As you’ve grown, how do you know if your ideal customer has changed?
In Conversation – a joint perspective from Yellowyoyo and Finex Advisory
At Yellowyoyo, we believe the best ideas often emerge when different perspectives come together. This article is the result of a collaboration with our friends at Finex Advisory.
Bringing together our different perspectives and areas of expertise, we’ve explored a topic that’s increasingly relevant to ambitious businesses. We hope it provides useful insights, sparks discussion and offers practical value.
When you started out, you probably knew your ideal customer instinctively – their size, their problem, why they bought from you. But growth has a quiet habit of moving the goalposts. The customers you win at £5m of revenue are rarely the ones you won at £500k, and the danger is only realising it months later, after you’ve spent time chasing opportunities that were never quite the right fit.
So how do you know when your Ideal Customer Profile (ICP) has shifted?
Here are the signals to look for:
- Your early customers have churned. The customers who bought first, often those with an immediate pain, drop off once that pain is solved. If your early customers are leaving, treat it as a signal that your ICP may have shifted – or that you hadn’t truly found it in the first place.
- Conversion rates are falling. Prospects convert more slowly, or not at all, despite the same sales effort and marketing spend. The messaging that used to convert these prospects, no longer does. Ultimately, the customers you used to target, can no longer resonate with the brand.
- Your business has become better than your positioning. Many growing businesses still describe themselves as they did five years ago, even though they’ve developed new capabilities, stronger credibility and attract a different calibre of client. The business has evolved; the story hasn’t.
- New products and upsells get little traction. You launch a new product, or try to expand an account, and it lands flat. If your existing customer base won’t buy more, they may not be the growth-aligned customers you need.
- Account managers are working twice as hard to retain the same customers. Retaining accounts that used to be easy, now takes constant hand-holding and concessions. Over-compensating and compromising to retain customers are a clear sign that these are not your target profiles. In the absence of intense account management, these customers will churn.
- You’re under price pressure. Customers increasingly push back on paying full price for your product. When buyers cannot see past the price, through the value that they will attain from the product or service, they probably aren’t customers you’re built to serve.
- The problems you’re solving have become more valuable. Successful businesses don’t simply sell more; they solve bigger, more commercially important problems. If your messaging still reflects yesterday’s challenges, you’ll continue attracting yesterday’s customers.
- Customer lifetime is short. Customers take what they need and leave, because the relationship is transactional, rather than a relationship that should ultimately feel like a partnership. Life Time Value (LTV) and customer lifespan is one of the clearest signs that the customer profile behind this metric, isn’t the ‘right fit’. Especially for recurring products or services, your best customers should have high LTVs.
- Your best work consistently comes from a small minority of customers. Those clients often provide your strongest case studies, your happiest teams and your highest margins. They may already represent your future ICP.
- You’re losing sales talent. Good salespeople lose conviction, or leave, because they no longer feel they can get behind and sell the product to potential customers. In addition, you may also notice your sales talent actively looking for new verticals / customer demographics to sell into. Trust their instincts – it’s usually a sign that your ICP has shifted.
Data tells you what’s happening. Strategy tells you what to do next…
- Be patient with early signals. A handful of data points isn’t a trend. Collect data over a longer period e.g., 6 months, before drawing firm conclusions.
- Go past surface level numbers. ‘Revenue by customer’ or ‘revenue by segment’ won’t tell you the full story. Attain more granular data, such as gross and contribution margin per customer, Customer Acquisition Cost (CAC) against LTV, net revenue retention. These data points typically reveal a customer’s true worth. With our clients, we analyse this by using customer data cubes.
- Add the qualitative detail and benchmark against your best. Understand why each customer bought, how they came in, and how the relationship developed – then use your highest-LTV, strongest-retention customers as the benchmark for what your ICP now is. Every month, re-visit this data and adjust your ‘benchmark’ customers accordingly.
- Look for shared behaviours, not just sectors. Your best customers often think similarly, make decisions similarly and value similar outcomes, even if they operate in completely different industries.
- Listen to your client-facing teams. Sales, account management and customer success often spot changing patterns before they appear in dashboards.
- Ask each department to describe your ideal customer independently. If leadership, marketing, sales and customer success all give different answers, your business has probably evolved without consciously redefining its ICP.
- Benchmark your future, not just your past. Data shows who buys today. Strategy decides who you want to serve tomorrow. The most valuable businesses deliberately shape their ICP around the business they’re becoming, not simply the one they’ve been.
In Short
As you’ve grown your ideal customer has almost certainly changed – the question is whether you’ve noticed. Treat growth moments as a prompt to take a step back and analyse. Let your own retention, conversion and sales data do the talking and be honest about whether the deals you’re chasing still fit the business you actually want to build.
It’s worth remembering that changing your ideal customer isn’t an admission that your original strategy was wrong. Every successful business develops new expertise, greater confidence and a clearer understanding of where it creates the greatest value. As that happens, the definition of an ideal customer should evolve.
Every meaningful stage of growth should prompt one strategic question – If we were starting this business today, knowing what we know now, would we still choose the same customer? Businesses that ask that question regularly are far more likely to align their proposition, positioning and investment with the future they want to build.
About our fellow authors…
Finex Advisory is the finance partner of choice for owner-managed businesses. Founded and run by experienced CFOs, investment bankers and investors, we combine fractional CFO leadership, value creation and M&A advisory in a single, integrated offering – embedding within your team as operating partners rather than acting transactionally. We don’t simply present your business as exceptional; we help make it exceptional. Finex is an ICAEW Registered Firm.
