How to win budget for your customer success department

Every customer success department leader dreads that talk: the stressful budget talk.

Compared to well-established ones like marketing or sales, customer success departments are relatively new, so management is usually reluctant when faced with a budget request.

In this article, you will discover some approaches that will help you convince the CFO or whoever is in charge of approving your budget request that your department needs it.

Correlate customer success KPIs to the company’s overall goals

Similar to how you are held accountable for the CS department’s results, the CFO responds to top management regarding company profitability. And in their case, the pressure is probably higher.

Lucky for you, it’s easy to link customer success department wins to company revenue growth, thus finding common ground between you and the person holding the key to your budget increase.

There is substantial ROI to customer success. You just need to show the CFO how investing in the customer success department can increase revenue and profitability for the firm, and chances are you’ll win them over.

Pull out stats that back you up, such as the cost of acquiring a customer (CAC) being five times higher than that of keeping an existing customer.

Commit to setting clear and measurable KPIs to show you mean business and ensure they contribute to the company’s overall goals. 

They must tie into relevant CS metrics such as customer satisfaction score (CSAT), churn rate, monthly recurring revenue (MRR), and be achievable. Don’t over-promise because you run the risk of under-delivering and putting your job on the line.

To keep on the safe side, provide ranges instead of fixed milestones. For example, you can say, “churn rate will decrease by 2% to 5% in the following year”, instead of “churn rate will decrease by 5%”.

Make the case for increased efficiency

CFOs are result-oriented, so you need to prepare answers to any questions regarding the efficiency gains of a budget approval in advance. 

For instance, if you plan to purchase a customer success software subscription, you should articulate how this tool will help your team automate tasks such as sending messages to customers with low engagement or identifying upsell and cross-sell opportunities, leading to maximum efficiency. 

30% of SaaS businesses reported their churn rates have increased, which means churn is on an ascending trend. All the more reason to greenlight budget for a tool that will help reduce both voluntary churn and involuntary churn with little effort. 

If the budget you are asking for is destined for hiring a CS Ops Manager, for example, explain what the role entails and how having someone to oversee and implement customer success systems and strategies will help increase department efficiency.

Find corresponding efficiency metrics to track and observe progress. If you use the budget for customer success software, track the customers per CSM metric to see if any of your team members can handle more customers as a result of automating several tasks.

Bring prior customer success achievements into focus

Pointing out the limitations of your current budget (or lack thereof) might not be enough to get your desired budget greenlit. 

If you previously had a budget approved, the CFO or any other person in charge of budgeting may not understand why the previously agreed budget needs to be increased.

Make sure you prepare a review of last year’s customer success budget, how it was spent, and the positive impact it had at department and company levels. 

Bring up important metrics like customer retention rate (CRR), customer retention cost (CRC), and churn rate, if they have significantly improved in the previous year.

The cost to retain revenue can be a double-edged sword and might lead to a discussion about cutting costs instead. Be one step ahead by building a revenue and expense forecast.

The higher-ups will probably want to discuss the cost to retain revenue too, which is calculated by dividing the total CS expenses by the total amount of revenue managed by CS. Ideally, there should be a decrease since last year for your budget negotiation to end well.

The cost to retain revenue can be a double-edged sword and might lead to a discussion about cutting costs instead. Be one step ahead by building a revenue and expense forecast - a well-thought plan to decrease the overall cost to retain revenue number for the upcoming year, showing that the best strategy is to allocate a budget for the CS department.

Play the market expense benchmark card

Although a SaaS rule of thumb says that each company should have a CSM to manage about $2 million in ACV or ARR (depending on which metric the company bases this on), it’s not likely to help your argument if your company is in the beginning and cannot afford to invest this big a budget in a department.

There are many yearly SaaS surveys out there that can give you an idea of the sums other companies are investing in Customer Success. Look to companies that are at approximately the same growth level as your own and see if you can find out their CSM to ACV/ARR budget amount.  

This technique works in your favor if you need a budget for new hires and there is ARR growth from last year. You can argue that you can afford to have more people on the team thanks to the increase in revenue. 

There are SaaS CFOs that believe budgeting and benchmarking go hand in hand, so they use this technique themselves when conducting all budgeting negotiations. It prevents departments from fighting over who gets the bigger budget, while, at the same time, giving everyone an ensemble look of their joint efforts.

Successful budgeting for customer success

There are many ways to put the customer success budget to good use, including but not limited to purchasing customer success software, bringing in new hires, organising professional training for team members, paying for CS conference attendance, and so on. 

Anything that can increase your team’s performance is worth spending part of your budget on, but you must always aim to better prioritise those actions and help your team achieve its goals and objectives. 

Keep your budgeting up to date and conduct quarterly reviews to ensure the plan still fits with your CS department’s evolution.