ARR to CSM ratios and benchmarks

shamsao

Can anyone suggest benchmarks for CS rep efficiency?

• ARR managed / CS Rep
• ARR managed / CS Rep OTE

In Sales, I've seen some good benchmarks for New ARR / OTE (3 is good, 4 is very good, 5 is great).

Have you seen metrics like the 2 I mentioned above for CS? Or if not, what do you think is good based on what you've seen in the companies where you've worked?

TJ Waldorf

I'm less focused on the ARR ratio than I am the customer to CSM ratio (we're in balancing mode currently). However, the ARR to OTE ratio can vary anywhere from 4X to 9X in my experience, depending on the type of activity and frequency of 'touch' for your accounts. SMB vs enterprise differs pretty dramatically.

Ed Powers

@Sham Sao, Jason Lemkin (of Saastr fame) quotes $2M/CSM, and a recent survey of about 600 companies by ClientSuccess showed an average of $1.72M/CSM. Of course, these are just top-down averages and your mileage will vary. Loading also depends on many factors, so what works for you (bottom-up) will be different than other businesses. Tiering is essential. That same ClientSuccess survey measured an average of 104 accounts/CSM, which is impractical. I have a tiering analysis spreadsheet that helps you make top-down decisions about CS cost and staff allocation--let me know if you're interested and I'll send it to you. 

Keep in mind that no matter how productive you are, the goal is not what's 'good,' but what's 'better'--Deming said that if you're not improving quality and productivity by at least 3%/year, you're standing still. Year-over-year improvement while maintaining or improving employee satisfaction and retention is the mark of a well-run operation.

shamsao

I've been collecting some data from a handful of CS leaders and that ratio seems really low from the numbers I'm seeing.  

Of course, all this stuff is dependent on the business, but the cost-to-serve is pretty high relative to other companies at that level.  The numbers I've been seeing as I've been reaching out to folks are more like 15x on the lower end and 27x on the higher end.

TJ Waldorf

Hey Sham- You're right! I had net bookings in the brain when I posted those numbers. If I look at ARR:OTE it's more like 24X. We're on the same page.

Paula Sobb

Hi Ed, 
I would welcome the opportunity to take a look at your tiering analysis spreadsheet.   

Paula Sobb

Chad Horenfeldt

You may be interested in this article by Tomasz Tunguz from Redpoint where he breaks down a recent Gainsight survey. As Ed and others said, it all depends. I tend to a bottoms up and top down approach.

Chadd Rivera

Very timely post, Chad. I was just having the ARR-to-CSM conversation yesterday with my leadership. Appreciate the post!

Ed Powers

Thanks for sharing that, @Chad Horenfeldt. To me, 80 accounts per CSM is still awfully high. Robin Dunbar, a British anthropologist, studied the relationship between brain size and social groups throughout evolution and determined that human cognition is limited to managing around 150 relationships--we simply don't have enough neurons to keep track of more. Given the typical number of friends, family, and coworkers, the number left for customers is pretty sparse.

Jay Nathan

Few points to add here.

First, there's no one-size-fits-all benchmark. I think that's been covered in other responses. 

Second, the assignment of accounts varies relative to how the accounts are segmented. We have Tier 1, Tier 2 and Tier 3 accounts - all important - but that receive different levels of proactive human outreach. We range from 1:50 on the larger accounts, and have a pool of accounts on the other end of the spectrum that do not have a named CSM. Which brings me to my third point... 

CSMs are not the only answer for delivering customer success.

For instance, at Higher Logic, we have a large "Launch Success team" who take care of customers during onboarding until we see they've attained initial value. We have a large support org who help customers when they have needs. We have a whole schedule of programming and content targeting all of our customers around education, enablement and best practices. These programs touch our customers in small groups and we've impacted hundreds of them since launching them this year. We also have a community (as you'd expect!) which we consider one of our scaled customer success tools. 

We have yet another team that provides managed services and strategic guidance to our customers on a paid basis. 

So the net of it for us is that our dollar ratio across all the tiers is much higher than some of the benchmarks that have been thrown out on this thread. And our Gross Margin as a business is healthy according to industry benchmarks. Are our customers taken care of? You bet they are.

In the early days 1:1 CSMs who do everything for a customer are common, but specialization and orchestrating the customer journey with tools and systems is the key to scaling toward $100MM in ARR and beyond vs. throwing bodies at it.