The $2 Million(*) Dollar Man/Woman: How to Think About Scaling Your Customer Success Team (Updated)

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In SaaS, there are a lot of great “rules” that do make sense overall but can be confusing or borderline misleading at times.

One you may not have heard but it’s a good one — is Hire One Customer Success Manager for every $2m in ARR.? This is pretty much where most of us end up at, at scale.? But it’s not necessarily where you want to be in the earlier days, especially if you’ve been fortunate enough to raise some extra capital.? Most of us these days are anchoring about $1m per CSM as they scale (see the survey above) — if they have the capital and growth rate to afford it.

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, at least to skate to at scale. ?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:

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:

• For $100k+ deals, it’s so few customers per CSM, you need to get on a jet to visit those customers, at least twice a year. ?Even if you closed them on the phone. ?The CSM should know everything there it is possible to know about these customers.
• For $20k+ deals, the dedicated CSM should know most of them reasonably well and their business processes cold. ?Visit all of them if they are local, some if they are remote (if practical on roadtrips to). ?Map out the org and who owns and is responsible for what at the end customer at a very granular level.
• For $5k+ deals, you need to bond in the onboard process or first interaction, and then follow up in an automated but informed fashion. ?You can’t know everything about 400 customers. ?But you can try to learn the key facts, and at, say, 200 workdays a year, you can afford to talk to all of them proactively, 3-5 per day. ?You can. ?Even this segment doesn’t need to be reactive. ?There are enough hours in the day to talk to all of them, check in with them, and solve their problems and address their needs before they ever have to create a ticket. ?Or get angry. ?Or leave.
• For $1k+ deals, you need strong systems and automation. ?But you should still identify issues and proactively reach out when you see them. ?Some will say you can’t be proactive here. ?But much as we discussed that you can use salespeople at a $99 price point … if you can sell at $99 … you can manage that $99 customer to success, one way or another.
• Below that, it’s going to probably have to be all reactive and automation and ticket-based.

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KeyBank’s Annual SaaS Survey also has some good, current data.? In 2023:

• CSMs at SMB SaaS startups covered 100 accounts on average, with $1.3m in coverage
• CSMs at Mid-Market SaaS startups covered 40 accounts on average, with $1.5m in coverage
• CSMs at Enterprise SaAS startups covered 14 accounts on average, with $2.6m in coverage

In practice, I’ve seen higher numbers than this in all 3 categories recently, as folks have pushed toward $300,000 or more in revenue per employee.

But this is great confirmatory data to see:

The Keybanc data also shows overall startups cover about $1.7m in ARR per CSM.? That’s our 2 million dollar woman/man right there.

And finally, Gainsight’s latest benchmarking data also ties here:

Does this change in orgs where CS is really becoming part of Sales?? Probably.? Will the push for AI and automation force even higher “coverage” here?? Probably, too. Nick Mehta, CEO of Gainsight and I dug into all this and more below.

CS is in flux, in change right now.? But one thing is clear: customers love talking to someone real, someone great, a true subject matter expert when they have questions or issues.

Do that right, your NRR goes up, your churn goes down, and your CSAT up.

Hey everyone, Workshop Wednesdays is back this week with Gusto !

This Wednesday, LIVE at 10 am PT, Tolithia Kornweibel , CRO at Gusto and Jamie Edwards , Head of Go-to-Market Operations and Tools at Gusto will share their High-Velocity Techniques to Maximize Sales.

And since we could all use help closing more deals in sales these days, this is definitely one not to miss.?Sign up for free here .