Issue 58 – Building a Business Case for Customer Success
Have you been tasked with winning executive buy-in for a customer success department? Here are practical tools and formulas to help you build and deliver a business case for customer success. Start by gathering metrics on renewals and upsells. Calculate the impact of churn on your business. Quantify that lost revenue over the lifetime of the customer. Soon you will have tangible evidence that your SaaS organization needs customer success practitioners to thrive—and perhaps even to survive.
Forrester Research reports that SaaS adoption is poised to surpass the 50% mark within the next 12 months, and with it comes the task of customer retention. Actively managing and strengthening customer relationships has a quantifiable ROI as measured by churn reduction, increased revenue from cross-sells and upsells and new lead generation—all of vital importance to SaaS business owners.
Scout Analytics’, Matt Shanahan, shares research that shows efficiency gains in customer success enjoy a “double bump” in increased margin. For example, if a customer success team uses marketing automation to make onboarding more efficient, this process improvement doesn’t just improve the customer experience, it increases gross margin and creates competitive advantage.
A percentage point in increased efficiency combined with a percentage point in increased retention rates creates a two-point margin advantage. For a $50M SaaS business, that equates to $1M of investment in development, marketing, and sales.
To garner executive sponsorship for a customer success team, you will need to build a business case that demonstrates simple and compelling returns to your department; and that the investment in customer success will drive meaningful results. For this, you must highlight key data points that quantify outcomes and improvements to the business.
A Customer Success program has many beneficiaries – and that’s a good thing because you are going to increase adoption, retain more customers, capitalize on growth opportunities, generate referrals….which might make things harder because these benefits can be attributed to different departments.
This guide will help you prepare your business case through the eyes of a customer success executive and furnish you with the critical questions you must be able to answer to justify the investment.
Need to secure funding for your Customer Success organization? Technology Services Industry Association (TSIA) believes that the ideal budget range for customer success organizations can range anywhere between 3 and 20% of total company revenues.
To help you make the case for investment, TSIA has developed a model that ties these investments to customer success charters of Adoption, Retention, Expansion—and outlines the financial results they’ll help you produce for your company. View the slideshare titled Seven Steps to Customer Success at Scale provide for additional tips for building your business case.
Customer Success Association (CSA) director, Mikael Blaisdell, uses a simple firefighting analogy to help quantify the value of a customer success team. Two sets of data, the actual firefighting costs and the estimate costs for prevention, are the starting point to build a business case for your customer success team.
Start by learning everything you can about the fire you just put out. Where did it start? What were the first warning signs? What specific actions did your team take? How many calls, emails, visits or other activities were involved? How long did each take? How effective were they? Get Accounting to give you a general “billing rate” for each of your team members so that you can put actual costs to all of the above. Using your billing rate data, what were the direct and indirect costs of the emergency efforts?
Taking the time to gather data will give you the foundation for your business case for customer success.
Other Good Reads
Considering a strategic partnership? Do your homework. Be ready. And ask these three key questions from OpenView founder Scott Maxwell’s Why (and When) Strategic Partnerships Make Sense for SaaS Startups.
Mark Benioff’s Dreamforce 2015 keynote proposed a world of possibilities in customer, one-to-one delivery; highlighting the importance of customer success in Chapter 2: The Internet of Customers and the Customer Success Platform.
Ryan Thomas of ServiceSource touts the benefit of moving from reactive to proactive health scoring and why it matters in How the wrong kind of customer health scoring can hurt you.
With no System of Record of Customer Success, did anything actually happen? shows how concrete data substantiates the impact of customer success, helps build your business case for expansion and win executive support in this Amity blog.
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SaaS Tattler - Business Case for Customer Success w/ articles by @Forrester @ScoutAnalytics and more!
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About the Author
Paul Philp is a leading innovator in SaaS and Customer Success. As Founder and CEO of Amity, Paul has spoken with Customer Success professionals from over 1,000 SaaS providers. Paul has a lifelong passion for helping business put customers first.Follow on Twitter More Content by Paul Philp