How to choose the right client and define your ICP

CLIENT: Ignition

Original article: https://www.ignitionapp.com/blog/define-your-ideal-customer-profile

Published: 2022

ICP marketing: The silver bullet your accounting practice needs?

From time immemorial, business owners have grumbled about ‘bad’ customers.

But as cathartic as venting can be, it’s not a strategy to grow a profitable accounting practice. Rather than dividing customers into ‘good’ and ‘bad’ categories, often based on the emotional reaction they evoke, successful business people focus on client selection, specifically increasing the number of ‘ideal clients’ they service.

ICP marketing 101

The ideal customer of a business is one that generates the maximum amount of profit for that business with a minimal amount of hassle.

If you haven’t given deep thought to who your practice’s ideal client would be, rest assured that you’re in the majority. The good news is that you can quickly identify your practice’s ideal customer profile (ICP), if you’re willing to invest a little time and effort into the process (see below). The even better news is that creating this ICP will almost certainly boost your practice’s bottom line by allowing it to more effectively target lucrative clients while more effortlessly steering clear of unprofitable ones.

As explained in this article by Gartner, Ideal Customer Profile (ICP) marketing can achieve “compelling business results including: faster sales cycles; higher conversion rates; [and] greater average ACV [annual contract value] and LTV [Lifetime Value].”

Think of it as applying the Pareto principle, also referred to as the 80/20 rule. You let go of the 20 percent of the clients who consume a lot of bandwidth while generating modest revenues to concentrate on the 20 percent of the clients who make it rain without expecting you to be at their beck and call 24/7.

Adriaan Basson is the founder of the South African firm Wingman Accounting. He has observed, “You can really accelerate your growth by being ultra-selective on who you let through the gate… The 80/20 principle is true – I’ve found that you always end up spending a whole lot more time on the clients that you don’t love working with and that don’t really bring you much revenue.”

What is an ideal customer profile?

You’ve probably read a few ‘How to market your business’ articles. If you have, you may imagine creating an ICP involves determining what your practice’s total addressable market is and then working back to identify a target market and then constructing ‘buyer personas‘.

There’s an overlap between traditional marketing and ICP marketing, but there are also some differences. ICP marketing focuses on businesses. Traditional, persona-based marketing focuses on those individuals within a company (or household) who make purchasing decisions.

As this article from Qualtrics puts it, “Your Ideal Customer Profile describes the company that your buyer persona works for. So, let’s imagine that you sell vehicle fleets to hospitality businesses. If your ICP is a chain of hotels, one of your buyer personas might be the operational manager for that chain.”

Persona-based marketing is more of an art than a science. In contrast, creating an ideal customer profile is a data-driven exercise. As Tom Scearce says, “The ideal customer profile (ICP) defines the firmographic, environmental and behavioral attributes of accounts that are expected to become a company’s most valuable customers. It is developed through both qualitative and quantitative analyses, and may optionally be informed by predictive analytics software.”

Using an ideal customer profile template

There’s no right or wrong way to identify your business’s ideal clients. But you’re likely to get the best results if you round up any colleagues who might have something valuable to contribute and work through a list of questions about the characteristics of your business and the characteristics of businesses it is best suited to working with.

This Qualtrics’ ideal client worksheet suggests the following three-step approach:

Figure out what your practice does best. What is your USP? Who is your customer base? What attracted the existing customer base? (Price? Quality? Niche positioning?)
Identify your practice’s ‘good enough’ customers. Be warned, your ‘good’ customers – the ones who are friendly, or undemanding, or flush with cash – may not be your ideal customers. Nonetheless, you and your colleagues will be able to identify the type of customers in the running to be ideal clients and those (late payers and time-wasters) who aren’t. Consider your practice’s ‘good enough’ customers and determine whether they have common traits. For instance, does everyone at your practice find it easier working with mid-sized businesses than with small ones, or vice versa?
Drill down. Once you’ve got a broad idea of who might be ideal clients for your practice, it’s time to clarify things by referring to an ideal customer profile template and posing questions such as the following:

What industry do they (i.e. your ideal customer) operate in?
Where are they based?
What is their annual revenue?
What is their budget for accounting services?
Do they need one-off solutions or ongoing support?
What solutions are they most likely to buy?
What are their biggest pain points?
How can your solution help?
What are their corporate values?
What technology do they use?
How many employees do they have?
How large is their customer base?

Who are your customers?

For simplicity’s sake, let’s assume your practice’s ideal customer is a restaurant located in a CBD that turns over $10-$15 million a year and has 15-20 employees. The people who own these restaurants need expert help to (a) keep expenses under control, (b) avoid cash flow crises and (c) ensure staff are neither underpaid or overpaid.

Chances are, many of your practice’s current clients won’t fit neatly into the ICP. This isn’t something to be unduly concerned about. The goal is to progressively increase the amount of ideal, or close-to-ideal, clients while deflecting and dispatching the far-from-ideal ones. Over time – and it will take time – your practice can become the ‘mid-sized city restaurant’ specialist.

Your practice’s marketing should become much more cost-effective because potential customers can be targeted more precisely. For instance, you can advertise solely in hospitality industry publications if you’re targeting restaurateurs. Plus, once your practice acquires more restaurant clients, it’s likely to benefit from word-of-mouth advertising when restaurateurs talk among themselves. To make the virtuous circle even more virtuous, rather than having to be jack-of-all-trades accountants, you and your staff can niche down and just provide the services restaurateurs need.

The worst-case scenario is that you’ll be able to charge the same amount for tasks you can now complete more efficiently. The best-case scenario is that you’ll be able to charge above-market rates for tasks you can complete faster than competitors because your practice is the ‘restaurant specialist’.

Deflecting non-ideal potential clients is straightforward; you (honestly) tell them their business is unlikely to be a good fit with yours. Moving along existing non-ideal clients is a little trickier. The webinar below covers creating a ‘respectful disengagement process’ in depth. But, to summarize, honesty is once again the best policy. You can inform non-ideal clients they are no longer a good fit for your business and refer them to practices that are a better match. Alternatively, you may want to allow them to remain a client as long as they are willing to pay extra to fit your processes and style of business.

(While we are on the topic of potentially unpleasant conversations, it’s worth being aware of the costs of putting these off. The 2022 State of client engagement report recently conducted by Ignition in Australia, the UK and the US showed a significant proportion of accountants had suffered financial consequences due to delaying or avoiding awkward client conversations.)

Fortunately, it’s possible to largely automate both onboarding new clients and ‘offboarding’ old ones. You can use industry-vetted proposal and engagement letter templates for onboarding purposes and also create an ‘it’s not you, it’s us’ letter template to break up with existing clients.

You can’t set and forget

You can’t simply put together an ICP, run some well-targeted ads and then expect revenue to skyrocket. As the previously mentioned Tom Scearce explains, an ICP has to be revered as “a critical, strategic document that guides downstream efforts”. A document that can align “marketing, sales, service and executive teams to the highest-value accounts”, increase the “focus on scalable and repeatable strategies and tactics to engage and convert top accounts” and drive “target account list creation, segmentation, organizational structure and other key activities”.

Your practice’s current ideal client may not be its ideal client in 18 months’ time. (Remote working might empty CBDs or an economic downturn may mean people start eating out less.) So, it’s essential to keep an eye on the metrics (for example, cost of acquisition, deal cycle time, churn) that indicate whether your ideal customer is continuing to provide an impressive ROI.

Over to you

ICP marketing is a logical outgrowth of the Big Data era. After all, identifying the characteristics of an ideal customer is much easier when you have vast amounts of information about all your customers readily available.

But ICP marketing is also what successful businesspeople have, consciously or otherwise, always done – expertly target high-margin customers while avoiding low-margin ones. If gathering and analyzing some data could substantially increase the number of high-margin customers your practice attracts, wouldn’t you consider that as a worthwhile exercise?

For more information on how Ignition can assist your practice with its ICP marketing and other activities, watch our online demo.