customer-success-exec-series-blog-on-scaling-cs

I’ve been a part of two different B2B software companies at very different growth stages. As an executive at Omniture (which was later acquired by Adobe), we had a large customer success team with several layers of management taking care of thousands of customers around the world. On the opposite side of the spectrum, I’m now CEO of ClientSuccess, where we’re scaling our business and team to meet the market demands of the customer success industry.

With my years of experience from startup to enterprise, I’m frequently asked how to scale a customer success team and when.

To answer that question, I typically start by discussing three important factors.

  • Annual Contract Value Target Per CSM
  • Product Complexity (Simple to Complex)
  • Volume of Customers Per CSM

Below is a visual representation of these factors on a grid that will help guide your strategic thought process when it comes scaling your customer success team.

Three Important Factors to Scale Your Customer Success Team

customer-success-blog-clientsuccess-scale-csmsAnnual Contract Value (ACV) Per CSM

The first factor (and as illustrated above) is annual contract value per customer success manager (CSM). As a rule of thumb, each CSM should be able to manage about $2 million in annual recurring revenue (ARR). For some enterprise level CSMs, that range may be greater as they manage a fewer number of accounts that carry a bigger strategic dollar amount.

With my experience at Omniture and Adobe, managing the enterprise and strategic accounts required significant more time investment into relationship building (relationship ROI), product training, value realization, goal alignment and achievement, travel, onsite visits, and making sure that we went high and wide with key contacts in the organization.

On the other side of the spectrum, CSMs managing smaller revenue (ACV/ARR) targets can usually handle more customers. With the rule of thumb being $2 million in ARR for your mid market teams and larger SMBs. Of course, this number really depends on the your business. Knowing the ARR number per CSM will be important as you grow your SaaS business. You’ll want to have that number budgeted into your business grow plan. Your CEO and CFO should know that number. It will be your trigger to hire a new CSM to meet the demand and ensure customer renewal/expansion revenue.

Product Complexity (Simple to Complex)

Product complexity is another factor as you consider scaling your customer success team. As a rule of thumb, the more complex (think an Enterprise B2B platform), the lower volume of accounts per CSM. Complexity of your product will mean they’ll spend more effort into ensuring the product is deployed, configured, and adopted across the entire customer account. On the other hand, if the product is simple to understand and intuitive or fully automated, then a CSM can handle a larger number of customers.

For example, take the contrast between an enterprise SaaS solution like Salesforce.com and a consumer brand like Netflix. Both are technology companies, but the two platforms are completely different in their complexity. Salesforce.com has multiple “Clouds”, can scale across any size organization, and has more features and integrations available than most would ever even know. Salesforce.com’s CSMs work extremely close with their customers to ensure they understand the software and apply it correctly to their businesses to get the most impact. On the opposite end, Netflix’s technology is very easy to grasp and consumers who use the technology can walk through a simple instructional wizard and have a good product understanding. In less than about 10 minutes, they’ll be streaming their favorite TV show or movie.

While Netflix may not be relevant to the CSM discussion, you’ll quickly understand my point. It’s no different with B2B software solutions. The easier the product is to set up, learn, and use, the more customer accounts the CSM can manage. This will also require automation and technology to help the CSM take a proactive approach to a large number of accounts.

Volume of Customers Per CSM

The third factor is the volume of customers per CSM. This number may vary depending on the stage of your SaaS business. The rule of thumb is about 50 accounts per CSM. As a CSM is managing 50 or fewer accounts, he or she can build meaningful relationships, pick up the phone, respond to emails, and eliminate customer challenges in a reasonable amount of time. Any more than 50, though, and a CSM needs to use technology to improve their ability to take a proactive approach to customer success. Building software (technology) that makes this easy to do is my (our) passion at ClientSuccess.

Bringing the Three Factors Together (ACV, Complexity, and Volume)

Bringing ACV, complexity, and volume together will help you identify triggers to hire more CSMs. A best practice is to have each of the three factors defined clearly in your organization. While most companies may fit squarely into the factors above and others do not. Here are a few examples, if your product is complex and your CSMs are easily managing 100 or more customers. Or your product is simple and your ARR per is high. These are just a few examples that may fall out of the rule of thumb, but that’s OK, your main focus will be making sure your customers are successful and that your CSMs have time to do this. The numbers you define with the three factors may differ but the outcome should be the same, build relationships that last and grow. Defining and refining the three factors above will help you a develop a strategic approach to achieve true customer satisfaction and value realization.

The Importance of Knowing When to Scale

Now you have the three factors defined, knowing when to scale your CSM team will be more clear and strategic. For example, you’ll see that you’re trending towards 75 customer accounts for a single CSM by the end of the next quarter, then it’s time to start interviewing and budgeting for a new hire. Knowing these factors will help you budget headcount and structure so you can be proactive in your plans instead of reactive.

As you get buy in to the three factors, you will quickly be able to scale your team without losing momentum. Plus your CEO and CFO will enjoy your strategic approach to scaling customer success.

Check out our resources below for more customer success best practices and insights for how your organization can build a culture around customer success:

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