Expansion Stage Companies: Can You Further Segment Your Segments?

Devon-McDonald by

As I’ve written about in many posts in recent months, it is so incredibly important for expansion-stage companies to make sure they are focusing on the best target market segments, and the top buyer profiles within those segment(s).

This discussion often bubbles up when the Labs team helps the portfolio companies launch their first outbound prospecting, business development teams (which, for us, is often one of the most interesting projects new investments want to participate in — “Hell yeah! Build my sales pipeline with more qualified opportunities!?! Where do I sign up!?”).

At this point we have worked with SO many companies on this type of engagement that we can confidently say if a sales and marketing organization does not have real focus on select target markets/buyer personas, an outbound prospecting engine will likely fail.

We are so confident in this theory that we will only take on this type of project with our portfolio companies if they can commit to honing in on a segment where they know they have a likelihood of success.

We wouldn’t necessarily leave a portfolio company hanging — we’d likely suggest that BEFORE we help them launch an outbound prospecting team they should engage with our Research and Analytics team to help develop and test some hypotheses.

Committing to a target market is no easy feat — it takes lot of testing and analysis. Many companies at the expansion stage don’t HAVE a ton of data to work with, and, sadly, it’s because important data has not been collected in the sales organization’s CRM. Again, this is why our Research and Analytics team can really come in handy — so that a company isn’t aiming blindly.

Okay, so clearly not taking aim at specific target segments and buyer personas is an issue. A major issue. Have I beaten a dead horse enough yet? But you may be reading this thinking, “Devon, I’ve heard this from you and the Labs team before. We get it already! We DO have target market segments. Get off of our back! But seriously, why don’t we have more deals in our pipeline?”

My response: Great. That’s awesome that you are focused on your segment. BUT, can you further segment your segments? Is your target market too broad? (“GAH! This girl is killing me!”). Honestly, my boss, Brian Zimmerman and I have had numerous conversations in the last few weeks just like this:

Expansion Stage Company: “Yes, we are super focused. We are going after market X.”

OVP: “Oh, okay great. How many companies are you focusing on?”

Expansion Stage Company: “Number of companies? I’d say around 50,000.”

OVP: “50,000 — wow. That’s a big market! Are all of those companies your ideal customer profile? Can you call into all of those companies and find someone in a buying role who has the same pains as the last and not have to adjust your messaging?”

Expansion Stage Company: No.

Recommendation: Test/experiment, record, analyze, discuss, refine, focus, and REPEAT until you’ve moved out of the expansion stage.