FA-301a · Module 3

Ideal Customer Profile Economics

3 min read

Every company has an ideal customer profile — ICP — defined by firmographic and behavioral characteristics. Cohort analysis adds the financial dimension: which ICP segments generate the highest LTV, the lowest cost to serve, and the best net retention? The ICP should not be defined by who you want to sell to. It should be defined by who actually retains, expands, and generates margin. Those are often different populations.

Segment Economics — Trailing 12 Months:
──────────────────────────────────────────────────────
            Enterprise  Mid-Market  SMB       Startup
──────────────────────────────────────────────────────
Avg ACV:      $185K       $44K      $12K      $6K
CAC:          $62K        $14K      $4.8K     $2.1K
Gross Ret.:    95%         88%       74%       61%
Net Ret.:     118%        106%       82%       68%
LTV:          $412K       $89K      $18K      $7K
LTV/CAC:       6.6x        6.4x      3.8x      3.3x
Payback:      8.2 mo      7.8 mo    9.6 mo   11.4 mo
──────────────────────────────────────────────────────

Enterprise and mid-market have comparable
efficiency. SMB is marginal. Startup destroys
value. The ICP is enterprise + mid-market.
Startup acquisition should stop.

Do This

Define ICP using cohort-proven economics: LTV/CAC, retention, and payback data
Reallocate acquisition spend from low-LTV segments to high-LTV segments
Update ICP quarterly as cohort data matures and new segments emerge

Avoid This

Define ICP based on who you want to sell to instead of who actually retains and expands
Continue acquiring segments with negative unit economics because "they might improve"
Treat all customers equally in resource allocation regardless of segment economics