One of the biggest challenges Customer Success leaders face is operationalizing a capacity model that reflects reality. If done correctly, your CSM team can scale to $250 million in revenue with optimal output and reduced burnout. If done incorrectly, churn can metastasize while your customer retention costs balloon to 15-20% of revenue. But what's the right approach?
The origins of "account"
Perhaps some of the confusion lies in the nebulous word itself: account. Derived from Old French and Late Latin, account was primarily a financial term referring to "a count" of something, or a reckoning of money to be paid. Around the 1600s, the definition of account garnered some nuance: "course of business dealings requiring records"—but it never ventured far from its original purpose: counting stuff.
But this poses a challenge for leaders, their CRM software, and the CSM organization. IBM and Nuts.com are very different accounts.
Let's start from the bottom
Many Customer Success executives will boldly prognosticate: "An enterprise CSM can handle 15 accounts, and a corporate/mid-market CSMs can handle 150 accounts" — or some variation thereof. Are they guessing? Yes, mostly. And that's okay early on as you test & tinker with your Customer Success model.
But cavalier guesswork can get you in trouble, especially as you begin to scale from $20M to $50M and sales begins closing dozens of deals per week.
Most leaders miss a vital input: How much TIME can my CSM team actually spend with customers?
To answer this question, we monitored my CSM team's activity for 12 months and measured how many hours they were spending with customers. Since logging calls in Salesforce is (very) prone to human error, I pulled the data directly from their Google Calendars (using a powerful software called Datahug), and inferred account names from the email domains on the accepted calendar invite.
What we learned: 15 hours per week
Sustained over the long term, the maximum amount of time a CSM can spend with a customer is 15 hours per week. At first glance, 15 hours per week might not seem like a lot, but think about it: that's three 1-hour customer calls per day, or six 30-minute customer calls per day. After you account for meeting preparation, internal meetings, administrative overhead and lunch, you run out of daylight pretty quickly.
To help build our capacity model, we can consider this a viable upper limit.
Not coincidentally, 15 hours/week was the output of one of our top-performing CSMs who typically worked 50 hours per week, so 30% of her time was spent talking to customers (either on the phone or in-person meeting). An absolute workhorse, she also had the highest product usage and often the best net retention on the team - but these are topics for another day (the r-squared between CSM "customer time" and net retention was 0.82, i.e. very strong correlation).
Highest value activites
The next piece of the puzzle to consider: if we know that CSMs can spend ~15 hours per week with customers (max), what is the highest-value use of that time? The answer depends on your product and customer profile, but the list usually looks something like this:
- Discovery: learning about the people and business of the "account"
- Product training: education on features & functionality to drive value for customer
- Business reviews: some sort of recurring value visibility/validation exercise
- Project management: systematic growth of product users and consumption over time
- Marketing: obtaining customer references, testimonials, case studies
- Sales: asking for referrals, identifying upsell/cross-sell opportunities
- Product: seeking feedback on current & future product experience; "voice of customer"
From the bottom to the top
Now that we've 1) established a rubric for CSM bandwidth—a precious 15 hours/week engaged directly with customers—and 2) reflected on their most valuable activities, we can zoom up and outward to think about your customers:
Who are they? What industry are they in? What do they need from you? Where are they getting stuck? Where are they in their lifecycle? How would you assess their maturity? How many teams/people will be using your product? Have they bought multiple products? What is their growth potential? With these answers, you can begin to assess what your customer needs from your Customer Success programs.
It is in these gradients that we come to appreciate all accounts aren't created equal. Some customers simply require—or deserve—more time, and it is in these tradeoffs that you begin to craft your CSM strategy: being proactive, while acknowledging the reactive. Here are the customer profiles that tend to require the most time:
- New customers: onboarding requires heavy training and implementation work; you might consider creating a separate team that focuses exclusively on new customers, e.g. we called them our valiant "Launch" team which launched dozens of customers per week via a virtual launch program delivered via interactive Go-To-Webinar.
- Low maturity: teams with less experience in your technology (or software in general) will require more work to generate the education and enthusiasm needed to create sustained behavior change; your CSMs have to literally help them build the habit of using your tech.
- Bottom quintile ARR: the old saying "the squeaky wheel gets the grease" is often true of smaller customers; often resource and time constrained, these customers often tax your entire Customer Success team and must be planned for with education & support programs at scale.
- Cost: depending on the nature of your product and maturity of your company, the cost of your CSM team will typically be between 1-4% of TTM revenue.
- Work/life balance: companies inadvertently create a burnout culture by constantly increasing CSM portfolios. This is unsustainable in the long run.
- Customer segmentation: how you categorize your customers—industry, geo, what they pay, what they bought, company size (revenue), company size (seats)—will help determine what they need, and what you want to provide them
- CSM service level: how you structure and stratify your CSM offering is the most important decision to manage bandwidth/capacity effectively; aim for the lowest common denominator.
- Account potential: what customers pay today is not indicative of what they could be paying; therefore, you might consider a dual-classification system to quantify both, e.g. A1, A2, A3, B1, B2, B3, C1, C2, C3. In this system the letter is what they pay you today (A = top decile/quintile ARR), and the number is the potential extrapolated from your value metric (1 = high potential/top decile in employees). This will enable you to OVER-serve your B1s, and C1s to capitalize on their potential despite modest ARR right now.