How to Determine the Best Customer Success Manager (CSM) Ratio
When planning a Customer Success Management organization, or just trying to prepare your budget for the coming fiscal year, the question that always comes up is "What is the ideal ratio of Customer Success Managers (CSMs) to the number of customers? To the amount of Annual Contract Value (ACV) / Annual Recurring Revenue (ARR)? Both?"
And that question, especially lately, is often followed by "what about bringing in CSMs with vertical knowledge, for example a CSM with a healthcare background would manage healthcare customers?"
As always, the disclaimer of "it depends” is applicable here, too. But I think I can give you some direction.
The Customer Success Manager Ratio Guidepost
That said, I continue to use the "one CSM per $2M ARR" as my guidepost. I've seen nothing that disputes it in a meaningful way. Of course, there are situations that will complicate that simple ratio, and that's if you have CSMs performing onboarding or other high-touch operations; this would force you to a different ratio, at least for some of your CSMs.
But, in general,I think one CSM per $2M ARR is a good target. In fact, I could argue that you could have a highly efficient and profitable Customer Success team if the number was $1M instead of $2M.
CSM Ratio Examples
Having said that, I'll give you a couple of variations. At Marketo, I ran the Customer Success Management organization on a 1-to-$8M ARR ratio largely because we didn't actively manage customers but just worked with at-risk accounts.
Conversely, here at Gainsight, I'm running below $1M as we over-invest with early customers to ensure success. We'll try to grow into the $2M by the end of next year, but ensuring success, even with a higher financial cost, is the goal.
Automate and Optimize for Low-Touch
There's an old saying: "automate what you can, and nothing more.”
Okay, that may not be the exact saying, but I personally think one of the keys to scaling a CSM organization while providing the best experience for your customers i is to have a true low-touch program, even if you don't have low-touch customers.
Obviously, where customers want / need / expect a high-touch experience, you should provide that; but limit it to that. Too often we continue to offer high-touch experiences where we don't have to and it makes everyone - including your customer - less efficient than we could be.
I'm in currently in the process of hiring a full-time CSM/Customer Marketing person to do just that (if that's you, let's talk). Over time, we'll have customers with smaller contracts who don't get a designated CSM and we'll help them largely through one-to-many programs (email, Community, webinars, etc.).
I'm starting to build those processes and programs now to take some burden off the CSMs who are doing high-touch but would be more effective if we can take some of their one-on-one time with customers and automate it.
Vertical-Specific Customer Success Managers
We're also going to test the waters on the verticalization of CSMs next year. I'm hiring a CSM whose whole career has been working at technology providers for the healthcare industry.
In some ways, it's just SaaS regardless of the customer, but I think there is something beyond just the Sales/Marketing positioning of that person as "the healthcare CSM” at Gainsight... we should be able to arrive at some real value for our customers in there as well.