How Customer Success can get a bigger piece of the budget pie with Jeff Heckler

As a Customer Success leader, do you find yourself watering down your budgetary requests?

It can be intimidating to ask for what you need, especially in the face of a recession. You might worry about coming off as demanding, or incompetent at making do with what you already have.

And yet, downplaying your team’s needs undermines CS’s current impact and future revenue-driving potential. According to our 2022 Customer Success Leadership Study, CS teams are already underfunded and under-resourced.

The solution is for CS leaders to learn how to get money to spend money so that they can make more of it, says Jeff Heckler, director of Customer Success solutions at MarketSource.

But it’s not about driving revenue at all costs, cautions Jeff. Efficiency and profitability are top of mind for every executive today.

In our webinar, “Convincing your CEO to invest MORE in Customer Success,” Jeff shares how to win more budget for your CS team by backing up your requests with the right research and data.

The Q&A portion of the webinar covered topics including how to overcome budget objections, promote CS wins across the organization, secure budget at the same rate as sales, and much more.

How Customer Success can win more resources, budget, and credibility with Jeff Heckler

Q: Many CEOs acknowledge that Customer Success teams are important for business growth, yet they still push back on their budget. Why?

A: For fear of being in the echo chamber here, I think that’s my job. My job is to help, to educate, and to level up everyone across my org: new hires, folks right out of university, interns, individuals who haven’t had exposure to Customer Success, and my C-suite. If I’m working for the right leader, I know that they want that information. Sharing what is important, what I’m seeing, that’s part of my job. I lead the Customer Success function here at MarketSource. My job is to continually inform and share knowledge that’s going out in the marketplace.

There’s a good spotlight on the entire theory of ecosystems and companies providing an ecosystem—or for lack of a better term, a community—for their customers. You see a lot of this in Customer Success because community is a large part of what we do and how we grow and enable our customer base. But I see a lot of ecosystems and communities in a larger sense now with organizations, because they too, are trying to figure out how to enable, grow, and retain their customer base in the most efficient motions possible, and a lot of that is done through community.

I immediately thought of my company and my organization, not just Customer Success, but MarketSource. For decades, we have provided communities and ecosystems for telco, auto, tech, and a number of very large verticals within the Fortune 1000. I wrote about that and really Customer Success being the basis for that to come on. It’s one of our blog posts from last month, and it’s on my LinkedIn profile. Customer Success has the ability to really lead in those instances.

I would not find fault with the leadership that I’m under, but rather I would find an opportunity to be a leader within my organization to help share where the markets are heading and where we’re seeing growth and opportunity.

I work with a lot of C-levels in my company, outside of my company, and I talk to other ones that are in my network. They got a lot going on, so if Customer Success daily isn’t in their inbox every morning, it’s because they’re relying on you to help share that information as well. Part of it is that we’re always talking about Customer Success education, awareness, and advocacy. We need to do that internally as well.

Q: In the webinar, you recommend using pilot programs to show proof of concept and gain support for more resources. How can you recover from an unsuccessful pilot program without losing your credibility?

Jeff: A pilot program isn’t where I’m going out with marketing bells and whistles. This is something that I’m doing with fractional headcount allocation. A lot of times, my COO might know about it. My VP definitely does because I vetted the idea with them, and we’re going to go with it. But this isn’t something where I walk into the C-suite and say, “Hey, by the way, I’m allocating four hours a week from two CSMs to try to do this expansion motion, which I think will have a lot of goodness.” I’m not interested in that. They’re interested in what you’re allocating 40 hours a week with 17 people.

The pilot programs aren’t meant to be these big bells and whistles, not even after you launch an official full-time headcount on something. It really gets to the point where you say, “We have the opportunity to scale this. Now we have a name for this. It’s going to be the growth team, and we’re going to put three to four headcount on it. CFO is on it. We are going to hire two heads now and one in another 45 days and one in another 60 days.” That’s when you want something to be visible.

When you’re running your pilots, it’s like startups. Most of them are going to fail. They’re built to fail. That’s OK. What doesn’t fail is the data. What behind it wasn’t working? Was it in the discussion? Was it in the talking points? Was it in the collateral? Was it with your cohort analysis? What was in your hypothesis that wasn’t right? It doesn’t mean the whole hypothesis was wrong. I come from a chemistry background. I know the whole hypothesis doesn’t get scrapped. You don’t scrap the whole project. What about this needs to be iterated?

This is also a great opportunity to learn who’s interested in doing what. Who’s got different skill sets that you didn’t know about? Who shows strengths and weaknesses in areas that help you develop your team further? That’s some of the other side benefits of doing things like this.

Q: How can Customer Success teams promote their wins within the organization?

A: Never second guessing if you should. There’s an ethos that exists in customer-facing places, and there’s an ethos that exists in non-customer-facing places. The ethos in customer-facing places is that you share your wins. It’s best to do it with storytelling. It’s best to do it if customers do that. It’s best to do that with all the players in the organization that make it happen.

But my first point was, don’t let your self-modesty ruin a good opportunity. I was guilty of that for a long time. It’s not about me. It’s about feeling as if you have a voice, and you should. I’ve done things like starting a weekly Slack post to highlight all the things that have gone on in the department, like a newsletter. It pays off huge dividends for giving a little shine to those in the organization who don’t get a lot of shine and feel like a lot of their efforts are being dismissed.

It also helps with brand awareness. Your Customer Success team in your organization has a brand, and it probably kicks a lot of butt and drives a lot of revenue. But what you need to put in that newsletter are the numbers that are making it happen. What conversations led to what results, and who was involved? Make it a cadence. Don’t make it happen randomly on a Wednesday. Do it every Thursday morning or make it a part of your week to showcase what’s going on. Because if Customer Success is the everything company, then we are getting everybody else involved as well. We can share the goodness from all angles of the company that we’re working with and that we’re working with our customers on.

If you’re really lucky, you can get your customer to attend an all-hands meeting or give a quote or you can just anonymize the things that come through an email, or even better, soundbites from your calls.

Q: How can you approach your leadership team about their decision to add budget for new business sales without committing budget toward retention at the same rate?

Jeff: What I’ve done in the past is take the ARR or MRR that comes through our teams. If sales is bringing in X-amount of MRR a month, look at that headcount, and then look at what you’re managing on your team. Now, it’s not a one-to-one comparison because you have to take what sales is bringing in and then compound that from what they’re bringing in every month while you are managing dollars that are hopefully staying month on month.

We haven’t even started talking about CAC ratios. The industry numbers tell us that it’s roughly $1.67 per dollar brought in by sales, whereas it’s about 63 cents on the dollar for what Customer Success manages. Those are very broad numbers that you can find industry wide, but that’s a starting point. It’s much more cost efficient to keep the customers you have than to go out and find new ones. You can find those numbers everywhere. Next, look at your org and say that we have X-number of heads that are bringing in these dollars monthly or quarterly, and that’s great. But we’re doing this and managing this bunch of revenue with the head count that we have.

The very old number—and I wouldn’t put much credence to it—was a CSM can manage roughly $2 million. It depends widely on what products and what kind of customers you have. Do you have 2 million $1 customers or one $2 million customer? It’s widely different, so that’s something to look at.

Somewhere to start, very apples to apples, is to look at your training budgets. What is allocated for product or sales or both annually per head for training? What’s allocated for Customer Success? It can be argued easily that Customer Success should have more training because of the skill sets that are necessary to do the job on a daily basis. You want to think about these conversations—such as “I’m trying to inform you about Customer Success, or I’m trying to get more budget, or I’d like to talk to you about training”—as productive and positive and not guarded or defensive or antagonistic.

You’re fighting for your team. I have more battle scars than I can count from battling for my team for things like Customer Success operations bonuses or different levels of time away because of what it is to deal with customers on a daily basis, and how to mix up your teams and find more team events and dollars for that. When it comes for a dollar across the company, it’s generally going to come just for headcount, but you want to compare from one department to the next to ensure there’s equal footing.

Q: What words, KPIs, and numbers do the C-suite and board love to hear?

Jeff: Anything that points to efficiency. Anything that points to you doing—and I’m tired of this already—more worth less. What have you been able to beg, borrow, and steal from inside your own organization in improving processes, like maximizing green time for your team versus red or having more productive revenue-driving conversations versus triaging issues?

How are you managing customers so that you can get to more valuable conversations? Customers will respect you when you tell them “no” or “not right now,” and why.

How are you building new initiatives in your department that are giving higher efficiency ratios? You’re having more conversations using fewer or the same resources.

How are you helping to scale across the organization? One easy way I’ve seen this done in other organizations, and we did some of it at other places I’ve been, is incentivizing MBOs for your team members to write help articles and collateral that helps customers at scale, and then seeing how many of those are consumed on a monthly basis.

The numbers that your board and C-suite want to see are how you’re able to contribute to higher profit ratios off of your burn rates. What’s it costing you to run the operation?

If you don’t know what those numbers are or how to get them, ask your CFO or ask your friends in finance how they’re measuring you. You might realize that you didn’t know your COO looked at that number, or that was so important. They’re not all measured the same. I’d look at efficiency metrics and profitability.

Q: How do you recommend structuring variable compensation?

Jeff: Across the board, you’re going to see somewhere around 15% for a lot of CS teams that have a variable introduced. With enterprise managing accounts, I do 80/20. That’s a portfolio of accounts anywhere from five to 25, and 80/20 is a health mix to incentivize the right behaviors paid out quarterly. When you get to a larger portfolio mix, there’s less direct impact you can have on a portfolio that’s heavy in account numbers, whether they’re SMBs or mid-market, so maybe 90/10 is a little fairer.

That’s where I’d like to introduce the idea of quarterly objectives that you pay off, whether they happen spiff style. I hated this idea when my CFO and I talked about it. I was like I do not want quarterly incentives based on new product, or I have to put my pride aside someday and say if that’s what’s going to move the needle then we’ll do this.

The beautiful thing about incentivizing based on very direct activities that are contained within a quarter is they can be shifted around from quarter to quarter. You don’t have to hold them through. They’re easy to measure. They’re easy to track. They’re easy for your team to follow. They’re always top of mind. I think about very direct quarterly objectives for individuals that don’t have enough influence on their portfolio to really move a variable on an 80/20 or 90/10, and then move them into a place where they can.

You’ll learn a lot about your team, let me tell you. Give individual contributors a place where they can find one-off goodness and get incentivized on it. Thinking about those numbers piling up, you’ll see people that really have a knack for moving that needle. Or with projects, you can offer incentives around something that your company or department needs that’s mission-critical by saying that you’re going to build this into a quarterly bonus metric for them on an MBO basis based on how much they attain.

With the Customer Success operations bonus, that was just gravy on top. It’s not a real heavy performance, but what it said to my company, and more importantly what it said to my team, is here’s a number, and based on 90% to 120% attainment, you’re in for it. This is something that is part of your job. You are a vital member of everything that’s going on here. We can’t upsell, cross-sell, expand, touch our customers if we don’t have outstanding Customer Success operations running. That was much more because it was the right thing to do and to draw visibility to it and to tell the company that this operations team that we have in Customer Success is vital to everything we do for our customers.

Q: I work at a startup where the co-founder is responsible for managing a three-person Customer Success team. When should we hire a role to take over that responsibility, and should it be CS ops or a manager?

Jeff: I hate to say that you should have gone further upstream, but you should have gone further upstream. That most likely is a first-time founder, which is fine. But the problem is that the founder’s running too much already. That’s the first answer.

You really need to hire both. What I say to anybody starting a Customer Success team is your first CS hire, whether they’re labeled or not, is also your first CS ops hire. Because unless you dictated your playbook to them, that person is figuring out how to best interact with your customers on the fly, and they’re doing that at least with some sort of repetition. You’ve already started your ops team, and when you get to hire No. 2 or No. 3, you have to hire them knowing that one of these three people will be your first CS ops hire. Do they have a knack for data? Do they have a knack for process? Do they have a knack for leadership? Do they have a knack for project management? Any of those things will be very helpful.

Hiring CSMs that have done CS is great. But hiring CSMs that haven’t done CS before is also great because you get a lot of ancillary skill sets if they come from the world of finance or education or professional services. I’ve said this a thousand times, and so you’re already late to the game, but get the reigns out of the founder’s hands as quickly as possible. They need to be thinking about the vision of the company, not about how you’re engaging with the customers one to one on a daily basis.

When you’re starting off, those customers, whether they’re one or 1,000, are the most important one or 1,000 customers you have. Even if you outgrow them, they are what are making you live and breathe today. They’re the realistic reason of why you have a viable idea. Get Customer Success out of the founder’s hands ASAP. Otherwise, I can only imagine the other issues that are going to come about if you don’t do this.