During the fag-end of every fiscal year, there are debates about setting the yearly budget across the organization. At such times, CCO is the only leader who has to bear the brunt; after all, customer success is at an adolescence phase! Due to this very reason, it becomes extremely difficult for the CCOs to pitch budget ideas for customer success successfully.
The worst part is that while product, sales, marketing, and engineering have a vote to increase their respective budgets, resulting in enhanced revenue or engagement, customer success depends on financial metrics like revenue per CSM or customers per CSM.
The problem for the CCO is to showcase the real value of the customer success as a department and then get the budget approval. It is not an easy proposition.
However, once you plan your steps strategically by demonstrating quantitative data contributing towards customer success, it can become quite hassle-free to convince the CFO of your organization to provide a good share of the budget for the customer success department.
The CCO’s guide to winning budget for customer success
As a CCO, the first thing you need to do before presenting your case of budget for customer success in front of the CFO is to look at numerous factors that contribute to customer success investment.
Look out for areas where additional funds would be required
- Hiring new CS (Customer Success) professionals: Hiring the right professionals can get any brand to doubleits growth. The better the hiring, the more efficiency. Fresh talent and expertise will help improve outcomes, reduce costs, and streamline operations. Since customer success is a new field, relatively, there are lesser chances of finding top talent specific to the CS domain. However, one can find top executives in sales, marketing, finance, product, or customer support who are ready to carry out the role of a CS professional. This hiring comes with some costs. This can be considered while pitching for a budget.
- Every CCO needs to look at CS professionals who are key to the company. You need to promote personnel who are performing well with the right compensation.
You need to motivate and give your team hikes in compensation. While bringing this up, you must make sure to entail their revenue alignment. You can use a tool like SmartKarrot that shows you how much each CSM handles in terms of revenue. With SmartKarrot’s reporting feature, you can see how much each CSM is dealing with and the modes of communication or contact made.
- The other necessity is an investment in professional education and certifications for upskilling professionals in their fields of expertise. CSMs need to know the latest trends and hacks in customer success. With that, they can bring out a change in net retention rates or NRR, expansions, cross-sells, upsells, health scores, customer satisfaction scores, NPS, and so much more. A simple guide on customer onboarding can help them improve the efficiency of the process and reduce time to value.
- Apart from that, you must look at the latest CS tech investment. Make a case for investment in CS tools, training, software, and process. These will make your company and CSMs more efficient. This is the best way to scale for any company.
Once you have the information in your hand, pitch the idea to the CFO using the following tips.
Budget for customer success can be difficult. You need to articulate why the customer success departments need the budget. The core line should be the value that it brings to growth. You need to pitch properly about plans to scale, use technology, automation, playbooks, and more. You need the right technology partner to ensure product adoption, usage of best practices and ensure no data slips through the cracks to succeed. You need to tie and demonstrate how CSMs or customer success teams’ work impacts the company’s growth.
However, in some cases, a CCO might struggle with communicating what they want to demonstrate in terms of value. These tips can help a customer success leader ace that boardroom conversation about budgets for customer success.
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Showcase an estimated revenue and expense forecast for the upcoming year (Have every piece of financial detail in hand for query resolution)
The first step is to demonstrate revenue growth and how previous investments have performed. You can show NRR growth, customer satisfaction score, customer health score as proof for top-line growth. Customer success is not a cost center but a profit podium. A CS leader can show the expense forecast for the upcoming period. You can quantitatively show how your inputs will help pan the revenue and expense forecast.
While presenting, you need to show how you plan to drive revenue with the enhanced budget. You can thus shift to investing instead of spending on customer success. You can include all the financial details, collaborations, and campaigns in the presentation. Showcase ideas to help your customers, team, and company with feature enhancements. You can take ideas from customer feedback forms to get an idea of what customers want, map it with expenses, and pitch accordingly.
Reflect the metrics highlighting the referrals, reference-ability, and retention rates
Correlate customer success KPIs like referral rates and retention rates with company goals. You can link customer success wins to revenue growth, thus showing profitability. For example, if the retention score is good, you can show how the business has retained over time and that the probability of the revenue coming in is steady. You can also mention that customer acquisition costs are five times higher than retaining an existing customer. Another aspect of being mentioned includes the referrals ability. You can explain how word of mouth is the biggest shareholder in NPS and hence company growth. MRR and CSAT are other metrics that can be tied to the pitch. Mention how you will focus on avoidable churn in the mid-market and small market segment. Have specific goals per segment listed out and ensure the CSMs know about this. In the initial stages of a company, the focus is on reducing churn. However, the real deal is the NRR which takes the cake for customer-related KPIs.
Show your approach towards increased efficiency
A CCO needs to know that everyone in the C-Suite is result-oriented. You must be prepared for any questions about efficiency in advance. For example- If you are making a case for employee training. You must show how it will help with results, better performance, and increased engagement. In the case of a customer success software tool, you need to show how the tool will help with marketing communication, low engagement, upsell chances, and cross-sell opportunities. You can show how the results include lower churn rates and decreased volatility.
Talk about the market expense benchmark card
You need to follow the SaaS rule of thumb, which says that every company should have a CSM for approximately $2 million in ARR. You can share an average of how many companies are investing in customer success and their growth levels. The investments in customer success are directly proportional to growth. Many C-suite levels feel that budgeting with benchmarking will help improve performance. This will also help in the equitable distribution of amounts to departments. When you show the parity of how other teams are performing in customer success by investments, you can ensure that they know the value given to customer success.
The ROI Pitch
Every investment is categorized as good or bad depending on the return on investment. You need to pitch based on expansion revenue and churn reduction. It is expected that a good return will improve the organization. Customer success is a new function. Hence you need to commit to the financial improvement you can bring. Align your pitch in terms of what ROI you will bring. For this, SmartKarrot’s reporting feature will help. The reporting feature shows you can see the total revenue split in upsells, renewals, cross-sells, and expansion. This will help you understand the vastly positive nature of investing in customer success. You need to show proof of how and what your customer success team achieved. Some of the top data proof you can send includes-
- Number of customer accounts
- Total expenditure
- MRR or ARR achieved
- Gross retention rate or net retention rate
- ROI of CS investment
- Customer satisfaction score or NPS
- Improvements expected in NRR
When the CCO presents the growth in these metrics, you can create an advocate for customer success. Pitch in your idea for a budget increase for the next financial year based on the numbers reflected above
It is never easy to get your customer success budget approved by CFO. As a CCO, you need to make the CFO understand the value of customer success as a department. And then tell them how significant is CS for the overall fulfillment of the organization’s objectives.
If your organization’s primary goal is to sustain the existing business, show the CFO how you plan to use the new budget to reduce customer churn, resulting in the maintenance of the existing customer base. The important thing is you make sure that customer success objectives are precisely demarcated and are realistic. 20
The next step is to select the right metrics to showcase the value of the customer success team to your management and board of directors. Always present your facts to make them feel that it will help you quantify your objectives with an additional budget.
Shivani is a talented CS manager with the skillsets to elicit, scope and manage end-to-end B2B SaaS project delivery. She has a keen interest in depicting her learnings in customer success by writing resourceful blogs and articles.
Published February 09, 2022, Updated March 02, 2023