At what point in a company's growth should the customer success manager (CSM) role be established? Is it important to hire a CSM early on in a startup environment?
Among experts, the verdict is still out. That being said, some best practices have emerged that companies can look to for guidance on when you should hire a CSM.
Build A Customer-Centric Culture From The Start
Customer success can and should be an executive priority out of the gate, even before an official CSM is hired. There’s a common belief in startups that the CEO should manage sales before outsourcing to a dedicated sales professional. The idea behind this is that the CEO needs to truly understand the customer and how to position sales before bringing on others to manage the role.
While the CSM and the sales representative engage differently with the customer, the CSM is directly tied to the customer’s recurring business relationship. With that in mind, just as a CEO may have a heavy hand in sales, especially at the early stages of the company, a CEO should also truly understand how to establish and maintain the ongoing customer success relationship. The CEO should learn to prioritize customer success and build this into the heart of the company through allocating resources (namely customer education and communication) to help the customer get the best results possible from their product. In addition to the CEO, all startup employees should understand what the CSM role is all about. This should happen even before a CSM is brought on, so that when the CSM is hired, the development, sales team, and growth contributors understand how they are to interface with the CSM to make them successful at making the customer successful.
For further on how to integrate customer success into the fabric of a company, watch Jeanne Bliss’ great keynote talk at the Totango Customer Success Summit 2014.
Hire a CSM As Soon As You Can Afford It
SaaS expert Jason M. Lemkin, who co-founded EchoSign (later acquired by Adobe), suggests that hiring a CSM as soon as you can is advisable. According to Lemkin, “each sale is worth about 6x the initial ACV over its lifetime.” With this logic, hiring someone to manage this relationship early on is a low-risk way to maximize value over scale. (Source). CSMs brought in immediately will quickly add value and drive engagement, satisfaction, and long term retention.
When can you afford it? Or, better put, when can’t you afford not to have a CSM? According to SaaStr, a great rule is to hire a CSM once you scale to 2 million in revenue. (Source) The logic here is that at 2 million in revenue, churn becomes your greatest enemy and the role easily pays for itself over the long-term value of a customer relationship.
As You Scale, Grow The CSM Role
Gainsight’s Chief Customer Officer Dan Steinman argues that because customers will touch so many different people during their first year using your product, it’s extremely valuable for them to get to establish a relationship with one CSM right away who can guide them (he calls it the “air traffic controller” CSM model) through their experience. (Source) Eventually, the CSM role should be more than just a guide to resources, and should actually be skilled at using your product and conveying industry best practices.
As Steinman suggests, growing the CSM role means finding someone who is also a product or products expert, depending on how many products you offer. A mature CSM department may include multiple CSMs, each assigned to multiple clients, responsible for being product experts and customer education advocates. Part of this phase may involve building out a separate Customer Education Management (CEM) role when it’s sustainable for your startup.
CSMs are the front-line advocates for customers’ needs and maximize customer long-term value. At the same time, the CSM role is still evolving, and companies are continuing to grapple with how to best allocate resources in order to align the CSM’s efforts with those of other departments. The decision regarding when to hire a CSM depends on your company’s maturity, but there’s good proof that hiring a CSM as soon as possible yields significant long-term return upon scale.
Question to answer in the comments: When did your company hire CSMs and/or CEMs?