How and why should you build a Customer Success Budget?

Introduction

Creating a budget is an important activity for the overall success of any business.

It enables you to oversee and comprehend the short-term and long-term expenses and tightly manage the financial performance.

Working on the budget is one of the most crucial tasks businesses have at the end of every year.

However, when it comes to customer success, budgets are often overlooked, especially in small-scale companies.

To become a successful CSM, you need to always be aware of the financial implications of your decisions and plan the budgets accordingly. This can be a great way to allocate resources towards specific projects and initiatives, plan out your customer success activities, and set task priorities.

The Importance Of A Customer Success Budget

A dedicated customer success budget is crucial for increasing customer satisfaction and nurturing them for long-term loyalty.

It ensures that resources are allocated for essential activities such as onboarding, training, and proactive support.

By investing in these areas, companies can improve their customer retention, reduce churn, and focus on driving growth through upsells and renewal.

A well-planned budget also supports the development of tools and technologies that streamline customer interactions and provide valuable insights.

A robust customer success budget empowers the team to deliver exceptional value, strengthen relationships, and align their business initiatives to the overall objective of the company.

Steps To Follow To Plan The Budget

After working on multiple budgets, I have developed my guidelines to set things in motion.

Read on to discover the steps that I follow for planning the budget:

Step 1: Set Goals/Targets

This is the 101 step for budgeting. A budget should be designed keeping in mind the organization’s overall goals and mission for the subsequent year. It’s important to align them together well in advance.

Step 2: Identify your Income and Expenses

As a team, you need to look at what is going to be your revenue contribution and what you need to spend to make that happen.

Step 3: Distinctive Needs and Wants

Every team has a requirement that is a must and would impact the business immediately. Then again, some requirements are futuristic and long-term. Always keep them separate while working on the budget.

Step 4: Design Your Budget

Create a template for the budget so you can track the performance for each allocation, and know exactly when you would need capital.

Step 5: Put Your Plan Into Action

As soon as the year starts, put the plan into action and try to stay as close to ensure that your finance is managed well.

Determining The Source Of Your Funding

When discussing budgets for customer success, a question may arise which budget will cover up these costs?

And will it affect our existing financial plans?

Allocating funds might shift resources, but it does not mean that any department will suffer.

Allocating a budget for customer success leads to a bigger overall budget for all the areas for the future due to its role in driving revenue growth.

There is an ongoing debate about whether we should fund customer success from the cost of goods sold or sales and marketing reflects the dual nature of CSM responsibilities.

Tasks like training and support are often taken under the cost of goods sold while renewal and upsell fit better within sales and marketing.

With no one-size-fits-all answer, different companies adopt various funding strategies.

Typically the primary sources include :

1. Revenue Allocation

A portion of revenue is set aside specifically for customer success initiatives, reflecting its strategic importance in driving growth and retention.

2. Departmental Budget

Customer success may receive funding from the dedicated departmental budget, which is allocated based on projected needs and departmental goals.

3. Investment In Growth

Some organizations treat customer success budgeting as an investment in growth and allocate funds to it from growth and expansion budgets, aiming to enhance customer satisfaction and drive future revenue.

4. Cross-Departmental Funding

In some cases, customer success budgets are supported through cross-departmental funding, where different departments contribute based on their needs and interactions with the customer success teams.

Defining Your Customer Success Goals

Customer success cannot work in isolation, it is a company-wide effort.

The question that which department should be involved in customer success is a non-starter, every department has a role to play.

The CS team should have initiatives that drive success for the company. The primary goals for your CS goals should be the same as the objective that your company has set for itself.

By establishing clear goals such as reducing churn, improving time-to-value, and expanding revenue, you ensure that your budget supports initiatives that directly contribute to these targets.

This targeted approach helps in prioritizing expenditures, optimizing resource use, and measuring the impact of CS investments.

It also ensures that every dollar spent is strategically contributing to the overall impact and success of the business.

Here’s how being prepared with a budget helps in streamlining CS ops:

After conversing with numerous finance professionals from tech start-ups, I discovered that they’re most interested in the overall human resource budget, sales and marketing budget, product development and R&D budget, and other general expenses. Given that these departments consume a majority of the budget, to some degree, I can understand this prioritization.

However, with SaaS driving the tech start-up economy, it’s also essential to dedicate finances to the customer funnel.

Without setting up an ideal budget at the end of a fiscal year, you can’t expect your management to fund your projects and help you with your vision for customer success.

Additionally, it will aid in the proper planning and implementation of the respective projects. Planned spending will result in a cost reduction, and will allow easy comparison of projected and actual results and performance evaluation.

Bonus Tip for CS Teams: Keep this checklist handy while working on the budget

• Payroll cost (for new and old employees)
• Internal Training (domain-specific training and/or role-specific training)
• Customer Training (Feature-specific training or overall product re-training)
• Attending conferences (it’s important to see what others are doing)
• Software implementation (CS platforms, content creation tools, live chat tools, onboarding tools, etc)
• Travel costs for customer visits (travel is back again so budget for it)
• Marcom costs for QBR templates, renewal decks/leave-behinds, HTML emails
• End-of-the-year customer gifts/cards
• New initiatives (always keep budget for your ‘Wants’)
• Team building (to function like a team, you need to bond together)
• Incentives and bonuses (monetary motivation is simple and powerful)
• Team awards and recognition

This is by no means an exhaustive list, but it can be a starting point for anyone trying to design a budget for Customer Success. You can take this list and modify it to fit your needs by adding or removing headers as you see fit.

Hope this article helped you get the ball rolling for your next CS budget.

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FAQs

1. How does defining CS goals impact budgeting?

Defining clear CS goals allows for targeted budgeting that supports specific initiatives, helping to optimize resource allocation and prioritization of expenditures. It ensures that every dollar spent on CS initiatives contributes to achieving the key business outcomes.

2. What are some key CS goals to consider for budgeting?

Key CS goals for budgeting include reducing churn, improving time-to-value, standardizing processes, scaling CS efforts, expanding revenue, and raising customer sentiment. These goals guide budget decisions and align them with spending with business objectives.

3. How does aligning CS goals with the company’s objectives improve budget efficiency?

When customer success goals are aligned with the company’s objectives, it streamlines budget allocation by ensuring resources are directed toward initiatives that support broader business targets. This focused approach enhances efficiency and ensures that the investment leads to overall business success.