A Guide to Building your First Customer Success Organization

Three things truly matter in regards to measuring a SAAS company’s value and long term prognosis:

1. 1.Net New ARR Growth – How many quota-carrying account execs you can deploy that effectively hit their ramped quota numbers.
2. 2.Net Revenue Retention (NRR) – A measure of how sticky your product is post-purchase and the appetite for your customers to not just renew but buy more from you.
3. 3.Cost of Revenue Acquisition – The amount of money you need to deploy to achieve items 1 & 2 above.

This guide is focused on Net Revenue Retention and the importance of building a strong customer success experience and team.

NRR is a top metric for understanding the long-term potential of a business. At the seed stage, it’s tricky to gauge, but you can:

1. 1.Talk to 3 to 5 customers to understand their emotional attachment to the product and company.
2. 2.Discuss with founders their view on possible revenue expansion at accounts over time.

Revenue growth is exciting, but if it’s not sticky, it’s costly and difficult to sustain. Continually refilling a leaky bucket is hard, especially if former customers become detractors.

NRR and customer success start with the quality of your product. No amount of customer success effort can make up for a substandard product experience.

Assuming you have your ICP and product fit figured out, the next job is to ensure you are building the right level of post-sale support and guidance—your customer success team. This team’s effectiveness, combined with product quality, drives your overall NPS, a significant indicator of your company’s ability to scale.

Most start-ups at the seed stage have a 1-2 person success organization—overworked generalists who do everything for customers. This is understandable and a good strategy early on, but as you scale, this level of support becomes expensive, confusing to your P&L, and doesn’t allow for specialization or proper hand-offs. R&D should not be involved in customer deployments and support, as this will not scale.

Accounting for Customer Success Costs

• ​Professional services costs go into your COGs line. Separate out revenue for PS and PS costs to derive PS margin distinct from software/platform gross margin.
• ​Customer support costs go into your COGs line and are included in your software/platform gross margin calculation. Keep this margin above 70%.
• ​Customer success management costs are included in your sales and marketing operating expenses, as these costs go toward retaining and expanding existing revenue.

By Series B (around $5M ARR), your customer success org should include:

• ​A dedicated executive reporting to the CEO
• ​A dedicated professional services/onboarding team
• ​A dedicated technical support team
• ​A dedicated customer success management team
• ​CS financial metrics that make sense (e.g., net negative dollar churn, professional services margins at least break even, platform gross margins above 70%, CSM team costs at 10-12% of revenue in your magic number calculation)

But if you have only two people doing everything, how do you get there?

Step 1 – Start with the Generalists

If you have no customer success employees, start with 1-2 generalists who handle all things customer success. These should be clever multitaskers, ideally with domain expertise relevant to your customers. If your product requires complex deployment, these generalists should have professional services implementation experience. If onboarding is simple, focus on individuals skilled at driving product adoption.

Step 2 – Move to Specialized Roles

After 1-2 generalists, start building specialized roles:

Implementation / Onboard / Professional Service

• ​Get customers live after purchase (configuration, integration, data migration, training)
• ​KPIs: PS bookings, PS revenue, PS margin, billable utilization, deployment CSAT
• ​Compensation: Base salary + 15-30% bonus tied to KPIs

Technical Support

• ​Handle customer issues and questions
• ​Manage support queue, troubleshoot, contribute to knowledge base
• ​KPIs: First call resolution rate, case volume, SLA adherence, support CSAT
• ​Compensation: Base salary, often located in lower-cost cities

Customer Success Management

• ​Work with customers post go-live to drive adoption, retention, and renewals
• ​KPIs: Customer health score, NPS, gross and net churn
• ​Compensation: 70/30 base/bonus split, bonus tied to renewal rate or net churn

Summary:

• ​Professional services: Get customers live, measured on deployment success and revenue/margin/utilization
• ​Technical support: Resolve product issues, measured on resolution rate and CSAT
• ​Customer success: Drive adoption and retention, measured on net retention

Recommended hiring order:

1. 1.Create a defined technical support function (next 1-2 hires)
2. 2.Create a defined onboarding/implementation team (next 1-2 hires)

With a team of 5 (PS, support, customer success), define the customer hand-off model to ensure smooth transitions.

Step 3 – Diagram the Model for Scale

Diagram how your customer success organization will scale as you grow. Consider how much in-person touch is required versus what you can afford. Identify ways to increase efficiency (e.g., self-service, automation) to serve smaller customers and devote resources to larger accounts.

Ensure your product and target markets align with your ability to scale support. For example, don’t sell a complex enterprise product to SMBs unless you’re ready for high churn.

Step 4 – Build Organizational Linkages

Customer success should not be a silo. Build strong connections with other departments:

1. 1.Technical Support & Engineering: Submit bugs, review technical debt, monitor SLAs.
2. 2.Technical Support & Documentation: Keep knowledge base up to date, address top drivers of support calls in the product.
3. 3.Customer Success & Product: Factor top feature requests into the product roadmap.
4. 4.Customer Success & Sales: CSMs and AEs should collaborate on retention and expansion.
5. 5.Professional Service & Sales: Engage PS before deals close to ensure expectations are understood.
6. 6.Professional Services & Engineering: Align on integration and data migration strategies.

Step 5 – Measure Customer Health

Track these core customer success metrics:

• ​Customer Health (percentage green/yellow/red)
• ​Customer Retention (actual/forecasted net customer and net revenue churn)
• ​Customer Love (% referenceable customers, NPS)

Start with usage/NPS and add metrics around customer outcomes. Track scores by segment if you serve multiple segments.

Step 6 – Define Free & Paid Services & Support

Hiring in support and professional services is demand-driven. On support, hire based on case queue size and resolution rate. On services, hire based on required hours and acceptable deployment delays.

Customers will demand as much support as you offer, especially if it’s free. As you grow, define what is included in the subscription and what is paid. Charge for service implementations; don’t charge for product support and customer success management early on. For enterprise accounts, consider premium support offerings as a subscription.

Step 7 – Develop Customer Success Playbooks

Build playbooks for:

• ​Driving successful activation and usage
• ​Handling escalations
• ​Identifying and driving account expansion

Playbooks create process consistency and a benchmark for improvement.

Step 8 – Invest in Systems

Invest in software to support process consistency and metric measurement:

• ​CRM: Track the complete customer lifecycle, including post-sales activities.
• ​CPQ: Set up contracts and order forms for success offerings and software.
• ​Product Experience: Use tools to understand usage, provide in-product guidance, and collect feedback.
• ​HelpDesk/Jira: Track support inquiries and integrate with development tracking.

Step 9 – Contract Terms Matter

The more deals that are annual or multi-year, the better your NRR results will be. Customers will be more committed to driving successful usage of your product.