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Customer success capacity planning is not rocket science if you keep things simple. All you need is a simple formula that works for every situation.
Simply put, to calculate customer success capacity planning, you basically need just two information:
So, the number of CSMs you need (C) is:
C = A / B
Is it that simple? Of course not. There’s so much more to it. Let’s explore!
Companies often look at the customer success capacity planning in two more ways that include:
The problem with starting with these approaches is that there is no definite answer to it. Many considerations must be made based on different factors. E.g. if a CSM is expected to handle 30 customers then how many of them should be high-value, mid-value or small-sized? Or, if a CSM is handling $10 million ARR then how many customers of different sizes fit into that? What are the different levels of engagement needed for different sized customers?
So, the point is, the above two perspectives make it more complex if you start with them. Hence, to simplify things, we must talk in hours, which is the common thread across all kinds of customers as well as CSMs. And based on that, if customer success team allocation is done, it gives us a more realistic picture while also answering the above two questions.
To begin your customer success team set up, you need to calculate your total customers’ hours separately for three segments – small, medium and large – availing low-touch, mid-level and full service respectively.
A full-service package that an enterprise customer success manager would be offering may include the following services:
Note that all the activities listed above may not be happening every month. Few might be once a quarter, while others might be once in six months. Yet an average monthly hour is included here by breaking down the overall time required on a monthly level.
A mid-level service agreement for mid-size customers may include the following activities:
A low touch customer success service package would mostly have automated communication mode directed from 1: Many. The in-person meetings or calls would not be a part of it and there would be very low levels of personalization for the customers falling in this small-size bucket.
So, assuming you have 50 large, 100 mid-sized and 500 low-value customers, then your total hours needed for entire customer base (A) would be:
Total hours for all customers (A) = (50 x 24) + (100 x 14) + (500 x 6) = 5,600
Assuming a CSM works 40 hours a week, their monthly hours at work would be 160 hours. All these hours cannot be assumed to be put into direct service to the clients. They have various other activities too in their daily routine, that include:
So, approximately 60 hours are spent on internal activities which leaves them with:
Total hours a CSM can spend on clients (B) = 160 – 60 = 100
So, the calculation becomes simple now. Total CSMs required would be total hours needed for all clients divided by total hours per CSM:
Number of CSMs required = 5600 / 100 = 56
Assuming a CSL can manage 14 CSMs, then the total CSLs required would be:
Number of CSLs required = 56/14 = 4
So far, we saw the customer success capacity planning based on hours. But it won’t make sense if the revenues from your customers don’t leave enough margin after considering customer success cost.
Assuming a CSM’s annual CTC is $100K, then cumulative value of the customer’s ACV they handle must be somewhere around $1 million to $1.5 million to leave a scalable profit margin after considering various other costs like company’s running expenses, CSL’s cost, customer success tool cost, etc.
If CSMs are not available to handle more accounts than their monthly customer success capacity, then, for a profitable margin, you need to either shrink your services or hire more CSMs.
For the former case, you may do the following:
In the latter case where you cannot shrink your service but rather have to hire more customer success managers for dedicated service, it is advisable to charge your clients. You may offer different service packages at different rates and make your customer success service chargeable.
To start off with charging for customer success service, you can do the following:
Increasing price for existing customers must be done strategically to avoid attrition.31
Customer success capacity planning is a crucial stage in setting up your customer success team. This is not a onetime process because the employee-base and customer-base are always in a state of flux, at least a fraction of it. Hence, you need to always keep improvising to meet your needs. Yet, the core calculation remains same and simple if you talk in hours rather than in ARR or number of customer accounts.
Rohan has over 11 years of experience in client services, marketing and hospitality field. Previously, he was head of digital marketing for a hi-tech mobile application. Rohan is driven by new challenges and the possibility of making an impact on individuals and businesses.
Published February 17, 2021, Updated March 01, 2023
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