Budgeting for Customer Success in 2015
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The document provides guidance on budgeting for customer success in 2015, including setting goals, determining necessary roles and headcount, and justifying investments. It recommends setting segmented churn and upsell goals based on maturity and focusing initiatives on retention and expansion. Metrics like accounts per CSM and hours per account can help determine optimal headcount. Technologies and services can drive efficiency and effectiveness, and their ROI justified by increased retention, upsell, and advocacy. The webinar offers Gainsight's actual 2015 customer success budget as a starting point.
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Budgeting for Customer Success in 2015
- 1. Budgeting for Customer Success in 2015 December 4, 2014
- 2. Housekeeping • Q&A panel on your right • Recording for colleagues who can’t make it • All attendees will receive slides • Twitter hashtag #customersuccess
- 3. Our Speakers Nick Mehta CEO @nrmehta Byron Deeter Partner @bdeeter
- 4. On Your Mind? • Strategy • How do I set my goals for 2015? • What initiatives can drive these goals? • What do my CEO and board think? • People • What functional roles do I need in 2015? • How many of each do I need? • How can I justify the hiring? • Process • What processes can I use to drive efficiency and effectiveness? • What technologies and services can be helpful? • How can justify the ROI?
- 5. Strategy
- 6. How Do I Set My Goals for 2015? Maturity Churn Focus Low hanging fruit Customer engagement No brainer risk management Up-sell Focus Churn efficiently managed More products to sell Mature client relationships Focus
- 7. How Do I Set My Goals for 2015? Churn… Retained 90% Churned 10% 1) 2014 ARR* Avoidable 50% Unavoidable 50% 2) 2014 ARR Churned Out of business Acquired Sponsor change? * Hypothetical Example: Assumes 1 year contracts
- 8. ARR $5 MM $2 MM $3 MM 2014 Avoidable Churn 2% 5% 10% 2015 Target 1% 2.5% 8% Mid-Market Small Top How Do I Set My Goals for 2015? Churn… 3) Avoidable Churn by Segment 5% Avoidable Churn 3.4% Total Churn
- 9. Churn ARR Saved $50K $50K $240K ASP $50K $25K $10K Customers Saved 1 2 24 Mid-Market Small Top How Do I Set My Goals for 2015? Churn… 4) Sanity Check 27 Extra Clients Saved 54 (2X) Extra Clients Closely Managed?
- 10. ARR / # $5 MM $2 MM $3 MM 2014 Up-sell 5% 2.5% 1% 2015 Target 10% 5% 2% Mid-Market Small Top How Do I Set My Goals for 2015? Upsell… Up-sell by Segment 3.3% Total Up- sell 6.6% Total Up- sell
- 11. What Initiatives Can Drive These Goals? Retention Initiative Examples Up-sell Initiative Examples Customer-specific Tiering Time-to-value Early warning Success planning Sponsor management Playbook optimization Support improvements Renewal execution Tiering Up-sell identification Up-sell workflow QBRs CSM sales training CSM-sales alignment Company-wide Customer journey Voice of the Customer Product Sales qualification Pricing/packaging New products Price increases T&C optimization
- 12. What Do My CEO and Board Think? Cost Center Revenue Driver In COGS Efficiency Scale In S&M Productivity Acceleration
- 13. What Do My CEO and Board Think? • Part of growth initiative? • Part of customer sat initiative? • Standalone initiative? • Ranking in priority?
- 14. What Do My CEO and Board Think? Source: TomTunguz.com “But on average, the customer success team saves about 4 months of contribution margin per customer which means company can spend up to 3 months' worth of contribution per customer on churn management.”
- 15. What Do My CEO and Board Think? Source: TomTunguz.com
- 16. Example: Gainsight Retention Initiative Examples Up-sell Initiative Examples Customer-specific Cadence Success Express 1-to-many CSM CSM operations Services operations Community Exec sponsorship … CSM sales training CSM-sales alignment Company-wide Simplified packaging and T&Cs Sales to CSM hand-off Product on-ramps … New products
- 18. People
- 19. What Functional Roles Do I Need In 2015? Seed CSM Series A + Onboarding + Operations Growth-stage + Support + Customer Marketing + Renewals Pre-IPO + Training + Advisory Public + PMO + Managed Services + Domain Experts + Product Specialists / Architects** Earlier in companies with tech buyers
- 20. How Many Of Each Do I Need? Role Scaling Factor CSM ARR Onboarding New Clients Operations 1+ Support Case Count Customer Marketing 1+ Renewals ARR Renewing Training 1+ Advisory Revenue-driven PMO 1+ Managed Services Revenue-driven Domain Experts Revenue-driven Product Specialists / Architects Product ARR
- 22. How Many Of Each Do I Need? CSMs… Source: Jason Lemkin / SaaStr “As the deal size goes up, the CSM can be more proactive. And you’ll find it’s critical to segment the team based on deal sizes, so they can specialize in what they do.” $2 MM Rule of Thumb
- 23. How Many Of Each Do I Need? CSMs… Financial Line Item Value Revenue $100 MM Gross Profit (70%) $70 MM - R&D (15%) $15 MM - G&A (5%) $5 MM EBIT Before S&M $50 MM S&M for $100 MM Renewals (10%) $10 MM S&M for $20 MM New (20%) $20 MM EBIT $20 MM Grow 20% Spend $0.10 / $1 renewal Spend $1 / $1 new Make 20% EBIT Assume $100K/CSM Assume 2X Overhead $2 MM ARR / CSM
- 24. How Many Of Each Do I Need? CSMs… High-growth Low-growth Early-stage $250K ARR / CSM Jack of all trades Ramp time $1 MM ARR / CSM Jack of all trades Late-stage $500K ARR / CSM Ramp time $2 MM ARR / CSM
- 25. ARR $5 MM $2 MM $3 MM CSMs 5 2 3 Accounts / CSM 20 40 100 Mid-Market Small Top How Many Of Each Do I Need? CSMs… Assume $1 MM / CSM
- 26. Accounts / CSM 20 40 100 Hours / Quarter 520 520 520 Hours / Account 26 13 ~5 Mid-Market Small Top How Many Of Each Do I Need? CSMs… Sanity Check
- 27. How Can I Justify The Hiring? CSM Hiring Plan 5 => 10 2 => 2 3 => 3 Accounts / CSM 20 => 10 40 => 40 100 => 100 Net Retention Increase 20% Mid-Market Small Top Investment Proposal $1 MM Investment $1 MM Net ARR Growth
- 28. Example: Gainsight Value 2014 2015 ARR X 3X CSMs 3 15 Onboarding ~15 ~30 Operations 0 2 Support 2 8 Customer Marketing 0 1 Renewals 0 2 Training 0 1 Advisory 0 5
- 30. Process
- 31. What Processes Can I Use? Efficiency Ramping Prioritization Automation Effectiveness Training Content Timing
- 32. What Technologies and Services? Technology Support CSM Community PSA LMS Communication Advocacy …. Services CSM Training Sales Training Team-building Conferences Churn research …
- 33. How Can I Justify The ROI? Retention Up-sell Cross-sell Advocacy Ramp Time Consistency Account Ratios
- 34. Example: Gainsight Technology Zendesk Gainsight! Community Software Clarizen Service Rocket Influitive Services CSM University! Sales Training Pulse! Eigenworks
- 36. Need a Starting Point? Here, take ours. All attendees of today’s webinar will receive Gainsight’s actual Customer Success budget for 2015. Keep an eye out for today’s follow up email.
- 37. We’re Here To Help Fill out the survey on your screen to schedule a meeting with a Customer Success specialist. Strategy & KPIs Structuring the CSM Org Investing in Process Free 30-minute consultation call between now and the end of 2014.
- 38. Thank You! December 4, 2014
Editor's Notes
- http://tomtunguz.com/upsell-ratios/
- http://tomtunguz.com/upsell-ratios/
- http://saastr.com/2013/10/01/the-2-million-dollar-man-woman-how-to-think-about-scaling-your-customer-success-team/