the discount (you should name the exception in advance, not negotiate it in the deal)

They don't refer (after you'd expect them to). High-fit customers move in packs. A customer who refers is someone you want more of. To put the other way, a customer who never introduces you to anyone is either a weak advocate or wrong-fit. [caveat=don’t use this signal until you have at least 6 months of data.

Now, if you read these you will notice that there are some things you can do upstream to make identifying your anti-ICP easier. Here are 5 tips to do this:

Set a price floor and enforce it. Do the math then write the number down. Prospects under it get referred out, not discounted. Every exception erodes the floor for the next customer [ask them their budget in the intro meeting!]

Set a value timeline. Pick the number of days a good-fit customer needs to see value. If a prospect blows past 2x your timeline, they aren't slow, they're wrong [ask them their timeline in the intro meeting!]

Audit the roster quarterly. Sort by fit, not by revenue. The bottom quartile is the reference set [What you see there is your anti-ICP showing itself!]

Build the referral script. Have a partner, a competitor, or a starter tier you route wrong-fit buyers to. Saying no is easier when you have a yes elsewhere.

The one sentence test: Most founders can recite their ICP. Fewer can finish the sentence: "If you are an X, you are not our customer." If you can't, you haven't graduated.

At a certain point, the fastest path to an efficient business is by subtraction.

Peace,
Ramsey