Editor’s note: The following is an excerpt from OpenView’s report: Benchmarks for Customer Success. You can access the full report here.
Transactional and enterprise sales models each take different approaches to how they deploy customer success resources. Organizations selling enterprise products usually spend more time engaging with their customers and have a lower ratio of customers to CS employees.
While it makes sense that each CS rep in a transactional sales model has many more customers than her enterprise counterpart, knowing when to scale your CS team regardless of sales model is less intuitive.
To answer the question of when to scale your CS team, you need to examine three important factors.
- Annual Contract Value (ACV) Target Per CSM
- Product Complexity (Simple to Complex)
- Volume of Customers Per CSM
Annual Contract Value (ACV) Target Per CSM
As a general industry rule of thumb, each CSM should be able to manage about $2 million in annual contract value (ACV). This can also be based off of 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. Managing these enterprise and strategic accounts requires significantly more time investment into relationship building, product training, value realization, goal alignment and achievement, travel, onsite visits and ensuring that each CSM goes high and wide with key contacts in the organization.
On the other side of the spectrum, CSMs managing smaller revenue targets can usually handle more customers. In many cases, when you look at the books of business of mid-market CSMs managing 40 customers versus strategic CSMs managing 10 customers, their overall ACV managed aligns remarkably well in the $2M ACV range.
Product complexity is another factor to consider when scaling your customer success team. As a rule
of thumb, the more complex the product, the lower volume of accounts per CSM. Complexity of
your product will mean each CSM spends more effort ensuring the product is deployed, configured,
and adopted across the the customer’s organization. On the other hand, if the product is simple and
intuitive to implement and use, then a CSM can handle a larger number of customers.
Volume of Customers Per CSM
Lastly, when scaling your team, think about the volume of customers each CSM can manage in a proactive way. This number may vary depending on the stage of your business and the experience of each particularly CSM, but I believe that severe degradation in proactive customer success starts around 50 accounts. Ideally, each CSM should only be dealing with between 25 and 35 accounts. However, many CSMs can manage up to 50 accounts and still build meaningful relationships.
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, others do not so you may need to refine your model based on the unique factors in your business.
Natural signs that your model needs refinement include shallow customer relationships, overworked CSMs, lack of insights, failure to understand the true pulse of your customer base and, of course, increased customer churn.
Looking for more customer success benchmarks? Be sure to access the full report here.