The document provides guidance on budgeting for customer success in 2015, including setting goals, determining necessary roles and headcount, and justifying investments. It recommends setting segmented churn and upsell goals based on maturity and focusing initiatives on retention and expansion. Metrics like accounts per CSM and hours per account can help determine optimal headcount. Technologies and services can drive efficiency and effectiveness, and their ROI justified by increased retention, upsell, and advocacy. The webinar offers Gainsight's actual 2015 customer success budget as a starting point.

1. Budgeting for Customer
Success in 2015
December 4, 2014

2. Housekeeping
• Q&A panel on your right
• Recording for colleagues who can’t make it
• All attendees will receive slides
• Twitter hashtag #customersuccess

3. Our Speakers
Nick Mehta
CEO
@nrmehta
Byron Deeter
Partner
@bdeeter

4. On Your Mind?
• Strategy
• How do I set my goals for 2015?
• What initiatives can drive these goals?
• What do my CEO and board think?
• People
• What functional roles do I need in 2015?
• How many of each do I need?
• How can I justify the hiring?
• Process
• What processes can I use to drive efficiency and effectiveness?
• What technologies and services can be helpful?
• How can justify the ROI?

5. Strategy

6. How Do I Set My Goals for 2015?
Maturity
Churn Focus
Low hanging fruit
Customer engagement
No brainer risk management
Up-sell Focus
Churn efficiently managed
More products to sell
Mature client relationships
Focus

7. How Do I Set My Goals for 2015? Churn…
Retained
90%
Churned
10%
1) 2014 ARR*
Avoidable
50%
Unavoidable
50%
2) 2014 ARR Churned
Out of business
Acquired
Sponsor change?
* Hypothetical Example: Assumes 1 year contracts

8. ARR
$5 MM
$2 MM
$3 MM
2014
Avoidable
Churn
2%
5%
10%
2015 Target
1%
2.5%
8%
Mid-Market
Small
Top
How Do I Set My Goals for 2015? Churn…
3) Avoidable
Churn by
Segment
5% Avoidable
Churn
3.4% Total
Churn

9. Churn ARR
Saved
$50K
$50K
$240K
ASP
$50K
$25K
$10K
Customers
Saved
1
2
24
Mid-Market
Small
Top
How Do I Set My Goals for 2015? Churn…
4) Sanity
Check
27 Extra Clients
Saved
54 (2X) Extra
Clients Closely
Managed?

10. ARR / #
$5 MM
$2 MM
$3 MM
2014 Up-sell
5%
2.5%
1%
2015 Target
10%
5%
2%
Mid-Market
Small
Top
How Do I Set My Goals for 2015? Upsell…
Up-sell by
Segment
3.3% Total Up-
sell
6.6% Total Up-
sell

11. What Initiatives Can Drive These Goals?
Retention Initiative Examples Up-sell Initiative Examples
Customer-specific
Tiering
Time-to-value
Early warning
Success planning
Sponsor management
Playbook optimization
Support improvements
Renewal execution
Tiering
Up-sell identification
Up-sell workflow
QBRs
CSM sales training
CSM-sales alignment
Company-wide
Customer journey
Voice of the Customer
Product
Sales qualification
Pricing/packaging
New products
Price increases
T&C optimization

12. What Do My CEO and Board Think?
Cost Center Revenue Driver
In COGS
Efficiency
Scale
In S&M
Productivity
Acceleration

13. What Do My CEO and Board Think?
• Part of growth initiative?
• Part of customer sat initiative?
• Standalone initiative?
• Ranking in priority?

14. What Do My CEO and Board Think?
Source: TomTunguz.com
“But on average, the customer
success team saves about 4 months
of contribution margin per
customer which means company
can spend up to 3 months' worth of
contribution per customer on churn
management.”

15. What Do My CEO and Board Think?
Source: TomTunguz.com

16. Example: Gainsight
Retention Initiative Examples Up-sell Initiative Examples
Customer-specific
Cadence
Success Express
1-to-many CSM
CSM operations
Services operations
Community
Exec sponsorship
…
CSM sales training
CSM-sales alignment
Company-wide
Simplified packaging and T&Cs
Sales to CSM hand-off
Product on-ramps
…
New products

18. People

19. What Functional Roles Do I Need In 2015?
Seed
CSM
Series A
+ Onboarding
+ Operations
Growth-stage
+ Support
+ Customer
Marketing
+ Renewals
Pre-IPO
+ Training
+ Advisory
Public
+ PMO
+ Managed
Services
+ Domain
Experts
+ Product
Specialists /
Architects** Earlier in companies with tech buyers

20. How Many Of Each Do I Need?
Role Scaling Factor
CSM ARR
Onboarding New Clients
Operations 1+
Support Case Count
Customer Marketing 1+
Renewals ARR Renewing
Training 1+
Advisory Revenue-driven
PMO 1+
Managed Services Revenue-driven
Domain Experts Revenue-driven
Product Specialists / Architects Product ARR

22. How Many Of Each Do I Need? CSMs…
Source: Jason Lemkin / SaaStr
“As the deal size goes up, the
CSM can be more proactive.
And you’ll find it’s critical to
segment the team based on
deal sizes, so they can specialize
in what they do.”
$2 MM Rule of Thumb

23. How Many Of Each Do I Need? CSMs…
Financial Line Item Value
Revenue $100 MM
Gross Profit (70%) $70 MM
- R&D (15%) $15 MM
- G&A (5%) $5 MM
EBIT Before S&M $50 MM
S&M for $100 MM Renewals
(10%)
$10 MM
S&M for $20 MM New (20%) $20 MM
EBIT $20 MM
Grow 20%
Spend $0.10 / $1 renewal
Spend $1 / $1 new
Make 20% EBIT
Assume $100K/CSM
Assume 2X Overhead
$2 MM ARR / CSM

24. How Many Of Each Do I Need? CSMs…
High-growth Low-growth
Early-stage
$250K ARR / CSM
Jack of all trades
Ramp time
$1 MM ARR / CSM
Jack of all trades
Late-stage
$500K ARR / CSM
Ramp time
$2 MM ARR / CSM

25. ARR
$5 MM
$2 MM
$3 MM
CSMs
5
2
3
Accounts /
CSM
20
40
100
Mid-Market
Small
Top
How Many Of Each Do I Need? CSMs…
Assume $1
MM / CSM

26. Accounts /
CSM
20
40
100
Hours /
Quarter
520
520
520
Hours /
Account
26
13
~5
Mid-Market
Small
Top
How Many Of Each Do I Need? CSMs…
Sanity Check

27. How Can I Justify The Hiring?
CSM Hiring
Plan
5 =>
10
2 => 2
3 => 3
Accounts /
CSM
20 => 10
40 => 40
100 => 100
Net Retention
Increase
20%
Mid-Market
Small
Top
Investment
Proposal
$1 MM
Investment
$1 MM Net ARR
Growth

28. Example: Gainsight
Value 2014 2015
ARR X 3X
CSMs 3 15
Onboarding ~15 ~30
Operations 0 2
Support 2 8
Customer Marketing 0 1
Renewals 0 2
Training 0 1
Advisory 0 5

30. Process

31. What Processes Can I Use?
Efficiency
Ramping
Prioritization
Automation
Effectiveness
Training
Content
Timing

32. What Technologies and Services?
Technology
Support
CSM
Community
PSA
LMS
Communication
Advocacy
….
Services
CSM Training
Sales Training
Team-building
Conferences
Churn research
…

33. How Can I Justify The ROI?
Retention
Up-sell
Cross-sell
Advocacy
Ramp Time
Consistency
Account
Ratios

34. Example: Gainsight
Technology
Zendesk
Gainsight!
Community Software
Clarizen
Service Rocket
Influitive
Services
CSM University!
Sales Training
Pulse!
Eigenworks

36. Need a Starting Point?
Here, take ours.
All attendees of today’s webinar will receive
Gainsight’s actual Customer Success budget for
2015.
Keep an eye out for today’s
follow up email.

37. We’re Here To Help
Fill out the survey on your screen to
schedule a meeting with a Customer
Success specialist.
 Strategy & KPIs
 Structuring the CSM Org
 Investing in Process
Free 30-minute consultation call
between now and the end of 2014.

38. Thank You!
December 4, 2014