Your CSM Ratio Is a Conversation, Not a Benchmark

By Kristen Hayer

Fall planning is underway, which means the headcount conversation is coming. Your CFO already has a number in mind for how many customers or how much ARR a CSM should carry, probably from something they read. The trouble is that the benchmarks out there vary widely. In my experience, they run from roughly $1 million to $2 million per CSM for early-stage companies and up to $5 million or more for mature ones. Building your own ratio from the bottom up is the right move, but it isn’t the whole job, because you still have to reconcile your math with the number in your CFO’s head.

Two kinds of CS programs

Before you can build a ratio, you need to be clear about which kind of program you’re running. In an assigned program, every customer has a named CSM. In a pooled program, a shared team of CSMs serves a group of low-touch customers. These two models need different approaches to capacity planning, and mixing them up is where a lot of ratios go wrong.

Assigned CSMs: everyone gets proactive attention

In an assigned program, the whole point is that all of your accounts get proactive attention. That’s what the assignment means. So capacity is the time it takes to proactively serve every customer in the segment. Start with your customer journey and estimate the time it takes to deliver it to a single customer, including the meetings, preparation, follow-up, and internal coordination. Then divide the available time per CSM by the time to serve one customer, and you have your customers-per-CSM ratio.

I’ve seen the suggestion that capacity should be based on how many accounts get proactive attention, and for an assigned model I strongly disagree. If only some of your assigned accounts get proactive attention, the rest aren’t really assigned to anyone in a meaningful way, and you’ve given up on part of your customer base without saying so.

Pooled CSMs: proactive where it matters

A pooled model works differently, because you can be selective about who gets proactive attention. The condition is that proactive outreach has to be part of the plan. Estimate the time it takes to serve every customer in the segment reactively, then add the time it takes to proactively serve customers in situations where that makes sense, such as selling, saving at-risk customers, or driving change. Average that time across all customers in the segment and divide the available time per CSM by the result.

If everything in your pool is reactive, you have glorified support, and it might be possible to automate it entirely. After all, why have a CSM pool if the team isn’t doing anything to demonstrate value other than responding to inquiries? That’s what a support team does.

Take it to your CFO

Once you have your bottom-up ratios, compare them with the ratio your CFO has in mind, which is a top-down number. Then have a conversation about the trade-offs required to serve each segment. You might need to scale back your customer journey, or your CFO might need to lower expectations. Either outcome is acceptable, as is a combination of the two, as long as you talk it through. The wide range of benchmarks is the reason this conversation matters, because whatever number your CFO is carrying is one of many and might come from a company at a very different stage than yours. The ratio you land on should be one you’ve agreed to together.

Keep segments on separate teams

All of this assumes that different teams manage each segment of your customer base, which is what works best. When CSMs have to switch between journeys, it’s hard to keep them straight, and you’re likely to end up with one muddy journey that sits somewhere in the middle, along with a ratio that doesn’t work well for anyone. Startups that can’t staff by segment should keep to one journey and use the same process to arrive at one ratio.

Put the ratios to work

With a ratio for each segment, you can use your sales expectations to figure out when you’ll need to hire for that segment over the coming year. That turns the headcount request from a plea into a plan, because you can show the workload your journeys require, how many customers each CSM can serve, and when new customers will push you past that point. Revisit the ratios each fall alongside your segmentation, with churned customers removed and new ones added.

The ratio is the output

A CSM ratio isn’t a number you inherit from a benchmark or defend as a guess. It’s the output of decisions you’ve made about what each customer gets, and a plan you and your CFO have worked out together. When you build it that way, the headcount conversation stops being a defense of your request and becomes a discussion of how to serve your customers well within what the business can afford.

The Success League is a global Customer Success training and consulting firm. Need help with your segmentation? We offer Customer Segmentation Strategy as a part of our consulting offerings. Please reach out to us or visit TheSuccessLeague.io for more information.

Kristen Hayer - Kristen is the Founder & CEO of The Success League, a global, customer-focused consulting and training firm. Kristen’s background includes leading award-winning sales, marketing, and customer success teams in early and growth-stage tech companies. She is the host of several podcasts on CS and leadership, and has written over 100 articles on the field of customer success. The book she recently co-authored with 5 other CS thought leaders - The Customer Success Talent Playbook - hit #1 on Amazon in 5 categories. Kristen received her MBA from the University of Washington and splits her time between San Diego and San Felipe, Mexico.