This is the full teardown of all reports, dashboards and KPIs you need in Customer Success. In this article, I cover common challenges, where to start and the best practices in the business.
There’s a lot of focus on data and buzzwords flying around in Customer Success, SaaS or if you’re in the tech industry in general. My goal with this article is to help you straighten things out and help you find the right reports and dashboards for you.
How to Predict the Forward Multiple of a Software company
In most industries, valuation is usually based on profitability and margins, but in a software company or a SaaS-business, it’s mainly about revenue growth and sales efficiency. In this article, I will focus on revenue growth since it’s impacted by Customer Success while the same can’t be said about sales efficiency.
SaaS KPIs
ARR (Annual Recurring Revenue) or MRR (Monthly Recurring Revenue) are key metrics since the whole company is valued based on revenue or revenue growth. There’s another common KPI: NRR (Net Revenue Retention) which also is closer to Customer Success.
Net Revenue Retention = Current ARR from customer group / ARR from same customer group 1 year ago
NRR’s strength is that it indicates how much of your revenue will remain for the next year. If you have a positive NRR, your company will - without new customers - keep growing, year after year. This is quite significant! If you have a really high NRR, like 130%, you will actually double your business within three years without new customers coming in, so it has a huge impact on revenue.
NRR is also affected by churn. Did you know that if you have a gross churn at 8%, it means that your customer will stay on average for 12.5 years? These numbers have huge impacts on your revenue and thus your company’s valuation.
You’ve already seen the financial formula for NRR, but I want to go into the operational part of it to make it useful for you in your day-to-day life. Churn (if you lose a customer or part of their contract) has a negative impact on NRR, while expansion (if you upgrade a customer and they buy more from you) has a positive one. (I suppose you’re already keeping track of this, right?)
However, looking at historic data doesn’t really help us looking forward. Reporting and dashboards are meant to help and guide you towards making the right decisions going forward. These are commonly referred to as lagging measurements and leading measurements. A churn rate is a lagging measurement because the churn rate is a consequence of things that happened earlier (or - not happening at all if we missed doing something). Leading measurement tells us if we’re moving in the right direction. For Customer Success, this is critical! This tells us if we’re driving the business and if we’re doing the right things.
Workflows
We can all agree that we want to improve our NRR, and we do so by improving churn or expansion. How can we do this on a day-to-day basis? We have identified five different workflows which allows us in Customer Success to have direct control over what we usually work on. These are:
- New Customer Workflow (basically onboarding or trial-conversion)
- Success Plan Workflow (how well do we plan for the next step? And take it?)
- Fix Deviations Workflow (When the shit hits the fan, what do we do? How efficient are we at fixing things?)
- Retention Workflow (we need to keep track of our agreements, when are they up for renewals, opportunities, potential… How efficient are we in managing this and making sure that the customer wants and will renew, and that we reach the potential?)
- Promoter Workflow (How do we take care of our most engaged users or customers? How do we develop and grow them? This is key for new businesses as well.)
What to Measure?
Now that we’ve stated the five key workflows in Customer Success that we want to improve on, what should we measure? Well, we want to measure our customers, workflows and the team working with it. This could get a bit confusing - I often see these measurements getting mixed up (they are interlinked, so it’s understandable). Therefore, it’s a good idea to separate them into three “boxes” in order to simplify.
- My Customers (1/3)
As Lincoln Murphy would put it: Customer Success is all about helping our customers achieve their desired outcomes through their relationship with us. This is the high-level goal of why we have customers and why we work in customer success. To measure this, we usually end up looking at a customer health score. This is home turf for us at Startdeliver, and we see people struggling with why they don’t get an efficient customer health score.
Where most people go wrong with customer health:
- It’s not measured (or you have too complicated models)
- It’s not dynamic (not data-driven, not updated.. You have to go and find the data in some drive folder somewhere)
- It has no leading indicators (we are missing important information and not covering why our customers get value from us)
These are all common mistakes. At Startdeliver, we are strong believers in keeping things simple and easy so that everyone can understand and keep up. I will now share with you an example of how to build great customer health.
Customer Health is about Context
Ask yourself: How is the customer doing? One part of the answer is of course found in the commercial side - the contract. What is the ARR? MRR? Is it increasing or decreasing? Is the customer adding users or not?
Usage
Are they using our product, and are they getting the outcome they strive for? These are great indicators of customer health.
Experience
Are they getting the experience they want from us? Are they getting the help they need? Do they enjoy working with us? We can pick up signals on feedback, support tickets and so on.
Joint Accountability
Another part of context is also understanding the customer. We’re in this together with our customers. We need to know who we’re working with and all the stakeholders on the customer’s side.
Progress
Are we making progress? A situation where we have a customer that uses our product to some extent and rates the experience as “ok” is a risky customer if we’re not driving any progress.
Changes
Make sure you’re in control of changes and developments. Things change on the customer’s side and you need to stay on top of it.
Customer health is all about keeping track of context because it helps you set priorities based on it. It can help you plan your week, where to spend your time and do the right things.
Health scores should guide you to do the right things (which I believe is true for all dashboards and reports. Unlike sales, that has a clear process that ends with a deal, (hopefully) you have the customer for 12+ years in Customer Success. That’s why you need to have data presented to you in a dynamic way so that you can pick up changes, developments, red flags and so on.
With a great health score you can also have these leading indicators and measurements that indicate if you’re on the right track. It tells you if you have a good retention rate and low churn, or if you need to turn things around.
- My team (2/3)
This is all about measuring the team of Customer Success Managers or perhaps the big organizations with several CS-teams. How can we measure what we do in an efficient way? I see a lot of people coming in from sales or with sales experience, who take over Customer Success teams. There are differences here between the roles that I think are crucial to be aware of. Let’s highlight the difference between the two.
What’s the difference between Sales and Customer Success?
In sales, traditionally, we measure activity level and performance. It’s easier over a shorter period of time to measure sales reps’ performances vs. Customer Success Managers’ performance. Let me explain this to you using an analogy from football.
Sales reps would be the striker scoring in football, whereas a Customer Success Managers’ performance would be more related to winning the game. And following that, there are trade-offs here.
Trade-offs: What Happens When You Lean on Revenue and Expansion for Performance?
What if your measurements of Customer Success lay heavily on revenue and expansion? On the positive side, you will get more deals done when you have a clear revenue target, which probably wouldn't happen otherwise. On the negative side, if you only measure revenue and expansion, you will not get the team to do the hard work required to turn around a risk customer. Why would you spend time on that if you can get a bonus, or if the only evaluation is based on expansion?
If you drive hard on expansion you may end up with expansion that's not in the interest of the customer. It can turn out to be very risky; a worst case scenario is to drive expansion that doesn’t make sense on a customer, and then they will churn on you.
Another Tradeoff: Whether you Should Measure Activity Levels on CS or Not
In sales, you typically have some sort of target in the number of meetings, demos or calls. Should you have that in Customer Success too? If you have an activity target in Customer Success, that will normally drive a specific type of behavior and activity levels will surely go up. But what about the quality of these actions? A target could be, for example, to do x number of meetings with a customer per week, but what kind of meetings would that be? It can actually be quite counterproductive, so be careful with that.
On the other hand, if you have no activity targets, there's a risk that we only talk to the customers we know and only react to incoming emails. We avoid the “need to be done“ activities and tasks that really drive development on the customer side. So, again, these are tradeoffs to be aware of when you look at evaluating and setting targets on a Customer Success Manager.
Setting KPIs for a Customer Success Manager
Ok, so what should we measure on a Customer Success Manager?
1: If he or she has a portfolio which they are responsible for, they should have a NRR target on that portfolio. Surely, it can vary a lot depending on the type of business and customer, but we believe in having a target there.
2: Also, measure “goals achieved with the customer”: the things you do with the customer where we usually interact more. It doesn’t have to be expansion, but it should be activities that drive progress.
3: Measure the NPS on the portfolio and track the delta. Ask yourself if you’re having a positive development.
What to report on in the weekly staff meeting
Most companies have weekly meetings, but what should they be about? In Customer Success, there are so many topics and so much to potentially talk about. Our recommendations are the following three points:
- Target status & key changes (e.g. NRR status, new risk customers) - how are we developing? What is the status? Link a few key changes from last week. Are there any risk customers? Upgrades? Work around the overall high level targets that you have.
- My weekly priorities (e.g. key actions for the week) - set up a few (no more than three!) actions for the week. Every CSM has a lot of activities, but focus on three we should report on next week.
- Celebration (e.g. turnarounds, onboardings completed, feedback received) - CS is sometimes hard work where a lot of focus goes to churn and overall negativity, so we need to lift all the great things that we do. For example, celebrate customers who’ve gone from being at risk to not being at risk anymore. Or successful onboarding. Or great feedback!
- My workflows (3/3)
Workflows are processes we drive in Customer Success. Basically, it’s asking ourselves how well the machine is running. We aim to get the answer to that through different reports and workflows.
New Customer Workflow: How Efficient Are We at Onboarding New Customers
- Time to first value (e.g. 46 days) - how quickly can we get a customer from signing to first value? Measure in time.
- Onboarding completed (e.g. survey approval) - how efficient are we in completing an onboarding, and what is complete onboarding? Perhaps we have some sort of survey when we think the onboarding is over where you get a signoff from the stakeholder. (Of course, the customer should be up and running with our product!)
- Red flags
- Sales handover not done properly
- Delayed project
- No decision-maker involved
Success Plan Workflow: How Efficiently We are Driving the Next Steps with Our Customers
What happens after the onboarding is completed? We want to see the customer adopting the product, and we need to have a process for how to plan for progress with the customer.
- Goals - a sign of progress: the more goals we can drive and achieve with the customer, the better! It’s a great measurement of progress.
- Goals = Objective + time frame
- Customer should have agreed to the goal
- Customer should achieve the goal
- Red flags - risks
- Decision-maker changes
- Customer changes (acquisitions, entering new markets)
- Customers with low progress
- Customers without any activity the last 90 days
Fix Deviation Workflow: How Efficient We are at Fixing Deviations in Customer Health
Anyone who’s been in Customer Success knows that we spend a lot of time in damage control. When the shit hits the fan, how efficient are we at fixing it? How can we have a good reporting structure around this?
- Health development vs. our actions (e.g. impact our actions have on improved health) - if we can see health development and our own actions (meetings, training, calls, support..) and connect the two, we can see what actions drive customer health. This is a strong metric to track for Customer Success.
- Red flags - good reports help us identify red flags that we can fix or send signals when something’s off. They can help us discover and deal with the following, for example:
- Drop in usage
- Inactivated superuser
- Poor feedback from stakeholders
- Support overload
- Project delays
Retention Workflow: How efficient We are at Forecasting, Managing & Retaining our Customers
- NRR breakdown (by ARR now, expansion, churn & what the ARR was 12 months ago)
- ARR opportunities and potential
- ARR forecast (take into account risk-customers as well as customers which we believe will renew)
- Red flags
- Customers at risk
- Confirmed cancellations
- Churns
Promoter Workflow: How Efficient We are at Identifying, Engaging and Developing Promoters
Promoters are a quite overlooked area. Although we’re all aware of it, we don’t really keep track of it or report on it. Here are our recommendations.
- Promoter list (confirmed advocates) - people we send to sales & marketing who promote our product
- Power user list (heavy users of our platform) - ask yourself how to keep track of them and how you can keep them engaged. What can you do for them?
- Testimonial list (official references we use from the web or sales materials)
- Ambassador list (lead generators we appreciate)
Report to Leadership team with NRR performance & Leading Indicators
Customer Success has a direct impact on Net Revenue Retention which probably is the most important metric for the board, the management team, leaders and so on. If we want to report to management, we should of course report on how CS can improve and what impact we have. Our recommendation is to share the NRR performance; what the ARR is now, status of churn, status of expansion, what ARR looked like for the same customer group 12 months ago, and show the leading indicators. Tell them “We believe, based on what we’re doing, that we’re improving these numbers”.
That's the strongest message you can send to the board and management team.
Final notes
What I’ve shared with you in this article are all the workflows and processes we need to keep track of in Customer Success. I’ve also added a few recommendations on each process on what to measure. If you currently don't have anything in place, start with the process you believe is the most critical for you.
Impact Academy
I also strongly suggest that you have a look at Impact Academy which we run together with Lincoln Murphy. Impact Academy is about you becoming a better Customer Success Manager or Head of Customer Success. Check out the dates and courses offered here.
Thanks for reading and good luck!
// Johan, Founder and CEO of Startdeliver
jnilsson@startdeliver.com