Customer Success: Unlocking Growth from Existing Accounts in SaaS Companies

Demand for Customer Success leaders grew substantially in 2015. With SaaS businesses increasingly looking to drive growth through retention and account expansion, the Head of Customer Success has become a critical hire for every SaaS company.

The fastest growing SaaS companies rely more heavily on generating revenue from existing accounts than their peers, and an effective Customer Success Management (CSM) team can maximize the value of current customers by assuring renewals and driving upsells. According to the 2015 Pacific Crest Survey of Private SaaS Companies, for companies above $40MM in revenue, the top 50% of fastest growing companies generated 37% of new ACV from upsells to existing customers. In comparison, the bottom half of companies in that revenue range, or the slowest growers, received only 27% of new ACV from upsells. While larger SaaS companies have always tended to rely more heavily on revenue from existing accounts, the 2015 survey found that companies that derive a larger portion of revenue from their current customers are growing faster than their counterparts regardless of company size, suggesting that CSM can play a crucial role earlier in a company’s life cycle.

In addition to accelerating growth, customer success can have a significant impact on long-term profitability, as the cost to add revenue from an existing customer is a fraction of the cost to add revenue from a new account. The Pacific Crest Survey found that customer acquisition cost (CAC) for revenue from an existing customer is only 24% of CAC from new customers.

Despite the impact that CSM can have on growth and profitability, many SaaS companies have yet to implement the function at a high level. In a recent survey of 125 CSM professionals, only 35% reported that their Head of Customer Success reports directly to the CEO.

In the Fall, JM Search co-hosted a summit on customer success with Sapphire Ventures, which produced a number of insights from leading SaaS companies on how CSM is implemented and executed across different organizations. In a survey of attendees, 61% noted that their customer success leader reports directly to the CEO. While this indicates a positive trend towards elevating the place of customer success within organizations, there is still significant room for growth.

As CSM becomes more widely recognized as a revenue generating function, the Head of Customer Success will emerge as a standard part of every SaaS management team. Redpoint Ventures’ Tomasz Tunguz has suggested that CSM teams can generate more revenue than sales teams. SaaStr’s Jason Lemkin has stated that “customer success is where 90% of the revenue is,” and in the book he co-authored with Aaron Ross, suggests that customer success is 5x more important than sales. Companies that have exceptional CSM teams led by world-class Heads of Customer Success will outperform their competitors in 2016 and beyond by effectively unlocking revenue growth from their existing customer base.