You’re ready to make your first Customer Success hire- congratulations! Establishing a dedicated Customer Success team is an investment in the long-term success of your customers. Most companies realize they need Customer Success when they discover the actual cost of customer churn. These companies learn the hard way that customer acquisition isn’t enough- they also need to retain customers over the long-term.
And how do you convince customers to stick around? By delivering value through your product. Customer Success signals a shift in focus towards proactively delivering value to your customers and increasing customer satisfaction, retention, and expansion revenue. Your company isn’t the only one making this shift- the number of companies with dedicated Customer Success teams increased 225% in the past year. This post will help you determine when to hire your first Customer Success Manager, what skills you should look for, and how to set this new team up for success.
The number of companies with dedicated Customer Success teams increased 225% in the past year.
When to hire
As with all positions, it’s better to hire before you’re underwater and urgently need someone. That means bringing on your first Customer Success Manager before churn and expansion revenue are an issue. This has lead to the mantra that Customer Success is a single-digit hire. Below are a few factors to consider when making your first (and second, and third) Customer Success hire.
Factors to consider when making a Customer Success hire:
- ARR per CSM
- Median Annual Contract Value (ACV)
- Product Complexity (Simple to Complex)
- Volume of Customers Per CSM
The most common metric used to justify establishing and growing a Customer Success team is how much ARR is managed by each CSM. The ratio popularized by Jason Lemkin is one CSM for every $2MM in ARR. However, this ratio doesn’t make sense for every company. Assuming your ACV is close to the industry median of $25k (as reported in Pacific Crest’s 2016 SaaS survey), each of your CSMs will be managing 80 accounts to get to that magic $2MM in ARR figure. If your CSMs were to speak to each of their accounts once a quarter, they would need to reach an average of 1.25 customers every day- that’s a lot of calls. It’s important to consider additional factors when deciding when to bring in a Customer Success hire- such as the complexity of your product (can users pretty much figure it out on their own, or does it require a lot of up front training?), and the volume of customers per CSM (and as an extension, the type of relationship you can reasonably expect those CSMs to have with each account they manage). But don’t forget that your first Customer Success Manager is an investment in the future success of your customers. That means that they might not be managing anywhere near $2M in ARR right off the bat, and that’s okay.
Who to hire
What type of background should your first Customer Success hire have? First let’s talk about who you shouldn’t hire. Don’t go out and hire a VP of Customer Success. Over-hiring can stall the progress of your Customer Success team before it’s even started. Someone with a lot of experience is unlikely to be able to get into the weeds, which is exactly what you need in your first Customer Success hire. A mid-level Customer Success Manager will be ready to enthusiastically jump into getting to know your customers and providing value as soon as possible.
What types of skills should a CSM have- should they be able to code, or should they be more of a teacher? The answer depends on your product and in what ways your customers find your product challenging. If your product is technical and designed for developers, then your CSM will need to be comfortable speaking to technical folks. If your product is used by healthcare companies that require HIPAA compliance, then your CSM will need to be knowledgable in that environment.
One background requirement you shouldn’t overemphasize is experience in Customer Success- too few candidates have it. 43% of executives who work in customer success come from sales or account management while only 24% previously worked in success. The remaining 33% of experts have different backgrounds, from marketing to product or engineering, consulting or finance. Instead, compare their past experience with the work they will be doing to deliver on your customers’ goals. This might lead you to determine that someone with a teaching degree would be a better fit than someone with 8 years of experience working with Fortune 100 companies.
43% of executives who work in customer success come from sales or account management while only 24% previously worked in success.
Setting up your Customer Success team for success
Take the time to consider how you can set up your Customer Success team for success long before your CSM shows up for their first day. You’ve already brainstormed what type of background your CSM should have, now identify specific projects and responsibilities this person will manage. Below are a few recommendations for where they might get started.
- Become a product expert
- Understand ideal customer and use case
- Act as the voice of the customer
- Have a pulse on customer base
- Identify/ confirm value prop
- Track key metrics
- Establish team KPIs
- Audit onboarding and engagement
Bringing in a Customer Success consultant is a great way to ensure your first Customer Success hire isn’t operating without direction or focus. A consultant can also scale your Customer Success efforts from a single CSM to a scalable process that will lead to repeatable and reliable Customer Success driven growth.