Bigger, Better, Faster, Stronger: Make Customer Success Your Secret Weapon
I often find myself overanalyzing gross revenue retention (GRR) and net revenue retention (NRR) (who doesn’t!?). Of course, meteoric new logo growth and eye-catching low CAC payback are all wonderful metrics, but there is something critically insightful about GRR and NRR. There is always more than meets the eye there. After all, GRR and NRR represent how the companies that know you the best - your existing customers - think of your product and people.
In the last couple of years (let's say 2020 to today), NRR has only increased in its predictive accuracy of enterprise value, and given the unpredictability of 2023, the smart money is on NRR growing as a key variable for valuations. To punctuate this, let's stare at this write-up from Gainsight:
“The results, shown below, indicate a clear positive relationship between a company’s NRR and EV / Revenue ratio. The regression coefficient of 0.72% suggests that each percentage point increase in NRR is associated with a ~0.7x change in a company’s revenue multiple. This means that for a $1B revenue SaaS company, a mere 1% increase in NRR could translate into more than $700M in enterprise value!”
I’m an avid admirer of the impact Customer Success (CS) can have on an organization, but I’m no savant. To tackle a conversation on how to make customer success successful, I asked Alex Paquette from IronScales to join me and a couple dozen CS leaders from Jump’s portfolio to:
- Define what great looks like for a CS organization
- The profile of exceptional CS talent
- How to organize the team
- The interconnectivity CS has to other functions in the company (particularly sales, marketing, and product)
Alex’s passion and affinity for all things CS come through the moment you engage him. I walked away with a lot to think about and a few key insights to share:
Accountability is key
Alex emphasized that customer success is more than a department and that CS should be measured in terms of customer outcomes. His reasoning was simple, “When you think of it that way, everybody within the organization becomes responsible. Whether you're in the product, marketing or sales team, it doesn't matter. Everybody is committed to the outcomes for your customers. Because without a healthy customer base, with a long lifespan with your organization, you're going to be hurting as a business, right?”
Take away: Executives need to be measured on NRR. It should be a component of their variable comp, which should be the case for the senior leadership team, particularly Sales, Marketing, and Product.
Open your ears
When discussing signals to pay attention to, Alex shared that “predictive signals to measure depend on your vertical and offering to the customer.” He went on that the net they’ve found is that the more the Customer Success Managers with customers, good things happen. He cautioned that Customer Service Managers need to be effectively trained, so they can “do the right discovery to ask the right questions, so they don’t just feature dump and jump right into product capabilities but understand each customer’s business.”
Take away: If you take one thing away from this write-up, it’s the general encouragement to speak with your customers as often as possible. Listen to what they're telling you. Measure it and then be able to disseminate that to the different parts of your organization – doing so ensures fluidity across departments to improve the product, marketing, and, obviously, the company’s bottom line.
Talent over experience
We asked Alex what he looks for when hiring CS talent. He pointed out that “at early-stage companies, you barely define anything, let alone everything. You need people who can fill in the gray, especially in a customer success role. And the value is that they'll figure out and prioritize for you and your product team where to invest and where to start.”
Take Away: When hiring for CS, look for coachability, curiosity, and work ethic. Sure, there's a component that includes prior experience and job skills, but the reality is that early-stage companies aren’t going to hire people who already know their product – which means you’ll have to train new hires anyway. Find the people who know what good outcomes for your customers look like and train them to be advocates for your product and champions for your customers.
Ultimately, Alex's insights underscored how integral Customer Success is to the overall health of a company – and the faster companies embrace it, the better. If you also overanalyze GRR and NRR, keep the conversation going via email. Drop a line to [email protected] with your favorite CS resources.