Do you believe that the target market your firm serves is well-defined?

Do your colleagues believe that?

Many consulting and advisory firm leaders will answer this question with a fairly resounding "yes." But when we dig deeper, it becomes evident that they don't actually have a clear definition of the firm's ideal customer profile (ICP).

What's more, we often find the founders and CEOs of these firms have a much more positive perception of how well their ICP is defined compared to the rest of their executive team and marketing and business development function.

The target ICP conversation with consulting firm CEOs and partners is one of the most difficult because they are afraid to focus. They see focus as risk - as something that will stop the existing growth inertia (usually 5-15% growth YoY) and alienate potential, or even existing, clients. But in many cases the growth inertia is actually happening in spite of this lack of focus. Until there are enough other headwinds to stop it. At which point, they are often stuck.

The ICP Test

First, answer this question: Is your target market well-defined? It's a simple yes/no answer. Then, scroll to the end of this article to answer four qualifying questions.

This is one part of our ten-part growth gap assessment. If you found this valuable, I recommend you fill out the entire thing.

I want you to think about ICP alignment from a positive perspective:

• It will help you make better use of marketing and business development resources
• It will help you make a more compelling case for why they should work with you
• It will help improve profitability because you will attract more best-fit clients
• It will help improve employee morale because they won't be stressed working on a client they can't service effectively

A quality ICP definition

A common mistake I see made is confusing ICP with TAM (total addressable market). There are plenty of companies who can and will try to buy from you, but only a small subset of them are ideal for you - best-fit for your people and services.

During a recent conversation I had with Max Traylor, he shared a great question he likes to ask clients to get at the heart of this issue "If I were to ask you for a reference, what client would you introduce me to?"

I love this question as the start to ICP discovery. This opens up a conversation about why this is the client you would choose as the external evangelist for your business. Through that conversation, you can work to define some details:

• How easily did you win this business, and why?
• Who are the people (function, job titles, etc.) that you work with on this account?
• How does the revenue, ACV, and delivery margin differ on this account versus others?
• How do the results you have delivered for this client differ from others?
• Do your people enjoy working on this account?
• Do the client contacts enjoy working with your people?
• What has the client said that they most appreciate about working with you?
• What are some things that the client has said they don't much care for?
• Has this client sent any referrals your way?

Now, one of two things is likely to happen as you go through this line of questioning:

1. It's actually not as great a client as you thought - not likely, but does happen sometimes, especially if you chose them only because they are the largest.
2. You will have a solid qualitative definition of what makes an ideal client and why.

Now you can take that qualitative definition and verify it quantitatively by reviewing your CRM data for the following:

• Firmographics where you historically have the highest opportunity win rate
• Firmographics where you historically have the most revenue
• Firmographics where you historically have the highest ACV and/or LTV
• Firmographics where you historically have the highest margins
• Firmographics where you historically deliver the best results
• Firmographics where you historically have the highest likelihood for referrals

And you should also verify it against the following by doing extra research:

• Firmographics where your people historically enjoy working the most
• Firmographics of best current market opportunity

It's just as important to understand what the worst client looks like. You will often be surprised how similar they may look on the surface.

You can turn each of the above into a disqualifying statement (e.g. firmographics where you historically have the lowest win rate).

From a quantitative perspective, you should use the Pareto principle here (aka the 80/20 rule). Look for the top and bottom 20% and use those to create your qualifiers and disqualifiers. From a qualitative perspective make sure you dig into things like org structure as it relates to your likelihood of success and positive relationship.

The business case for a clear ICP

ICP alignment helps make better use of resources

In many firms, business development is a part-time job. It's done by "doer-sellers" - VPs, practice leaders, and managing directors who are responsible for business development, but also for managing teams and staying billable. This means that any time spent on business development has a fairly large opportunity cost. It's time they could be billing to an existing client.

By having clear alignment on ICP - where you can have the most likelihood of success - you are setting your most expensive resources up for success by minimizing the opportunity cost.

There are also very clear implications here for marketing budget and resource allocation. Having clear alignment on ICP ensures that you focus on channels and activities that are most likely to influence that ICP. You are less likely to spread your budget too thin, or to lose focus. And most importantly, this ensures alignment between marketing and business development. Because marketing is a non-linear force multiplier on business development activity, if alignment isn't there, and your marketing isn't targeting the same ICP as your business development efforts are, you are quite literally throwing money into the wind.

ICP alignment helps make a more compelling case to prospects

Even though each client you work with is different, if you have alignment and a focus on a tightly defined ICP, you will have more observable trends to leverage in your marketing and business development efforts.

You will have a clear understanding of the unique pain points they face and come to you with, which will allow you to create more compelling case studies and testimonials.

You will have a clear understanding of the problems they are trying to solve, which will allow you to have more tailored consultative conversations with them during the business development process.

You will have a clear understanding of what the typical buying committee looks like, which will allow you to create relevant content and messaging.

ICP alignment helps improve profitability

In the professional services business, time is quite literally money - even if you are using value-based pricing. By focusing your growth efforts on companies where you are most likely to succeed, you will spend less trying to acquire net new customers, you will retain more of your existing customers, you will decrease the cost of retaining existing customers, and you will be selling more of your most profitable services. All of this will significantly impact your profitability. Something you will clearly see on your P&L after a while.

ICP alignment helps improve employee morale

Most clients don't want to be difficult. Sure there are some that are like that, but in most cases clients are only difficult when expectations aren't being met and they don't feel like they are getting what they were promised. This is much less likely to happen if up front you only focus efforts on getting more of your best-fit clients. Your people will thank you. And you are much more likely to improve your employee retention and even recruiting, because happy employees are much more likely to become evangelists.

Further resources

Maintain ICP alignment at all costs

I can't stress enough how important this foundational alignment on ICP is, and how often I find it missing or incomplete in consulting and advisory firms.

One last thing to consider - your ICP isn't static. It's not a one-and-done activity. As your business evolves, and as the market you operate in evolves, you will find a need to adjust your ICP, and realign your entire organization on it. I recommend revisiting your ICP once a year during your annual planning process. Most years, you will leave it as is, but making this check-in a part of your annual planning ensures that you don't miss a critical element of your growth system as your business grows.

Along with alignment on ICP, there are 9 other aspects to build organizational alignment around. Take the Growth Gap Assessment.

ICP Test qualifying questions

These are the 4 qualifying questions you should answer to decide whether you really have a clear ICP or not.

• Do you have unique (market differentiated) expertise in the primary industries you serve?
• Do you actively seek out specific niches within your primary industries?
• Are there certain industries or niches that your organization deliberately chooses not to work with?
• Is your buyer profile documented and understood across the organization?