A good idea is not enough. A painful problem is not enough. Before you build anything meaningful, you need to prove that the market and economics can support a real business.
1. Defining Your ICP (Ideal Customer Profile)
Your ICP is not “everyone who could benefit.” Your ICP is the smallest group of buyers who feel the pain acutely, have authority to buy, and will act now.
1.1 Role: who actually buys?
Start with the buyer, not the user. If you can’t name the role precisely, you don’t have an ICP yet.
- Who signs the contract?
- Who owns the budget?
- Who gets blamed if the problem isn’t solved?
If the buyer can’t personally justify the spend in one sentence, you’re targeting the wrong role.
1.2 Company size: where the pain is sharp enough
Company size matters because too small often means no budget, and too large often means long sales cycles. Define size using one clear metric:
- Employees (e.g., 25–200)
- Revenue (e.g., $5M–$50M)
- Customers served (e.g., 1k–10k users)
1.3 Urgency: why now?
Urgency is the most underestimated part of ICP definition. Pain without urgency becomes polite conversations, not deals.
Look for forcing functions:
- Compliance deadlines
- Revenue leakage
- Operational bottlenecks
- Headcount pressure
- Customer churn
- Executive visibility (“this is on someone’s dashboard”)
ICP one-liner (write this down)
Complete this sentence, cleanly:
2. Choosing a Price Customers Will Actually Accept
Pricing is not a spreadsheet exercise. It’s a behavior test. Customers don’t buy features; they buy relief.
2.1 Anchor price to pain, not features
Start by understanding what the problem costs them today:
- Time
- Money
- Risk
- Missed revenue
- Stress (yes, it counts)
- If the problem costs $50k/year, $200/mo is noise.
- If it costs $5k/mo, $1k/mo is reasonable.
- If it costs $500/year, SaaS pricing will be hard.
Your price should feel uncomfortable but obvious once the pain is acknowledged.
2.2 Use reference pricing
Buyers don’t ask “Is this worth it?” They ask “What do I compare this to?” Anchor against:
- Existing tools
- Internal labor cost
- Outsourcing cost
- Status quo inefficiency
- One analyst costs $8k/mo. We cost $600/mo.
- This replaces three tools totaling $1,200/mo.
2.3 Early-stage pricing rule
Early on, your pricing goal is learning, not optimization. Good early pricing is:
- Simple: one or two tiers
- Defensible: you can explain it in one breath
- High enough: to repel non-buyers
If nobody pushes back on price, you’re probably underpriced.
3. Estimating How Many Customers You Can Realistically Reach
You are not selling to “the market.” You are selling through channels, constraints, and time. Start with customer math, then reality-check the funnel.
3.1 Backsolve from the goal
Work backward from your revenue target.
Price = $500/mo
Customers needed = 200
3.2 Reality-based funnel math
Use conservative assumptions:
Conversation rate: 20% → 400 conversations
Close rate: 10% → 40 customers/year
That may be acceptable—or not. The win is that now you know. Speed to revenue is often a bigger problem than market size.
3.3 Founder constraint matters
Early stage, you are the bottleneck. Be honest:
- How many sales conversations can you run per week?
- How long is the sales cycle?
- How many deals can you close per quarter?
If the plan requires a sales team you don’t have (or throughput you can’t personally run), it’s not viable yet.
4. Getting Factual TAM / SAM / SOM Numbers
TAM/SAM/SOM are not for impressing investors. They’re for sanity-checking your plan. The key is to ground your numbers in sources and constraints.
4.1 TAM (Total Addressable Market)
TAM answers: if everyone who could buy did buy, how big is the market?
Use external data, not guesses:
- Government datasets
- Industry reports
- Trade associations
- LinkedIn / directory counts (as a proxy)
If you can’t cite a source, the number doesn’t count.
4.2 SAM (Serviceable Available Market)
SAM narrows TAM to your actual serviceable scope: your geography, segment, buyer type, and constraints. SAM should feel uncomfortably smaller than TAM. That’s a good sign.
4.3 SOM (Serviceable Obtainable Market)
SOM is the only number that really matters: what portion of SAM can you realistically capture in the next 2–3 years? SOM is constrained by sales capacity, awareness, competition, budget cycles, and trust.
Exit Criteria for Market & Economic Viability
You shouldn’t move forward until the math works without miracles.
- I know exactly who the buyer is.
- I know what they will pay and why.
- I know how many customers I need.
- I know how I will reach them.
- The math works without heroics.
If your ICP is clear, pricing is anchored to pain, customer acquisition is believable, and TAM/SAM/SOM are defensible, the idea deserves investment. If not, that’s cheap learning—take the win and iterate.