The Top 4 Financial Attributes of Your Ideal CustomerMar 18, 2021
When it comes to sniffing out opportunities, there seems to be a whole spectrum of strategies that business owners use. On one side, some business owners seem to go the “prospecting for oil” route, investing in hunches and hoping to hit “black gold”.
Of course, this kind of business owner would probably describe themselves differently, but it’s surprisingly easy to stop short of real data-driven insight. The result? It’s a growth-blocking blindspot that keeps you from locking in on the key attributes of a growth-driving prospect.
Today, we’re going to tackle the four key financial attributes that need to be a part of your ideal prospect persona.
Attribute 1: Ideal Clients Should Have Plenty of Financial Headroom (Critical Mass)
When you sit down and map out your perfect persona, this should be the cornerstone.
Most business owners have an idea of the general size of their client base (ie. annual revenue, employee count, etc.), but there’s an important difference between being aware of that number and starting with that number.
How Easily Can They Afford You?
At times, it can be tempting to jump right to offer alignment - how do we best meet our perfect customers' needs with our product or service? If we’re not careful though, we put the cart before the horse and develop an offer that clients love, but we’re not aligned on the price point.
By starting with a critical mass metric for your perfect persona, you can focus on building a profile based on clients that you know can afford you. It reduces wasted time and energy in a wide variety of other areas – sales lost on budgets, R&D invested in overpriced products... you get the picture.
Financial Strength Changes Customer Behavior
To build on this point as a cornerstone, in the total pool of customers looking for the offer you provide, there’s a range of budgets, right? The crucial point is that at each financial layer of the spectrum, there are different behaviors, different values, and different goals. Someone looking to buy a used Honda is a very different buyer than one looking for a brand new Mercedes.
For your business, if you don’t start with a defined metric for financial headroom, you run a high risk of misunderstanding your perfect persona’s behavior and motivations. It’s why a Mercedes dealership feels VERY different from a used car lot. They know what kind of buyer is coming to their store, and they tailor their sales and marketing accordingly.
Attribute 2: Commodity, Luxury, or Necessity?
Part of building your long term growth is targeting a stable client base. What determines your stability?
A great deal of your stability comes from how your clients view your contribution. Especially when times get tight and your clients are cutting budgets, how you fit into their business model is the top factor that determines whether you stay or go.
Commodities are Convenient, But Not Stable
If a client considers you a “commodity”, what does that mean? It means you meet a need, but there’s nothing particularly special about you or what you provide that produces loyalty to your brand. You fill the gap now, but if a better, more convenient offer comes along, you’re on the curb.
When you’re a commodity, a few things usually happen:
- You’re primarily competing on price, driving down your margins.
- It’s hard to grow with your client, and you’ll likely lose them to a more developed competitor.
- When times get tight, there’s no loyalty to your brand – making it easier to get undercut by a competitor.
Luxuries are Preferred, But Not Reliable
There’s a reason you primarily eat food from a grocery store and not from a Brazilian steakhouse. (Or maybe you do, in which case, we should absolutely connect...) Most days, you’d probably prefer the steakhouse, but it’s not feasible on a daily basis.
With your offer, a luxury might be the worst position to hold in your client’s business model. Luxuries ride high when times are good, but they crash hard when times like recessions hit. When your clients are in a cost-cutting mood, you can find your client base rapidly shrinking.
Necessities are Durable and Profitable
Wouldn’t we all love for our revenue streams to be resilient? Like a cactus that survives with little to no water, we want our revenue to remain stable when the world around is in turmoil – through, I don’t know, something like an international pandemic…
For this to be the reality for your business, you want to find customers that view your offer as necessary to their core operations. It’s why you’d cancel your Netflix subscription before you turned off your electricity. One you really enjoy having, but the other you need.
When applied to your prospecting, this involves a clear understanding of what your ideal customer relies on to operate their business. This is especially true of a few key areas:
- Revenue Generation: How can you position your offer so your client relies on you for some part of their ability to produce revenue?
- Vital Protection: Can you help your client avoid devastating consequences? (ie. auditing and compliance issues)
- Beating the Competition: Is there something you can provide to a customer that gives them a critical edge to outperform their competition?
If you can find a type of client where you can provide one of these three necessities, you help bolster yourself against economic volatility. The more they rely on your contribution, the more secure your revenue is.
Note: It isn’t enough to meet a need - commodities can do that. You need to meet a critical need AND set yourself apart with a unique, differentiated value proposition.
Attribute 3: The Size of the Next Deal
We already talked about starting with financial headroom when outlining your ideal customer profile, but now we keep an eye on the future. In the spirit of growth, we are frequently looking for opportunities to raise our prices, right? You’ll have a much better chance at accomplishing this if it’s built into your target customer from the start.
Pricing New Prospects: No Steps Backwards
Let’s start with prospects. If we’re being honest, it’s far easier to raise your prices on a new opportunity than to try and raise your prices in an existing relationship. No one loves that second conversation.
So when you’re assessing an opportunity with a new prospect, does the financial potential in play represent a step forward or backwards in your prices? Your target persona should represent continuity or growth in your pricing. In short, don’t take steps backwards if your current client base is healthy.
Pruning Current Clients: Upward Mobility
Have you ever walked into a house that is so cluttered, you have to watch where you step? There’s an obvious principle at play: more stuff isn’t better stuff. It’s true for clients too.
If you aren't Google, the fact is you have a limited amount of resources at your disposal to service your customers. If your current client base is limited in their upward mobility, they won’t be able to grow with you – and worse, they’ll stunt your growth.
Although it’s uncomfortable at times, a growth-minded business owner acknowledges this reality. It means at times that when you’re growing and a current client can’t keep pace financially, it may be best that you part ways.
On the other hand, when you have clients that represent room to grow, you should be actively seeking bigger, better opportunities where they align with your business model and resources. It may be easier to raise prices on a prospect than a client, but it’s easier to sell to a client than a prospect!
Attribute 4: How Quickly They Can Turn Into Revenue
How many movies have you seen where a couple seems to be a perfect match, but there’s just some outside factor delaying their happily ever after? It might be a career dream, money, a lack of direction – whatever it is, despite all the reasons their relationship makes sense on paper, they can’t get around that one critical issue.
When building your perfect customer profile, there are businesses that might look like a perfect match on paper. They’re in the right financial range, they need what you provide, etc. Even still, they might not actually be your ideal customer if it takes too long to turn them from an opportunity into realized revenue.
If you find that when you’ve checked all the other “ideal customer” boxes, the sales cycle is dragging out too long, they might not be your perfect prospect. It might be that their need for you is well below urgent. It might be that there are other, more pressing priorities and they need to find extra dollars in the budget to buy from you.
The bottom line is that your perfect customer needs to be judged on how quickly you can turn them into revenue. Too long, and you’re wasting resources on money you very well may never see.
A Deeper Understanding of Your Ideal Customer
When we hear the term “ideal customer”, we might think first about more “in the moment” attributes like how easy they are to work with or if you’re well aligned to meet their needs. Those things are definitely high priorities, but I can’t emphasize this enough:
Your ideal customer needs to contribute to your growth.
If you can get these four attributes right in your prospecting, you’ll start to see your business unlock new growth using the opportunities you already have.