Finding problem solution fit for your Ideal Customer Profile in B2b

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Yvonne
Yvonne
1 month ago

Andrej thank you for yet another great video 🙂 You mentioned something about linking a video on the steps of how to build the website (arund the value proposition and your diferentiation factor)…? 🙏 thank you!

Problem solution fit is the key to scaling. Problem solution fit is focusing on one problem that you can solve better than anyone else. Here is how to find it:

We’ll start this process with the most important part of your business. And yes, that’s your customers. Everything in your business should revolve around the value you create for your customers. Customers are the ones who have all the answers to your questions.

If you don’t know how to grow. If you don’t know how to position your product. If you don’t know how to convert them, how to get them to buy…

Your ICP has all the answers. 

Why DID they buy it? Why DIDN’T they buy it? What should you be putting on your social media account? Should you even be using social media? Etc, etc.

i know everything

All the answers come from your customers. 

When you don’t know how to attract or convert customers, when you don’t know which channels to use, or even if you should be using LinkedIn or something else, this is the result of you not having spent enough time with your customers. Because if you did, you’d know the answer. 

You’d know which channel to focus on. You’d know what kinds of content to create. You’d know whether even to create content or do something else. 

The challenge of scaling a startup

Often, when startup founders come to me, their company does about a million a year, and they serve multiple customer segments, often doing custom work for them, which is preventing them from scaling.

They read the advice that they should niche down, but they’re afraid to do it because niching down basically means leaving money on the table. It means saying no to opportunities so that you have space for better opportunities. And that’s a decision that they don’t want to make on their own because:

1) They’re afraid of making the wrong choice or the wrong decision.

2) They also want an expert to confirm that niching down is the right choice in case they have to report that to the investors.

Making the case for niching down

So, for example, you’re presenting your strategy to the investors, basically saying, “Hey, I think niching down is a good idea because I read it somewhere in a book.” 

This Is not an argument that’s going to take you far, right?

But if you say: “Hey, we hired this consultant who said this and that, and this is the plan that we’re doing, and this was his argument, so this is where we’re going, this is the path that we’re taking.”

That’s a much, much better argument for your investors.

When you’re in a situation where you have to scale from a million to 10 million and serve multiple customer segments, you probably have a complex product or service that can serve multiple segments and solve multiple problems for multiple people in completely different situations.

In that situation, the brave choice is to niche down. The brave choice is saying no to money that’s keeping you afloat and saying yes to money that helps you scale.

no one can stop you

Because you can only scale if you have scalable processes, and you can’t have a scalable process, not at this stage, not at 2 million ARR, you can’t have a scalable process for multiple customer segments because you simply don’t have the team, the resources, the knowledge to build multiple processes.

So the brave choice is to niche down, saying no to money and no to client X because we’re only focusing on client Z.

To scale, you need to do a few things well. Serve only a handful of customer segments, but serve them so well that they’re prepared to pay a premium for the service you’re providing. They’re prepared to pay a premium for your software.

Identifying and focusing on best-fit customers

Niching down is bad advice If you don’t have customers yet because, contrary to popular belief, it is not something you do entirely by choice. It’s not that you say: “Oh, okay. So from now on, we’ll only work with these kinds of companies”.

Niching down really comes from experience, basically looking at the data and saying: “These customers are easier to close, and these ones aren’t making a profit. But these customers understand our product better; we can serve these customers better.”

And if you don’t have that data yet, if you don’t have customers, if you’re pre-product, niching down might be the wrong choice for you unless you have a really clear vertical.

So, to narrow down your niche, you actually need to look at who is buying and all the product data.

No customers means you should cast a wide net, get that data, and then focus on best-fit customers. But if you do serve multiple customer segments, if your sales cycles are long, do niche down. And here is how to do it.

How do you niche down?

Write down the customer segments you’re serving.

  • Check your early financial data. Which customer segments brought in the most money? 
  • Who do you enjoy working with? 
  • Who converts easily? 

These are your best-fit customers. 

Focus on your best-fit customers.

Once you have the customer segment, the second part of this process is that you want to focus on them.

Horizontal startups will still potentially have multiple segments, but they’ll have a common denominator.

They’ll have one way of evaluating the software. The features they all need and use will be the same. The value that you’re providing will be the same. Their pain points will be very similar. Their jobs to be done will be relatively similar.

Understand your customer segment.

Once you have that customer segment or a group of 2-3 customer segments, the goal is to really focus on them and create the processes that work for them. And to do that, you need to know them really well.

  • What do they want? 
  • How do they evaluate the software? 
  • What is their real problem?
  • What sort of features are they looking for? 
  • What sort of jobs do they need to do? 
  • Where are they? 
  • What are they looking for in the software from a rational standpoint? 
  • But also, what are the benefits that they’re getting?

So when you have a customer segment, let’s say these are insurance companies, and you’re talking to the head of credit risk. What is he trying to achieve as well? Will he be willing to take on the risk of integrating your software?

Because when you start a project like selling software to an insurance company or a bank or something like that, this really becomes a major project.

Just the integration of the software, it’ll take quite a bit of time so that the company integrates your software, your solution, into the company.

Because this is a massive project, someone needs to take responsibility for this project. So one of the key questions is: Is this person that you’re talking to able to take that risk on them?

i cant do that

His job might be on the line because of it. If you’re selling something for 250,000€ a year, that’s a lot of money for the company.

They need to take the risk and be comfortable with taking the risk on their shoulders. So, you need to know them really, really well, whether they’re prepared to take the risk, how they evaluate the software, and so on.

Your message needs to be on point; you don’t just have to be the right solution for the company, but you must also make sure you address all the personal risks. You need to go deeper.

The final step: Problem-solution fit

As a final step, you need to figure out the one problem you’re helping these companies solve better than anyone else because that’s your problem-solution fit.

What’s the one burning problem that the company has that you can solve better than anyone else? 

Because if you can find that problem and solve it, that’s going to make you a lot of money. That is how you find problem-solution fit.

All the steps are in my positioning framework, and if you need help, message me. 

product market fit framework
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2 Comments
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Yvonne
Yvonne
1 month ago

Andrej thank you for yet another great video 🙂 You mentioned something about linking a video on the steps of how to build the website (arund the value proposition and your diferentiation factor)…? 🙏 thank you!

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