Jason M. LemkinCEO, SaaStr · Co-Founder of SaaStr AI, SaaStr Fund, Adobe Sign

Investing in Customer Success Managers: The Key to Startup Success

13 Dec 2023 · 1 min

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0:42

Jason M. Lemkin advocates for aggressively investing in Customer Success Managers (CSMs) in early-stage startups. He recommends ‘smothering’ early customers with attention and gives specific financial heuristics: aim for roughly $1M+ in ARR coverage per CSM (ideally about $2M eventually), pay CSMs much less than sales-commission rates, and use a 5% commission benchmark rather than 20–30%. He suggests that founders raise $5–10M to prioritize hiring multiple (e.g., five) CSMs to protect precious early logos.

Questions this video answers

About $1M or more in coverage per CSM; ultimately about $2M per CSM is the target.

About 5%.

Raise roughly $5–10 million and hire about five CSMs to protect early logos.

Chapters

We all learned that you want to smother your early customers with love. Like, and eventually you have to align around something like a million or more in coverage per CSM, because it's too expensive, because you can't pay them 20 or 30% of the renewal rate. Like, you pay a sales rep, you'll go out of business. You have to pay, like, 5%. So if you think about 5% and a salary later, you have to get to about 2 million per CSM. But if I had any venture capital today, and all the founders like me that are doing their next startup, they're all loads loading up on CS. They raise that 5 to 10 million, and the next hire you make is, I want five CSMs. I just want these early logos. Like, I don't want to lose them because they're so precious.