Picture this: You’re the founder of an early stage SaaS company. You’ve been prospecting and going after your first few clients, when all of a sudden, a massive enterprise company starts waving cash in front of you. They found you and they want to buy what you’re selling.
But wait. You didn’t build your tools for these kinds of companies. Hell, you’ve never even sold to an enterprise client before. But the money’s just sitting there, waiting for you to reach out and grab it.
So, what do you do?
If you’re like most founders, you’re going to take the money. The problem is, this is one of the biggest mistakes you can ever make.
Taking money from the wrong clients is a death sentence for your company. And I should know.
Want more advice on growing your B2B SaaS? Get a free copy of my book "From 0 to 1,000 Customers & Beyond", which I wrote together with my friend Hiten Shah, Cofounder of CrazyEgg, KISSmetrics, Quicksprout and ProductHabits.
How selling to Google and Oracle almost killed my startup
Back in 2007, a senior manager at Google reached out about a startup I was working on. Even though we knew our product wasn’t built for enterprise clients, the money was just too tempting. So we took it. And within a few weeks, we were running trials with not just Google, but Oracle and Intuit as well.
I thought I’d hit the goldmine. Not only were we selling to some of the world’s biggest companies, but they seemed like easy customers. They kept telling me they didn’t need any special treatment or changes to the product.
The thing is, they were all lying.
Fast forward a year and all the deals had fallen flat. Our product hadn’t been built for clients that big, and of course they had needs we couldn’t meet. We’d sold to our non-ideal customer, and it almost killed us.
You need to chase the smart money. Not just the most money.
Especially in the early days, turning away sales is difficult. But no amount of cash can make up for selling to the wrong customers.
If you get someone to purchase your product who isn’t your ideal customer—meaning they won’t get value or see success from using it—they’re going to destroy your business. They’re going to:
- Create an insane amount of support needs and noise
- Bombard you with feature requests and try to influence your product roadmap in a direction you shouldn’t take
- Complain and add a lot of negativity to your culture and team
Inevitably, they’re going to churn. And worst of all, they’re not going to go quietly. They’re going to tweet about you, write a blog post about their bad experience, and tell anyone who will listen how terrible your product is.
I feel like I need to say it again before we move on: Taking money from the wrong customer can kill your company and your brand.
How to define exactly who your non-ideal customers are
To understand who your non-ideal customers are, you need to be super clear on all three types of customers your business is going to come across:
- Ideal customers: Customers you built your product for and know intimately
- Secondary customers: Customers who you’ll sell to and make a bit of money, but you aren’t really focused on
- Non-ideal customers: Customers you don’t want and have to actively stop from buying your solution
At Close, we started out knowing we were committed to SMBs—the small and medium businesses. They were our ideal customers and we knew they’d get huge value and see massive success from using us.
Then, there were our secondary customers: freelancers and independent users. We hadn’t built our tool directly for them, but we wouldn’t stop or prevent them if they really wanted to buy.
Lastly, there were our non-ideal customers: enterprise companies and government agencies. We hadn’t built our tools for them and their needs and we knew they wouldn’t see success using us.
No matter how much money they waved in our faces, we knew we had to tell them no. We didn’t build our tools for you and we don’t want your money. If you still want to purchase, you’re going to be treated like an SMB and that’s going to be a very bad experience for you.
Use this information to create a Non-Ideal Customer Profile (NICP) for your entire team
Once you know who your non-ideal customer is, you need to make sure your entire team knows them too. Just like you should have a one-page summary that spells out who your ideal customer is, do the same thing with your non-ideal customers.
This summary can be as simple as you want, as long as it says:
“Here is the type of customer we don’t want to sell to. They’re not ideal for our business and we can’t deliver value to them. In every possible situation, we should turn them away.”
If you can create that level of clarity in your team—especially sales and marketing—they're going to be laser focused and be able to move much faster and see bigger results.
Turning down your NICPs creates powerful referrals
What? How does turning down customers bring in more customers?
Well, there’s a beautiful dynamic that happens when you tell a prospect, “based on what you’re told me, this is not the right solution for you.”
Potential customers aren’t used to hearing no. They’re going to fight you on it and try to get you to change your mind. But you’re not going to.
Because when you’re authentic and transparent like this, people will remember you forever.
They’re going to tell other people about you. Not only that, but they’re going to tell the right people about you. When you told them they weren’t your ideal customer, you were also telling them exactly who your ideal customer is. And because you built that trust by being transparent and open, they’re going to refer the right people your way any chance they can.
Marketing against your NICP keeps them from adding noise to your pipeline
When you know who your non-ideal customer is, you can also actively tell them in your marketing “this isn’t for you.” You can disqualify them before they even send you a message and muddy up your pipeline.
Here’s an example. Let’s say we’re writing an ad for Close. Instead of saying:
“The best inside sales CRM in the world.” (Which would potentially bring in a huge range of prospects).
We could say:
“The best inside sales CRM for SMBs.”
All of a sudden, we’re telling enterprise and larger companies “Don’t click here.” We’re cleaning out the noise.
And what if we’re getting clients without enough budget or who want a free tool? We could switch our ad to:
“The best inside sales CRM. Starting at $65/month.”
Now, those people looking for a free tool aren’t going to click. They know it’s not for them.
All these negative qualifiers prevent non-ideal customers from coming through your funnel and creating noise. But you can’t do this unless you know exactly who those customers are.
But Steli, what if I don’t know who my ideal and non-ideal customers are yet?
If you’re just starting out, you might not know who your ideal customer is. Or maybe you’re seeing a lot of demand from customers you didn’t expect. This is fine. Sales is all about listening and learning.
Look at the prospects you have coming in and start asking:
- Why is this organization looking at us?
- How did they even find us?
- What are their alternatives?
- What is the pain point they have that is so big that they searched a tool like ours out?
- How much budget do they have?
- What is their decision-making process?
If you ask these questions to 20–30 people and find a pattern, now you know you’ve got an opportunity to chase.
Never sell in a knee-jerk reaction. Instead, take your time, and listen and learn from your non-ideal customers. Serving the right customers in the best way it will be the difference between moving fast towards success and zig-zagging to nowhere.
Tell me your NICP stories
Have you had bad customers almost crush your business? Let me know what happened and how you dealt with your non-ideal customers in the comments.
Want more advice on getting more & better customers? Grab a free copy of "From 0 to 1,000+ Customers & Beyond", a book I co-authored with Hiten Shah.