When’s the right time to hire your first CSM?

22 Nov

So, you’ve got a Go To Market strategy, hired a few salespeople and probably one pretty good sales leader. Marketing is bringing in leads, and your pipeline is looking pretty strong.

When’s the right time to bring in Customer Success?

As soon as you can, ideally.

Here’s the thing about recurring revenue: it’s only recurring if your customers choose to renew.

Bringing in customers without having anyone to focus on how to deliver post-sales value is risky for two reasons;

Customer expectations are sky-high. It’s in your best interest to start off on the right foot. Most customers will need help adopting your product and recognising how much better life is now they’ve started using it. This is customer success. Without it, expect churn.
Customers expect some level of service. If you leave this up to your sales team, their focus will be split between answering questions and closing deals. You need to pick what you want them to focus on.

So, when should you start hiring CSMs?

Most scaling companies work on the rule of thumb that you’ll need 1 CSM for every $2m of revenue you bring through the door (don’t worry, this number goes up as you scale past $20m). Whilst I wouldn’t recommend waiting until you hit $2m ARR to think about post-sales, by the time you’ve hit this number, you’ll have enough customers, hopefully, to justify the spend.

Before you think about bringing in a CS team, make sure you’re thinking about your entire post-sales organisation and define some metrics and focus. If you think you need to hire some CSMs just because you have some customers now and it seems like the right thing to do, you’re right, but you might not get the outcomes you’re looking for.

Remember, customer success and customer support are not the same thing; build your organisational structure based on metrics you want functions to own and hold them accountable.

The type of post-sales organisation you need depends heavily on your product, who your users are and what support levels people will need. You also need to consider what your sales strategy is. If you want to land as many new business customers as possible, you’re probably looking for a commercial customer success team. If you’re targeting enterprise customers with a ‘land and expand’ motion, you’re more likely to want the sales team to stay engaged in the customer account. Therefore, a more technical, product-focused CS team will likely suit you best.

When you’re thinking about the critical metrics for your team, keep them tied to commercials, always.

For a commercial CS team, focus on NRR.

You want to see new revenue coming in from the CS team, but you don’t want to lose sight of retention. Therefore, NRR is the easiest way to track effectiveness. Don’t forget about GRR here, but the bottom line is that you’ll never get above 100% NRR if you have a churn problem.

For a product-focused CS team, focus on GRR.

If you have a product-focused CS team, you’ll want them primarily to engage with users around adoption and utilisation. You’re unlikely to renew customers who aren’t using what they paid for, so gross retention is a good metric to use.

Why not NRR? Well, because you can’t be accountable for the delivery of another team. If you’re leaving your sales team in customer accounts for expansion purposes, focusing your CSMs on retention through adoption and value delivery makes sense. Successful customers will likely grow, but you can’t hold your CS accountable if Sales owns it.

Keep it easy to start with and have one solid metric that you measure the effectiveness of your CS team with and measure it consistently. Many, many more metrics matter in customer success, but until you’re big enough for a CS Leader, you don’t want to over complicate things and cause distractions for your team.

So, when’s the right time to hire a CS Leader?

Honestly, depends how comfortable you are with post-sales leadership.

There are a few practical considerations here;

Do you have a problem with retention already? If yes, hire a leader now; you need the experience.
Can you afford one? You can likely have two, maybe three CSMs for the price of one leader; choose wisely.
Most CS Leaders do not mind being a CSM for a few customers, but they’re unlikely to want to be the only CSM. They will want to build a team quickly, so think about this when you’re looking at your budget.

Here’s a growth hack for you: hire a Senior CSM.

Hire someone with 3-5 years of experience and invest in their career. You'll likely have more success building someone into the role and giving them the career boost. Consider working with a fractional leader for a few months to start the process. They can help guide and coach your CSM while building the practice together, ensuring they’re not missing anything obvious.

So when can you expect results?

Good things come to those who wait.

It will take at least 6 months to see the benefits of having a CSM in your lagging metrics, although you’ll likely feel the impact much sooner on the customer experience and the team in general.

If you need to build a business case for a CS hire and you need some more immediate benefits, these can include;

Building customer relationships will develop advocacy, which can be funnelled back to marketing. Don’t underestimate the power of customers who advocate on your behalf.
Focus: you want your sales team to focus on closing new business. They won’t do this whilst they’re talking to customers about onboarding.
Your CSM will immediately develop a product feedback loop, which will enhance your development process.
As your CSM starts to create assets and documentation for your users, you can build these into a community and scale your ability to talk about your products en masse.
A great CSM will speed up your sales cycle. Bring them in to discuss onboarding and adoption during the final phases of your sales process, or have them collaborate as part of your proof of concept and watch what happens to your average time to close.

If you’re hiring your first CSM, be mindful of their experience, as customer success can be a lonely and thankless world. CSMs often rank highly for empathy and emotional intelligence, but they’re also prone to burnout and overworking as they try to solve everything for every customer all at once. They’re passionate and committed, but they’re also the first person customers take their frustrations out on when things aren’t going well, so ensure they’re well supported. This is especially true if you hire a CSM, not a CS leader.

So, in summary,

Hire as soon as you can, and hire consistently as ARR rises.
Before you hire anyone, make sure you know what you want your CS team to be. Have a North Star metric for your CS team and measure it consistently.
If you already have a big problem to solve, hire a CS Leader. If you hire a CS leader, support them with a budget to hire a team.
If you can only afford one CSM, hire an experienced one and grow them into a leadership role. Use fractional expertise to guide and coach.
Don’t expect to see tangible results in the commercials for 6 months. Build leading metrics to make sure you’re on the right course.

It can be daunting if you’ve never built a customer success team. There’s a lot of advice for every type, style and size of company, and a lot of it is conflicting. If you need help working out what sort of customer success team you need, what sort of skills you need to bring in, and the things you’re missing which are stopping your customers from growing, send me a message. I can help.