Issue 69 - Judge me by my size, do you?
Don’t let the size of a Customer Success team mislead you, they can handle quite a few customers! So how can you harness the power of the force? Well the (not so) easy way to do that is by hiring correctly and scaling effectively. Hiring and scaling a Customer Success team can be confusing or misleading at times so in this issue of the SaaS Tattler we will take you through the whole process from Hiring to Scaling.
We will be taking a two week break for the Holiday Season, so you can expect the next issue of the SaaS Tattler on January 6. On behalf of the Amity Team, we would like to wish you Happy Holidays! Thank you very much for your support this year and we look forward to talking more SaaS in the New Year!
How many customers can a Customer Success Manager (CSM) be responsible for? Or maybe the better question is How much revenue can a CSM be responsible for? According to Jason Lemkin, your best bet is one CSM for every $2 Million in ARR. In this article, Jason Lemkin discusses some rules for scaling your Customer Success team.
One you may not have heard but it’s a good one — is Hire One Customer Success Manager for every $2m in ARR.
If you haven’t hired a Customer (or Client – same thing ) Success Team before, it can be confusing to start. It will feel like a cost center. After all, I’m not really losing any of my Big Customers at the beginning — why spend $100k or so, all-in, to hire someone to proactively manage them and nothing else? And can’t customer support just do some of this at least?
Let’s step back because the $2m Rule is a Good One it Turns Out. Let’s look at the spectrum of deal sizes, and assuming $2m per Customer Success Manager, figure out what one can do at different deal sizes. You’ll see once you divide the average deal size per customer by $2m, you get a quick sense of how proactive your Customer Success Managers can be, and where the likely dividing line between Customer Success and Support will be:
Now that you have determined how many CSM’s you will need to hire, it’s time to begin the hiring process. But what exactly are you looking for? Well to answer that question you will need to have an overall understanding of where Customer Success fits into your organization. Once you determine the fit then you’ll know what qualities they need to be successful. In this article, Louise Philp lists the three must-have qualities that indicate a CSM will be successful regardless of the organization.
From my experience working with and staffing my team, there are three must-haves for customer success managers that are good indicators for success:
- Ability to multi-task and pay attention to detail. Most CSMs are juggling data and colleagues and new features and customers and more data. As the book of business grows, it’s easy to overlook or forget something – even a customer! And that’s just not acceptable to the customer or the business. It also helps to have a system in place to help them manage it all.
- Critical thinking. Have them walk you through interacting with a customer. Find out their play by play and their drive to succeed. How a CSM thinks through and approaches a customer it vital to the conversion and retention because each customer is unique.
- Communication. I mentioned above how a CSM needs to communicate and collaborate with various internal departments and of course the customer. How well do they read who they are speaking to? Can they speak to various levels of an organization – they might be talking to a CEO or designer depending on your service offering and are they comfortable all the way up the chain? Can they influence decisions in how they communicate?
So you have hired your CSM, now it’s time to plan for growth and structure your Customer Success team. Every business is different and for that reason, there is no one size fits all approach to structuring your Customer Success team. In this article, Nandini Jammi breaks down five major ways to structure a CSM role.
Typically found in early-stage companies where Customer Success is responsible for support, renewals and other post-sales activities. The good news here is that CSM is the “one-stop shop” and can ensure a great client experience. The bad news is that this model is hard to scale and places more pressure on the team to find the right candidate for the role.
Typically found in companies with a low level of product complexity and a competitive sales and renewals focus. In this model, Customer Success is aligned to revenue and is responsible for identifying up-sell. The challenge is that the focus is less on the customer, and can carry a negative “sales-y” perception amongst the customers.
Typically found in more mature companies with medium levels of product complexity. The pros are that Customer Success is aligned to customer needs as well as the rest of the service organization. The cons are less revenue alignment and an increase in touchpoints with the client.
Typically found in companies with moderate levels of product complexity and are in hyper-growth mode. In this model, the Chief Customer Officer “owns” existing customers and keeps the sales team focused on closing new business. It requires a very versatile CCO and success will depend on the maturity of the organization.
Typically found in companies with very complex products and a competitive sales and renewals organization. The good news is that Customer Success can be very customer-focused while maintaining alignment with renewals sales. The danger is that some levels of effort duplication are inevitable. Also, quantifying ROI becomes difficult in this model.
Looks like you’re building a team (and that’s a good thing)! Don’t let this get to your head but your company can’t survive without you. That’s because ARR growth and churn are noted as the two biggest predictors of growth for companies. Now that you’ve got your team it’s up to you to maintain a healthy customer base. In this article, Zach Bulygo discusses the importance of the Customer Success department.
Brian Stafford: The Sooner You Invest in Customer Success, The Better
McKinsey ran an analysis looking at the biggest predictors of growth for $100 million companies that turned into $1 billion companies. They looked at 600 companies over a 15-year time period.
One predictor they found for companies going from $100 million – $1 billion was the ability to become good at something they weren’t previously good at. This means they had to build out a new channel or capability in order to grow to $1 billion.
Stafford hits on two customer success metrics – ARR growth per customer, and churn rate. He says that ARR growth is one of the most underleveraged areas of growth for companies. Roughly 80% of the companies in the McKinsey database are growing ARR per customer at less than 10% per year. There is a massive value driver in customer satisfaction translating to new ARR that has not been hit. Even with the companies that are growing ARR per customer 10%+ per year, nearly half their customers aren’t included. They’re only touching about half their customers. This is particularly true for bigger companies. There’s an offer to charge them more, and many companies haven’t taken advantage of that.
Churn gets a lot of lip service, but rarely the attention it deserves. The sooner you realize the importance of investing in customer success and therefore preventing churn, the better growth you’ll have.
The Best of Customer Success Today
For fast-growing SaaS companies, life is good in many ways. Despite the recurring cash flow it creates a new a challenging problem. Are you suffering from Customer Overload?
Every company says it wants to be “customer-centric” and deliver great “customer experience,” but only a handful are able to turn their customers into brand advocates. Here are 10 Ways to Turn Customers Into Brand Advocates.
Cost is, quite rightly, a focus for all organizations. Every company has a limit to it’s resources, some higher than others, but waste is always unforgiveable. What’s The REAL Cost of Customer Experience?
Every week I issue this roundup of relevant articles from the customer success industry so we can learn from each other and share best practices. If you like what you read here, please consider forwarding to others. New reader? Subscribe.
Find an interesting article you would like featured in the next SaaS Tattler?
Feel free to submit them on this page.