Launching “Crane Foundations” with “The key to repeatable sales”

The counterintuitive “why”

As the founder of an early stage start-up who has raised, or is looking to raise an initial funding round, a large total addressable market (TAM) worth billions of dollars has no doubt been a part of your pitch to investors.

Post securing initial funding, the natural inclination of many founders is to try and concurrently sell into as many different companies, industries and geographies as possible within that large TAM.

This seems logical, especially if your product is applicable across multiple industries, companies and personas.

The reality however is that the software industry is littered with thousands of start-ups who tried this approach and failed because they ended up spreading their limited resources too thinly and ran out of money before they could develop any kind of sales repeatability.

A lack of sales repeatability is one of the most common reasons start-ups fail to raise their next funding round and / or ultimately fail as businesses.

This is why the approach of nearly every successful start-up has been to avoid trying to sell to everyone and anyone in their TAM, and instead (somewhat counterintuitively) begin by focusing on a small subset of the market before expanding further.

The foundational “what”

Founders who have successfully built sales repeatability did so by relentlessly working to identify this small subset or Ideal Customer Profile (ICP) market.

In practical terms, identifying this ICP market is a process of working out –

Who is most likely to buy from you and be successful, so you can focus all your resources on selling to them

The answer to this question invariably involves a lot of hard work, testing and iteration, but remaining relentlessly focused on it has immense benefits which we will cover in more detail later.

The iterative “how”

As an early stage founder, you probably have some initial ideas about who is most likely to buy from you, however don’t be surprised (or disheartened) if your initial hypotheses turn out to be partially or even completely incorrect.

This is very common, so the goal is to test your hypotheses quickly to determine if your proposed ICP market contains –

1. People who have a real “hair on fire” pain, and are willing to pay in order to solve it. This is the single most important part of identifying your ICP market.
2. A single, identifiable economic buyer who has access to a budget (and sufficient authority to divert some or all of it away from other areas if needed).
3. People who are happy with a “complete enough” solution, i.e. one that addresses the immediate pain sufficiently, without necessarily having all the functionality of a “complete” solution.
4. No dominant incumbent. Competition in any given market is to be expected, however if your prospective ICP market already has a de-facto owner, you are unlikely to find much success here unless your product is demonstrably 10x better and/or 10x cheaper.

The next step in testing a potential ICP market is to secure as many discovery meetings* as possible with people you believe match these criteria, using each meeting as an opportunity to discover more about their specific pain and your ability (or inability) to address it.

It is important to keep in mind when meeting that it is not your definition of the pain that matters, but rather the prospective customer’s. If there is a mismatch, or if they are unaware or do not care enough about it to pay to solve it, then this is unlikely to be a successful ICP market for you.

A pattern should emerge relatively quickly from these meetings about whether this proposed ICP market is a suitable candidate, or if it’s better for you to concentrate your limited time and resources elsewhere.

Beachhead benefits

A useful way to think about your ICP market is as a beachhead — a secure foothold in part of the larger market where you can build some initial success before expanding further.

Even with seed funding you are still likely to be resource constrained, so this beachhead needs to be small enough for you to have a chance of winning, but large enough to service your short to medium term revenue needs**.

Focusing on a beachhead brings significant operational benefits that would not be available if you were attempting to address the entire market at once. These include –

• Increased network effects — in a beachhead market, people tend to know other people working at similar companies. This makes referrals and introductions easier as word of mouth amongst peers speeds up the process of getting in front of the right people.
• Increased expertise — a beachhead helps you develop specific expertise about what potential buyers really care about, and more importantly what their specific pains are. This learning means you are able to demonstrate a deeper understanding and competence with prospective buyers which should help you to close more deals.
• Improved content — content creation and targeting becomes simpler as it is tailored for specific buyer personas, resulting in better quality leads. Similarly, product marketing materials, case studies, and other sales collateral can be tailored for the beachhead to achieve maximum effectiveness.
• Improved outbound campaigns — a beachhead allows you to focus on quick A/B tests of outbound messaging, landing on what works in a much shorter time frame than if you were trying to address the whole market.
• Improved digital marketing and events — marketing campaigns and events can also be more targeted and effective as they are now based around messaging that is specific to the prospective buyer’s pain.

These benefits make the best use of your limited time and resources and compound over time, resulting in your sales process becoming increasingly efficient and repeatable and eventually leading to a more stable and predictable revenue footing.

Finding the beachhead

The following variables provide a good starting point to narrow down from your large TAM to an initial beachhead or ICP market –

1. Industry — are there particular industries where you believe there could be a significant pain that you can address? An industry focus has advantages because if you are able to secure some initial deals, other prospects should prove easier to engage as they will only really be interested in what their industry peers are doing.
2. Geography — are there particular geographies you believe could have a significant pain or a better understanding of the pain? Or, where competition is weaker or non-existent? A geographical focus does have practical considerations, including time zones, language, business culture and travel requirements so focusing closer to home until your ICP is better understood may make more sense.
3. Company profile — is one the most common variables used to find a beachhead. This could include the size of the company by revenue or number of employees.

Whilst these provide a starting point, it is really important that you also consider any specific variables that are relevant to your solution, such as –

• Use case — are there specific business problems or workflows that repeatedly resonate because of the pain they cause?
• Technology stack — are companies that are using (or not using) particular technologies more likely to be experiencing a pain you can solve?
• Regulatory requirements — are specific companies or departments subject to regulatory pain? And are there particular geographies where that regulatory pain is more acute?
• Specific departments — are companies with (or without) a specific department more likely to be experiencing a relevant pain? Or, are departments of a specific size relative to the overall company size an ideal target?

Finding the right mix of specific variables is your ultimate goal, and the more granular you can be, the greater clarity you’ll have about whether the ICP market is suitable and which types of people and companies to target.

Company size considerations

Company size is a particularly important facet of the company profile for you to consider because the buying processes, complexity and length of sales cycle vary greatly between companies of different sizes.

Segmenting companies by size is particularly helpful in determining where you may have the best chance of initial success. For example –

1. “Rabbits” — are the smallest size of company you would consider selling to. Whilst the deals may not be large, they will typically have shorter sales cycles and fewer people involved in the buying process. Rabbits can usually go-live and demonstrate your product’s value quickly, providing valuable feedback and insight. Some companies in this segment may also punch above their weight in terms of brand recognition, providing more credibility with other prospects.
2. “Deer” — are mid-market companies which have the potential to deliver larger size deals than rabbits. These types of companies can have huge variability in terms of early adoption, so it’s important to assess if there is early adopter behaviour amongst individuals involved in the buying process. As deals will likely take longer in this segment, assessing how “hair on fire” the pain is becomes even more critical.
3. “Elephants” — are larger, often global companies that have huge revenue potential but are typically harder (and take longer) to win because they have complex approval processes and multiple stakeholders who need to be convinced. For example, it is not uncommon for a $100K deal in this segment to take a year, which is why it is vital to ensure that there is a genuine hair on fire pain and that all the stakeholders involved are aligned on the need to solve it. In this segment it is also worth considering if landing an initial smaller “deer” sized deal e.g. $25K, and expanding to something bigger over time is a faster option (although deer sized deals may still take just as much time as a $100K one in this type of company).

Segmenting by company size is relative to your product, for example, a 1000 person company for some start-ups will be a “rabbit” whereas for others it will be an “elephant”.

Regardless, segmenting is important because of the different needs, buying processes and length of time and effort involved, and because a good balance of different company sizes in your sales pipeline gives you the best possible chance of hitting your revenue goals.

Metrics matter

As with any type of testing, recording and reviewing your learning and tracking key measures is the key to success.

The learning from discovery meetings will help you to refine your ICP hypotheses and variables, and key measures such as –

• How many discovery meetings are being attended by prospective customers
• The conversion rate of meetings to qualified opportunities
• The conversion rate of qualified opportunities to closed deals

Will help you to determine whether it is worth focusing more effort and resources on this part of the market or if it is time to move on and test another.

The pain is worth it

The process of finding an ICP market is often frustrating, requiring persistence and intensive effort.

However, founders that persevere, testing their hypotheses with discovery meetings, tracking their metrics, recording learnings and refining their mix of variables, will eventually be rewarded with a secure beachhead that will put them on the ideal path to sales repeatability and that all important next funding round.

*Techniques for securing meetings will be covered in the next article in this series.

**Paraphrased from Geoffrey Moore’s “Crossing the chasm”