Lessons Scaling Customer Success from 1 Million to 300 Million in ARR with ex-VP CS of Motive

or even evening because we do have people that join us from around the world. So thanks for joining for this week's edition of our Workshop Wednesday. We are thrilled to have you back. And thanks so much for joining us. Every Wednesday at 10:00 AM, we are here week after week to share detailed, interactive, and hands-on workshops. We'll bring along a SAS expert to walk us through some content, whatever they're an expert in. And then we'll kick off an interactive discussion. So you'll have the opportunity to interact with the speaker directly. Directly to get any questions answered and also to connect with fellow community members. This week we are very excited to welcome John Gleason. He's the founder and managing partner at Success Venture Partners. He's also former VP of success from Motive. So he's gonna walk us through some lessons scaling customer success from $1 million to $300 million in ARR. He's kind of our customer success guru. So get all your customer success questions ready, any challenges that you're having, he'd love to answer after he goes through a little bit of content. So this was a super popular workshop for us at SAS TR Annual last month in San Mateo. In case you missed it, you'll get kind of a sneak peek and a little evolution of it here. But if you also— if you did see it, you'll get a chance to dig in a little bit deeper. And he had a ton of people lined up for questions. So maybe you're one of them, or maybe you didn't get your questions answered. He's happy to take them now. Like I said, we're aiming to keep these sessions as interactive as possible. So we do encourage people to go video on, ask your questions live. So I'll be kind of facilitating questions in the chat and asking if you're comfortable coming off mute to ask them, or I'm happy to ask them myself. But I'm sure you'll all get sick of my voice by the end of this. So we'd love to hear from you. John, welcome. Thanks for joining us.

Yeah, thanks so much, Caitlin. I'm grateful to be here. This will be fun.

Yes, super fun. Um, when we love to start off with a few warm-up questions for you so our audience can get to know you a little bit better. So before we let you dig into your content, um, tell us just how you define what you're currently doing in your day-to-day role.

Yeah, okay, so I am in process of building a fund as a first-time solo GP. Um, so that's what I'm— that's what I'm doing. And basically, like, The goal is to be that customer success person on the cap table of great companies. So when I was at Motive, a lot of founders would reach out to me and say, hey, we're looking for some help with customer success. What do you think? And that was kind of the genesis for building this fund. I recognized that there wasn't very many people in customer success helping early stage founders build customer success. And so the whole point of the fund is to be that person to support founders in their early customer success efforts. So that's what I'm up to, or what I define what I do as.

How to put it as simple as possible.

As simple as possible.

What project are you working on today that you're most excited about?

Oh, I got two big things. I'm working towards my first close. Of the fund, which is like super stressful, super fun, big learning experience. So that's, that's number one. And then number two, I host the world's largest meetup for, for customer success. So we've got a big event in New York on November 9th, and you all do a ton of events, you know that there's a never-ending list of things to do. And so I'm in the thick of things right now getting ready for that.

Love it. We'll make sure you drop in that info here in the chat too, in case people are local and want to join. In the last 12 months, what's been the hardest thing you've worked on?

Just adjusting from being an operator for a really, really long time to starting a fund, raising in probably one of the harder fundraising environments in recent memory. That's been, I wouldn't say hard, but it's certainly been interesting. And yeah, so I would say like the last 12 months have been an incredible period of growth for me personally.

Yeah, certainly different times. OK, last question, then we'll let you get into it. What is your current favorite SaaS tool or platform?

Oh, man. I have— can I say two? I have two. Please. All right. Matic. I don't know if anybody's using a platform called Matic. It helps your customer success managers or even salespeople generate dynamic content for, for your customers. So we used it a ton at Motive for executive business reviews. We could pull in all of this data and a CSM in a matter of seconds could, could generate a contextually relevant data-driven presentation for, for their customers. So pretty cool stuff. New company that I love is this company called Reef.ai. In my presentation today, I'm going to share a little bit about cohort analysis, and the approach that, that Reef takes is understanding cohorts of customers and the attributes that, that go into these, these different cohorts and how to drive business action against those cohorts. So pretty excited about that. Very early stage, but they're getting a ton of traction, and I'd I love the founder, actually. He was— he led customer success at MuleSoft from like $200 million in ARR to IPO and Salesforce acquisition. So probably one of like the best thinkers on post-sales that, that I know. Awesome.

Definitely one to watch for. All right, thanks for that little glimpse into just you and what you're working on. So without further ado, we'll let you pass it over and walk us through some lessons scaling customer success. Thanks so much.

Awesome. Okay, well, thank you so much, everybody, for having me here today. Let's get into things and I'll start at— whoops, here we go. I'll get into things. So I'll start at the very beginning. Basically, you know, if you've raised venture capital at all, net revenue retention is something that's probably pretty important to you. That's not important to you right now. It certainly will be in time. We know that when we look at publicly traded companies, there's this direct correlation between NRR and their enterprise value. Alright, so that's the end state that we're going for. And I think all of us are SaaS pros here. And so we all know the formula for NRR, right? Starting revenue minus churn plus expansion all over starting revenue. And that's a lagging indicator. And so I always like to think about that formula in terms of what is the question that, that formula is aiming to answer, right? And so framed another way, NRR is, do my customers find value in my product and/or service? In other words, are they willing to renew? And are they willing to trust me with more of their business? Are they willing to expand, right? So if you can answer yes to these two questions at every stage of growth, I would say like you're you're probably on the right track, you're going to do something great. So we mentioned that at Motive, I led from $1 million in ARR to $300 million in ARR. And customer success, in my opinion, evolves quite a bit over the course of that journey. And so for the sake of today's presentation, or learnings, I'm going to break things down into the classic triple triple double double framework. I think these buckets really start to, you know, unpack what's happening at each stage of growth. And so if you don't know what triple triple double double is, it's basically, you know, once you find product market fit, the hockey stick curve or the numbers that make up that hockey stick curve. So going from $2 million to $6 million, $6 to $18, $36, to $72 million, and then north of $100 million in, in AR. And it doesn't always break out perfectly like that, but for the sake of the presentation, we're going to pretend that it does. And so in SaaS, we really only have like 3 ways to make that curve stand up, right? We can either get more new customers, we can sell more to existing customers, or we can do a better job at keeping more of our existing customers. And we talk a lot about getting new customers, but what I've come to appreciate is it's actually the expansion and the renewals that make that whole curve stand up, right? It's expansion renewals that make that whole curve stand up. And that was my responsibility at Motive, was that expansion and renewal motion. And so I'm a little bit biased, But I would say without a doubt, customer success or well-executed customer success is one of the biggest accelerants to your growth. Alright, so here we go. Let's get into the triple triple, double double and what happens at each step of growth. Alright, so before we get into that too, I'm actually going to just like double back for a minute. I recognize that maybe a lot of the folks on the call are maybe past this stage. And I thought I was too, when I was at Moda. I thought that, you know, in the early stages, it's all about, you know, finding product market fit. And as things get going, you know, you kind of move out of that product market fit stage, and you move on to more important exercises. But what I came to realize at Moda was that actually, like, product market fit is really a never-ending thing. I was part of so many product launches while I was at Motive, and more often than not, it was my team that actually like fed the product engine, fed the insights that our CEO needed in order to come to market with things that were relevant to our customers again and again. We always felt like we, you know, had a sense of our customers when we went to market with a new product, but it was really only once they signed on on the line and they were customers that we really understand, or really started to understand their pain points. And so whether you're, you know, in the earliest stages just getting started or later stages, I would say just like keep, you know, keep a lens towards product market fit or, you know, always understanding the needs of your customers. And some frameworks that you can use to do that I would find myself in these meetings with customers and I was flying all around the country and I couldn't help but actually like go back to some of the things that I had learned when I was the first hire at a very early stage company. So I went back and I revisited— I don't know if we can see it on the chat. I can see the chat here. Has anybody ever read The Four Steps to Epiphany by Steve Blank? Jason M. Lemkin: Looking here. Okay, to me, this is actually probably like one of the best books on customer success. But actually, it's, you know, it's written about finding product-market fit. And so what we're doing in customer success a lot of times is we're understanding the pain points of our customers. We're, you know, really diving in, we're asking them questions, and then we're using our product to solve those pain points. Of our customers. It's a very iterative process, right? Well, that's the same thing that you're doing in product market fit. And so I'd say like, you know, that connective tissue, that always finding product market fit piece is going to stick with you really once you start to grow and certainly very important in the early days. So don't forget that. But the, the Four Steps to Epiphany framework of customer discovery, customer validation, I think is so important. So, so keep that with you in the earliest stages and carry that through. To the later stages. Other framework that I use when I was sitting in these customer meetings was the Lean Canvas, right? Oftentimes, when you sell the deal for the first time, you might understand the company's, you know, the customer's problems, or maybe your unique value proposition, maybe you've segmented them. But it's all of the after-the-fact things that you learn once they're customer. And more often than not, I would actually find myself, you know, sketching this, this lean canvas out, understanding, you know, all of the needs of the customers post-sale, and then feeding that back to the product team, feeding that back to our CEO. So in the early stages, customer success kind of looks and feels like an extension of the founder. And in the latter stages, if you keep these insights flowing and in the right way to the right channels, it really starts to become a hub in your organization. The other thing that I would say on this, and then we'll get into the really fun stuff here in a minute, is that renewals, if you think about it, are probably one of the highest forms of product market fit, right? It's one thing to like bring the customer over the line to sell to them for the first time, but it's actually really in the renewal process that the customer is saying, okay, not only did you like promise me something you could solve a pain point that I have, but you did that and I'm willing to do it all over again, right? And so as much as it's important to, to get new logos, we, we certainly need new logos to grow a company. I would say really pay attention to your renewal process because that's where product market fit, in my opinion, gets locked in. And so get those insights, do the customer discovery, and then really stick close if you're a founder to the renewals as well as the new logos. I think this is applicable at every stage of growth, but certainly in the, in the earliest stages, because that's where you're really locking in product-market fit. And, and probably like actually one of the reasons I started Success VP in a lot of ways, a lot of times founders were coming to me, you know, they were selling new logos, and then they had all of these customers that they had to support, and they were learning so much, and they were totally stressed, and there was some help that needed to happen there. They were churning some of their early customers and it was super stressful. And what I came to appreciate was that it was as much a product market fit thing as it was how they're supporting those customers. So, you know, before you're $2 million in ARR and certainly afterwards, just like really lean in here. And so again, biased opinion, but I like to reframe maybe founder-led sales to founder-led customer success because that's really what's happening is you're selling and then, you know, you're using everything you have to make your your customer successful. All right, so that wraps up getting to the pre-product market fit stuff. Now we're on this triple, triple, double, double journey. All right, so let's talk about the first triple. This is probably one of my favorite stages of growth. And let's just like dive into the numbers for a second. Let's see like where, where you're at. All right, so you're going from $2 million to $6 million. That's the goal. That's that first, the first triple. Chances are you've hired your first head of sales, right? And you're also probably about to see a lot of growth on, on the sales side, right? Your headcount maybe goes from 2 or 4 all the way up to 10. All right, so a lot of new people. It's really important to, to look at like just the velocity of new customers per quarter, you know, pre-$2 million, You may be getting like 6 to 10 per quarter if you're doing well. And then as you cross that $6 million mark, it's 20 plus, right? The velocity really, really picks up. And common practice at this stage is probably not to have a head of customer success quite yet. We'll get into that in a minute. But it— but there certainly are like some people supporting your customers. So that's what it's looking like. Going from 2 all the way to 6. And as much as the numbers are important here, I think it's really important to also like consider like organizationally what's happening in your organization. And I would flag this slide for the CS leaders in the room more so than the CEOs, because in the same way that your CEO just went on like this journey to find product market fit and learn everything they could about your customers. Now, basically what's happening is all of those new hires are also going on a journey to, to find their own, let's say, version of product market fit, right? They're learning how to sell this product. Your first head of sales is all of these new reps are— there's more people. You know, the whole goal is to codify that process, but it's not always a straight line, right? There's a lot happening organizationally as you you know, make that first jump towards scaling your organization. And as such, you're going to see mis-hires. It's inevitable. You're also going to see like poor fit customers, right? It's end of the quarter. There's more pressure. You get that customer over the line. Maybe you're not all the way there on your product roadmap. That's okay. These, these things happen. But nevertheless, it, you know, we would call it in customer success, let's say, a poor fit customer. You're also going to see more demanding customers, right? It's one thing to buy from a founder. It's another thing to buy from, you know, AE number, number 5. There's a different set of expectations. There's a different experience that comes with that, right? So you're going to see more demanding customers. And so our knee-jerk reaction in customer success is generally to Whoops, where am I? Our knee-jerk— there we go. Our knee-jerk reaction in customer success is to often, like, you know, fight this with, with a lot of process. And I think that's one way to do it. But actually, the thing that I would like really caution you on or really advise you on is to actually, like, bake a lot of flexibility or as much flexibility into that first $2 to $6 million stage of growth as you can. Because what I came to realize was that, you know, as much as customer success is supporting your customers, it's also supporting your entire go-to-market strategy, right? You know, Jason M. Lemkin talks a lot about like the flywheel of customer success and getting this all going. And I think customer success is a big part in supporting this. And so You know, really, if you go back to that product market fit finding piece that we just talked about a minute ago, and you really, you know, believe that, you know, your first, your first CS people are almost like an extension of the founders. There's a lot of extra work that happens here around just like finding product market fit, feeding the product vision and roadmap, right? If we think about like just where we're at in our journey, you know, from you know, up until $2 million in ARR, it's the founder supporting those customers, gathering all those insights. Now we kind of have this new version of product market fit, someone else other than the founder selling. And so there's also a lot of like just insights that come when you're selling something, you know, that's, that's by a rep, not a, not a founder. And so there's just so much more fit finding that needs to happen here. And so I would say bake in the capacity for those early customer success hires to do that. The other thing that I would say is, and I witnessed this firsthand at Motive, is those early customer success hires that you have in this $2 to $6 million stage, they're really educating your entire organization on, on your customers. Right. At this stage, like, you don't have an enablement function. And so your new reps are, you know, holding on to anybody who can help them understand your insights and the intel into your customer base. More often than not, it's your CS people. So you've got to bake in a little bit of capacity because your CS team is educating the entire organization on those needs of your customers as well. And so, yeah, if I could caution you with one thing, it would be keep the capacity here. So that you can really understand, you know, your customer base and even the, the experience that your customers are, are trying to, to get to, or maybe your own version of customer success. All right, so that begs the question, when do you hire your first head of customer success? All right, so I would say that this is as much maybe an art as it is a science. You really have to look to your first head of sales to get this right, right? If you hire customer success too early and you don't have customers and you have a big expensive hire sitting there with really not a ton of customers to support. So that can be fatal. So don't do that. But if you hire too late, you get all, you know, the whole sales engine picks up, the machine starts to turn over, you have all these new customers, come in and nobody's there to greet them, nobody's there to support them. So again, missing the mark, hiring too late can also be fatal. And so you've gotta get ahead of this. And the way in which I've found you can get ahead of this is actually just like really being honest with yourself when it comes to your first head of sales. So observably, like, are they ramping well? Is it reasonable to believe that velocity is gonna pick up? Again, look to those early sellers. Are they getting to quota quickly in a timely way? Those are like the big signals that I'm looking for. And then the math, or maybe more of the science of like when, when to hire this, this person is I love to see founders do at least $1 million in founder-led renewals. And this can be like with the support of like 1 or 2 early CS hires, but be there for the first million dollars in renewals, be really close to that process because again, you're going to understand just more about your, your product market fit, the needs, the packaging that your customers decide, desire. You know, we're a SaaS company, or we're all in SaaS, right? So that renewal is, is very important. If you're not getting that, you know, there's nothing to build on top of. And so I would say generally, like around $1 million in founder-led renewals, or about $3 million in ARR, if you're on that growth curve, they roughly shake out to about the same point in time. So start to look for that higher around then. And like I said, you can do this with maybe 1 or 2 founder-led CSMs alongside of you before you make this big, this big hire. Alright, so let's see what's next on the slides. Alright, so when you do go to make that hire, I would say, you know, you can certainly Google what this job description looks like, but I would add a couple things that maybe you won't find online. And we'll talk a little bit about this in a minute. But CS has changed quite a bit, right? We talk a lot about like product-led growth, and we talk about a lot of like the customer success actually being in-app. And so as such, there's probably a new set of competencies that older vintages of CS leaders might not have. And so I would say, we'll get into this in a minute, you'll see how this, you know, stacks up for the later stages. Yeah, of course. Hey, Anthony, maybe come off mute for a sec. Great. And there we go.

Cool.

So yeah, I would say like mastery of funnels, right? So in the same way that maybe marketing has a funnel or sales has a funnel and customer success, we have many funnels. We have onboarding, usage, case studies, expansion, certainly the renewal. So really like testing these questions. For that funnel-like bend. We've already talked about deep customer insights. And, you know, if we think about CS as an extension of the founder, we really want to hire somebody who can be truly cross-functional in nature. At the later stages, you know, customer success may not own all the resources to support the customer, right? There's drip campaigns maybe going out. There's maybe a an adjacent professional service organization. You really have to like be able to work cross-functionally and hire somebody with these extra attributes that maybe you don't see online. And some good key interview questions that I like to ask in order to kind of suss this out is look for things in their answers around like A/B testing. This can lead, you know, generally like, you know, lead you to believe that they know their way around a funnel. And then just always, you know, pressure test their ability to craft like a balanced approach, right? Customer success, more modern customer success, in my opinion, is as much process as it is technology as it is people. And so you're really looking for a blend of these three things. Old school customer success was a little bit more just like hiring people, but modern customer success really has to weave these things together. So look for that. And I would say, maybe not on the slide, but it's very important, is try and find a CS leader who can actually scale through a couple stages of, of growth. And I know maybe this is like counter to some of the literature that's out there is like certain people will only be able to scale through so many stages of growth. If you can find somebody who can scale through a couple stages of growth, I really think it pays a pretty good dividend. You know, when you think about it, nobody in your organization knows your customers as well as your CS team. And there's real, I would say, like value in having a consistent person get to know your customers over the course of time. Generally, what I found, you know, our highest churning books or customers were ones that had been passed from CSM to CSM to CSM. And so if you can create a leader who, or find a leader who can, you know, keep their team together and also be in that role and grow with your organization, I think it can serve you really well. And again, can help you be in the room as a CEO, maybe when you can't be because you have so much trust in that CS leader. That's certainly probably one of the keys to my longevity. All right, I'm probably getting on time. So let's, let's move through the second triple and the third triple pretty quickly here. All right, so the second triple, this is where, you know, if we talked about like a lot of flexibility, um, early on, this is where like we really actually start to need to build out our processes. And I'm going to show you why. So again, just like looking at the numbers here, you hired your head of customer success, you are going from $6 to $18 million. Things are getting really big now, right? There's a lot of people in your organization, both on sales and, and CS side. And now you have to really start to create some scale in your CS organization. I want to show you why. All right, so you made it to $6 million in ARR, roughly to this point, like a lot of your accounts haven't come up for renewal. But as you cross $6 million, this is where like the compounding nature of SaaS, in my opinion, really starts to take over. Right. And so it's after $6 million that your logos start to stack on top of each other if you have a good renewal rate. And that's where this curve really starts to come from. So looking at the purple here, you just see it, you know, renewals stacking on renewals stacking on renewals, get a curve. Even if you're growing at an incredible clip on the new logo side, past $6 million, it's really hard to just be consistently bringing in more new logos than, than you're renewing. And so this is generally where I see like that flexibility, do, do it all CS motion start to break down. There's simply like too many new accounts coming in and too many accounts to renew that CS teams start to, you know, get lost. There's just too much to do. And so what I would say here, probably like the first step in really the scale motion is to actually break out onboarding from your customer success function. And here's why I like to do this. Here's why this can give you a ton of capacity. So think about it, the CS role or the CSM role is a fully loaded role. It actually looks a little bit different than a lot of other roles in your organization or in your sales organization, right? Basically, once a CSM gets a book of business, and let's say they max out at $2 or $3 million, um, they really can't take on any more work after that point in time. Therefore, they're fully saturated, um, unless, you know, customers churn, right? Um, there's just, you know, to get more capacity for them, it's a really hard-fought battle. All right, so it's a fully loaded function. You know, it's these, these people stack on top of each other. You have $10 million, you need a certain amount of CSMs, assuming that they're renewing really well. Onboarding, on the other hand, looks and feels actually a little bit different. Onboarding, if you're good at your job, you're always passing a customer through the motion, right? A customer signs a contract and then you onboard them. The onboarding motion is done, right? So it's a throughput motion. You're always getting capacity back. It's a revolving door. And so I would say like, break out onboarding from customer success because you can just create a ton of scale in that onboarding. Motion and you can create some specialization in this role. And so I would say that actually probably the most underrated metric at this stage of growth is what I call time to value, right? In other words, how long does it take for my customers to find value in my product and/or service? So let's say from contract signed to proof of value. So for, for us at Motive, this was them actually like filing a report that meant that their users were in the application. It meant that they were actually like doing the thing that they got value from, and we would measure the days from contract signed to that proof of value point. And then the really cool thing about that is you could actually condense the time and you could, you know, do different drip campaigns. You could add people to it, you could build things into product, and you could condense that time to value. And as you condense time to value, you actually pick up a lot of capacity in process. And so at Motive, there was one point when we actually grew from $1 million in ARR to $60 million in ARR over the period of like 6 months. So just like incredible growth, we had customers coming in like crazy. And I would say the only reason we were able to be successful there was by breaking out the the onboarding function, you know, getting customers ramped really, really well in as fast a time as possible. There was a lot of learning that went into that. And I just like, I can't stress how important it is to do that. It also freed up the CSM team to think a little bit more strategic, a little bit more long-term. So I would say at this stage of growth, just like You know, the, the whole goal is to take your limited resource of people and to use them in the most effective way. And breaking out onboarding from CS is a really great way to do that. And so if I could conclude, it's scale starts or great scale starts with great onboarding. All right, so let's get into the next triple here, or actually kind of somewhere in the middle. So if we think about it for a second, um, you know, $6 to $18 million— when we're at $6 million and we just wrapped our sales team, most of our accounts, you know, they haven't come up on renewal yet, right? And so as a result, prior to that, your renewal rate is probably pretty good. You can fool yourself into thinking that your retention is probably better than it is because most of your customers haven't come up on their first renewal yet. And if you just wait around for your NRR number or your renewal number to change, chances are you're going to be too late to the game. You're not gonna be able to do anything here. It's a lagging indicator that customer's gone. You may never get them back, right? And so what I like to do is I actually like to start to break things out into a cohort basis at this stage of, of the game and look at actually customer vintages on a month-over-month basis and start to understand how those individual month-over-month cohorts are performing. This can kind of tip you off earlier than maybe your overall number will around where your problems are. And so a good starting point is to do this just like logo renewals or even, you know, GRR renewals. But you can also start to do this in a number of different ways. So you can look at this, vintages of usage, feature adoption, expansion, support tickets. All of these things are going to start to give you insights into how these individual groups of customers are performing. And, and a lot of times, like, what you can do is you can actually, like, use this to perform, like, a retro on your go-to-market strategy to date, right? So you'll be able to pinpoint the ramping benches. This is when we hired a whole bunch of new salespeople. How are these customers performing? Or this is when we hired our first head of sales, or this is when we launched a feature. And so you looking at it on a little bit more micro view, will really serve you well, certainly before the bulk of your customers have yet to renew for the first time. The other thing that this can be really good at is it can guide actually your motion around, you know, the playbooks to launch for your, your CSMs. Let's say you start to see cohorts of customers that look different than, than the average, maybe from an adoption or expansion perspective. Rather than blanketing your whole customer base, what you can do is you can set up individual playbooks for those unique cohorts around adoption or expansion. Again, this is another way that you can just like create really good scale in, in your organization. So cohort analysis for the win. All right, so cohort analysis, backbone customer success. Now let's get to the first double. All right, we're going to move quickly from here because I know there's a lot of questions, but all of us in in SaaS, we come to market with a point solution, right? The common wisdom is, you know, do that thing that you do 10 times better than your competitors, right? In the early stages, when I talk to a lot of founders, they say, I say like, who are your competitors? They say, well, we do it so differently, like we really don't have any competitors. And that's great. And actually, like, I certainly believe that. But the reality is, is that point solution probably only gets us so far, you know, at some point, the holy grail in SaaS is to build a platform. And as we do that, we have to come to market with more features. We have to make our product a little bit wider. And as this happens, we start to converge on our competitors, and our competitors start to converge on us. And we start to overlap. And this is generally where our churn starts to pick up because our competitors are selling against us. And if we're not selling against them in this motion, we start to lose out on deals, right? This happened to us at Moda. One of our competitors was really good at something that we weren't initially known for. And then they also did the thing that we were initially known for, and we started to butt up against them. And so just being defensive, just focusing on the renewal wasn't enough. We actually had to actively sell outside of our core solution in order to lock in our renewal. If we weren't getting the expansion on this product that our competitor was really good at, eventually they would get that attached to our customer. And then when it came up for renewal, they say, oh, and by the way, we can do that thing that Motive does really well. And, you know, it's, it's not our specialty, but, you know, we'll discount to, to a super low price on it, try it out. And then we'd lose that account outright. And so we actually had to be like very like front foot forward. We had to be very offensive in our approach to customer success. And you know, this is a different selling motion than the sales side. If you just, you know, go at it from a we're going to sell to our competitors, you're probably going to like rub them or sell to our customers. You're probably going to rub them the wrong way. There's a lot of building that goes into it and each account is going to be a little bit different. You can't just do like a blanket campaign. Retain like maybe you can on the new logo side. So you have to use that cohort analysis. And then you need to have different funnels set up and you almost need to track all of your customers down these different funnels in order to push them towards that renewal and that expansion. And so our big funnels at Motive were feature adoption. So every, uh, CSM would have a book of business and we would start to understand where their respective accounts were from a feature adoption perspective. We reviewed that in a Friday meeting, just like we did on the sales side, moving all of your customers down that funnel. Within that, the tools to do that, the proactive value-add touches. All right, so everybody's using the product now. Next step is to give them even more value. And so these were, you know, not inbound but outbound touches to our customers to help them do more with our, our products. So we had key touches across all the accounts. We'd move them down the funnel there. And after we got feature adoption and these touches in, it was then that we could start to actually open up the aperture a little bit and go for what we call the customer success qualified lead. And we wanted to make sure that every account had a CSQL against it. So we knew that if a competitor did reach out to them, there was a little bit of an insurance policy against it. In other words, they at least knew our full scope of offerings. We were there first to share with them everything that we could do. And so we had a chance if it came, you know, time for a, let's say, a bake-off with a competitor in one of our accounts. So we were meticulous in making sure that every account you know, built upwards in the funnel from feature adoption to proactive touches to eventually CSQLs. And that served us really well. And the account renewal actually only almost became inevitable because as the customers went to expand, they would also lock in for a longer, you know, relationship with us or renew outright on that expansion. And that served us really well in locking out our competitors from our account. And so maybe counter to what you hear a lot in customer success, but I really believe that the best defense NCS is actually a great option. So really be proactive in moving your customers along those different funnels. All right, and then finally, the last double. Um, this is kind of interesting. So when you launch a new product or you go to market the first time, you always undersell, right? And as you get comfortable, or as you pass it into your CS organization, if you're really good with expanding and providing value to your customers, naturally what happens is you recoup all of that value, right? Your customers expand. And as such, your NRR starts to climb, you pat yourself on the back and you say, oh man, I'm, I'm so great. NRR is super high. But what happens, and you see this really when you, you start to have a lot of ARR and things at scale, is at the same time you recoup that value, you get very comfortable selling your product. And so the sales deals that come in at this stage, um, they're actually like full ticket price, right? It's less of a land and expand, um, it's more seats. The sellers are more confident selling. So now these new logos come in, they're fully baked, um, there's more ARR there, and you have less to expand, you have less to recoup. So you're not putting as much back into your NRR number. You know, adding to that, when one of these newer vintages of customers churns, it counts for more. And so what you actually see here is as you get really good, sometimes your NRR can draw down, right? Because there's less to expand and these new logos count for more. So you see your NRR can actually draw down even though you maybe have a great customer success motion. And it's in this dip that I like to think this whole motion of customer success comes together. Because if we started this conversation with finding product market fit, CS being an extension of the founders, it's as you dip, or at least for me, as we dip, that's where I resumed, or really got pulled into all of those conversations in our company around pricing and packaging, product, because we needed to come up with that second act. We needed to figure out, you know, how to pull up NRR through additional offerings. And so this whole motion of building NRR is as much a, you know, a CS thing as it is a company-wide initiative. And because, you know, really like that close relationship with the founding team, we're able to then continue to pull up NRR. So the whole thing comes full circle as you reach scale. Product-market fit really never stops. And it's, it's really important in driving a high NRR number. So I'm going to pause there. These are some of my learnings. I'm going to come off full screen now.

Yep. Awesome.

Stop sharing. Probably more content than I even realized was there. So thanks for sticking with me, folks. We can definitely do some, some Q&A now.

Yeah, I love it. We do have quite a few questions that are coming in, so we'll get to them and try and get to as many as we can. So tons of people are asking about the recording. If you go to our YouTube channel, so SaaStr— or sorry, youtube.com/saaStr— there's a live tab. You can see the recording there. So as soon as we wrap, that will be live if you want to rewatch or share with your team. We will also be posting the slides on SlideShare, so slideshare.net. /saster, you can check out the slides. All right, without further ado, let's jump into some questions, John. So first up, I think Brandon from the chat, do you want to unmute yourself and ask your question?

Can you hear me okay?

Yeah, yeah, I can.

Great, great, great presentation. Definitely appreciate the information. I had a quick question about the renewals. I was wondering if if the renewals, if they don't upgrade or if you don't upsell them, if they have the same impact on NRR. If they— I was just thinking if some customers are pretty much locked into your product and they kind of just renew just to not change, if it's much different as far as like an NPS score, for example. If that score is much different than a person who actually upgrades during that renewal.

Yes, maybe like a couple pieces there. So like, just, you know, mathematically, you know, a customer who doesn't expand isn't going to have as big an impact on your, your NRR number. But I don't think that's a bad thing. If your customer doesn't expand, you know, that's, that's okay. And, you know, sometimes even in this environment too, just getting the renewal outright is probably important, right? A lot of teams have maybe shrunk in size this year, and, you know, a full contract this year for, you know, let's say all of the seats is maybe smaller than it was last year. I think that that can be certainly a win in this environment. I do like to— you know, in, in a world where there is growth to be had, I think it should be something that you should really look towards. You know, I would say like the expansion in a lot of ways is, you know, a marker of that customer trusting you or wanting to trust you with more of their business. And so if they are willing to expand or take on more of your, your product, there's probably, you know, something to be learned there, right? You're building product in, in the right way. They're trusting you to date, with the service that you're providing and the product that you're providing. So I think like really look to that. There certainly is, from what I've seen, a correlation between high NPS and expanding customers.

But it doesn't have to be a goal for renewal to get this same impact.

I think it's probably contextual to where you're at in your business. I like to make it a goal for certain cohorts of customers. So going back to that cohort analysis, let's say you have a pocket of customers who haven't expanded yet. They haven't— and there's two types of expansion too, right? We can have just like seat type expansion, or we can have attach of new products. And so let's say there's this cohort of customers who hasn't attached our additional product. I always like to make it a goal to at least have that conversation with these customers around all of the additional value we might be able to provide them.

Really good. Really good. That's a good point. Thank you.

Yeah, absolutely, Brandon. Thank you for being the first to go.

He's got another question in the queue too, so we'll see if we can get to it. But first up or next up, we have Juan. In his SASTR hat. So let's see if you want to unmute yourself and ask your question. And then just to everyone waiting for him, sorry, Ryan, you're on deck. So I want to make sure we get to as many questions as possible. Go ahead, Juan. Love that.

Hi, everyone.

Juan with housingbase.io, wearing my SASTR hat that I got at the conference a few weeks ago. So thanks a lot, Jason, if you're on board on the call. We deal with a lot of high, high-ticket, 6-figure government contracts that has an attached SaaS agreement on a multi-year contract attached to it. So it's a pretty complex sales process, but we have a much lower volume of sales. So I guess my question is really around, should there be a different ARR threshold for transitioning away from this whole founder-led sales and CSM?

Yeah, I think that's a great question. Look, I think, you know, even when we were at scale at Motive, you know, $300 million in ARR, and we were, you know, locking in, let's say, like a Walmart or a UPS or like just a big enterprise, your CEO is always going to be involved in in those big, big deals, right? They play a role in it and there's a lot of learning that happens there. So I think like contextually to your business, you have to understand, you know, what is, you know, what does the sales cycle look like? You know, how big are the deals? What is required to get one of these deals over the line? But from like a scaling perspective, you know, you do want to make sure that somebody other than the CEO can sell your product. And I just think like, maybe like the lesson there is like, let's not hold it to absolute ARR numbers. The lesson is focus as much on, you know, the learnings that lead up to the sale as you do what happens after the sale. Because once they're a customer, you just, you're going to learn so much more about their needs, their wants, their desires, what happens inside the organization, the integrations that you never thought of in, in the sales process. And all of those things go towards, you know, finding that, that next level of product market fit. And so I would say like, you know, keep that in your mind in spirit, maybe than absolutes.

All right. Thank you for that one. Ryan, you're up.

Hi.

Thanks.

All good stuff today.

I got a lot out of it, so I appreciate it. We're in that, that first renewal phase, upgraded most of our initial clients that were either on paid trials for the first 6 months or have been on a a lower ARR, like $12,500 a month is what we started our first 3 clients on. They've all upgraded. We got a further look behind the window. We're realizing they're doing a lot of stupid shit. No, no pun intended. Excuse my language. And we're trying to capture the data that we're pulling in on these renewals. What would be the most important thing if I'm the customer success manager, head of sales, head of marketing and everything all together? What's the most important thing that I need to pull from, from these renewals that we can use for future AEs and SDRs?

So what I really liked to do on those first renewals, and I did this like, you know, even as we got to scale, is I— and you might not have like great usage data or maybe even like a full, you know, full set of what they clicked on, things like that. But like, just, just go back Look at that renewal, go into your Salesforce and look at like the exchange between your people and that customer over the course of time and like try to pick out what some of those like through lines are, right? They're always reaching out early on because they can't figure out X, Y, Z, or we needed to intervene at this point in time in order to like bring them back to the path to renewal. Start to just like gather what this looks like. And I would just like, I would go through account history and I would just like read up on that account. I would look at what our exchanges look like. I would try to find, you know, areas where we maybe messed up, maybe ticketing got higher, we transitioned to CSM, start to figure out what those through lines are. And then ask yourself, And this is something that I think we really need to do now. Ask yourself, you know, what are those things that are best done by a person? What are those things that are best done by the product? What are those things that are best done by maybe a drip campaign or a process? So we were always going back and doing that motion. And so as we were, you know, going through our renewals, start to understand lightly what the customer journey looks like and trying to just make that whole path to renewal a little bit more seamless by, you know, certainly people, process, and automation. So that's where I'd start. If you have product data, really lean into that. I think that can be super valuable as well. Awesome. Thank you.

Another great question. They had to jump, but that is kind of a follow-up to that, or I don't know if you know this or if it's different at different stages, but what are benchmark annual renewal rates? For example, if you renew at 85%, is that high or low?

Well, okay, so I sometimes— and I see Jason on, so you're probably going to be better served at this. I think like you really, really have to, you know, think contextually, like what your business looks like, and the renewal rates, the NRR rates, the GRR rates are going to be contextual. To that, right? If you are a long-tail SMB business, you're certainly going to have higher churn. More of your customers are going to, you know, go out of business. If you are enterprise and you have maybe a consumption-based component to your pricing, let's think like, you know, Snowflake on the high end of the spectrum, right? 150 NRR, 53 NRR, I think it was last I checked. You're gonna have, you know, just naturally because of how you package, because of the nature of the product, because of the segment of the market that you sell into, you're gonna have a higher net revenue retention number. For us, you know, at Motive, we had 130,000 unique customers. Half my customer base was like super long tail. We had, you know, there was times when that number would fall, you know, below 80%. We couldn't control it at times. As things went out of business. Trucking companies, small companies go out of business. So I'd say like it's contextual. There's, there's some great resources online as well. Just like I'm sure you can Google it, just type in like S-1 NRR rate and it'll show you what the retention rates were for a variety of different companies when, when they went public. You can kind of back into, okay, Shopify, less lower retention rate because long tail business, most go out of business. So I would say benchmark yourself against the segment of the market that you probably fit into.

Okay. I know he has a hard stop at the top of the hour, so probably time for just one more question.

You know what? Let me double check here. Let's run long. There's a lot of people on here. I'll just send a note right now.

No worries. We'll try and just get to maybe one or two more questions then.

But yeah, let's do it. This— I'm having a ton of fun and I realize I presented a lot of content today. This is the highlight of my day. So let's keep going.

No, it's great. People are loving the CS content, which is great feedback for us. But also just all of the slides I think are really, really useful as kind of a playbook for people to take going forward. So comment from Jane, this is amazing. She wants to know if you happen to have stats for an SMB SaaS, maybe a future blog post or future presentation, but maybe kind of walk through a little bit if it changes at all.

Yeah, you're gonna, well, you know, you can have great retention in SMB too, but I would say like Google, what I said to Google a moment ago, I think like the other thing that you like really probably wanna focus on is your margins as you get into SMB. And so not talking about retention, but you know, most of what you're going to read online about customer success, I would say, is tailored more towards like mid-market and above, right? As you get into SMB, you need to do the same things, right? Your customers, you know, they need to onboard well, they need to get to those points of value in your, your product. They need to renew, you want them to expand, but the how to get there is probably a little bit different. And so, and, and think about this, every time you add a person into the mix there, you're eroding the margin, right? If they're only paying $500 a year or $5,000 a year, that's an expensive touchpoint, right? So just use those things sparingly. Not to say that you can't use them, but your model probably looks a little bit different. So I would say as, as I get into SMB, I really am mindful and and thoughtful about like the cost to serve the customers in those segments. And again, like caveat that all with, you know, early on, you got to, you know, everybody says you got to do things that don't scale. I think that's, that's okay. But if you can make the muscle memory early that, hey, we build things into product, we're watching this in the way that maybe would be watching a CSM. I think that can serve you well over the course of time.

Yeah. Hey, it's Jason. Just for fun, one challenge I'll add when I've thought about this a lot lately, right? Because I think the existential challenge for SMB SaaS is getting to 100, right? Especially in that longer tail, like you talked about motive. Like if you don't do something, typically it won't happen, right? If you don't do something radical, too many small businesses go out of business, too many. You just can't get— you have to do something radical. But what I've actually seen is to do something radical, the opposite, which is a lot of staffing. I've actually seen a lot. The number one most important is onboarding. If you don't onboard the SMBs, they all churn, right? They churn, right? And then you have to do a— and then if you do have the 80% retention like you had, Motive has enough scale, you can calculate, okay, what if we put a human being in? Will it stay at 80? Well, then just do a wiki, right? There's literally no point. If you put a human being in and you got to 88%, you can start to figure out exactly how much to invest in that long tail, which is where I think people get wrong. They underinvest because they don't pause and see, okay, if I put humans into this equation, how does it move the needle? Because in the enterprise, it's sometimes harder to calculate. It's so slow, you don't know if you put humans into the equation if it'll move the needle. The S&B thing, you can run this experiment in one quarter, and I'll tell you the output For the folks that I work with that are only SMB, not like Motive, they have nothing larger and they are relentless about this. They oddly enough end up with success teams larger than their sales teams. This is the non-obvious learning for me. Their success teams are larger than their sales teams, right? And that's in— but that's because they're hunting 100% NRR from truly small SMBs. So I'll shut up. Just one fun learning. I'll let you go.

More. I know, I agree. I think the roles in that maybe look a little bit different sometimes at times, but without a doubt that I see a couple Moda people on, on the call and they'll know how we went about that with, with people as well. Love that.

Okay, one last question, and apologies if we didn't get to your questions, but John, maybe we can send them to you after if you want to do a blog post or like I said, future Workshop Wednesday in the future. Mohammed wants to know how critical customer segmentation is and when is the right timeframe to visit or revisit throughout the triples and the doubles journey?

That's a great question. I think like to go back to what Jason was saying, I think segmentation is like very, very important. Yeah, there's, you know, if you're doing an enterprise motion on a very small account with maybe the potential not to grow very big, you can maybe build your processes in, in the wrong way. I think it's like, yeah, it's important to, to segment maybe not where customers currently are, but maybe where they can get to. I think that's important part of your motion as well, especially if you want to capture, you know, a higher net revenue retention number. One of the advantages that we had at Motive was we knew the TAM potential for all of our accounts. It was publicly available data. You had to post how many trucks you, you had in your fleet by law. And so I always knew that, okay, if we were, you know, we had 25% of this fleet business, there is 75% more to go. And so we would staff accordingly to make sure that we supported that. That customer and their growth. And there was actually a really big like link to our sales organization on that as well. And you had to make sure that, you know, your land and expand motion all fit together well. But yeah, segmentation is very important. Also, like, I'm a big fan of like micro segmentation as well. We talked about cohort analysis, right? You might have all customers that are similar, ARR potential size, they fit in mid-market or enterprise. But within that, I like to do like that cohort analysis where you can find these small pockets of customers, let's say customers who aren't using a particular feature. So cohort analysis, segment analysis on that, and use that not necessarily to align reps to that book of business, but use it to align rep activities to that specific need in this pocket of accounts. Accounts. And so that's, you know, oftentimes like we'll create general playbooks, you know, things that happen, need to happen on every account. And then you also create playbooks that are more like intervention, like so you find a pocket of customers who need to do this thing that we know correlates high to renewal. Okay, here is the talk track for this, here's the content for this, here's how we go about bringing them, let's say, back to center or to look like the rest of our general population.

Let's end on that. Super appreciate your time, John, and just sharing all your expertise and some of your insights. And thank you all for joining. So we will be back next week. We did share the Four Steps book as well that he mentioned, the link in the chat if you want to check that out. John, how can we learn more about your event coming up in November?

Oh, okay, cool. Thank you. Yeah, so it's in New York, November 9th. It's the San Francisco Customer Success Meetup in in New York, and just go to eventbrite.com. So type into your Google, uh, Eventbrite SF customer success meetup New York. We've got a pretty amazing, uh, we've got Alex Conrad, senior writer at Forbes. He does the Midas List. He's our fireside chat. And then we have great leaders from mParticle, Toast, and Datadog. So it's gonna be awesome. Yeah, hope to see you there. So sign up.

Thank you. Someone just dropped in the chat. Thank you all. We will see you next week for our next Workshop Wednesday series, and thanks so much, John, again.

Really appreciate it. I'm honored. Take care, everyone.