Has your CFO asked about your plan to “be more efficient?"

Customer Success is the only department that grows at (almost) the same rate as overall revenue growth. Sales and Marketing scale with the amount of new revenue acquired, Product and Engineering scale with feature and bug goals, and G&A scales with company headcount. Unfortunately that leaves CS as the CFO’s favorite target for budget reductions.

What’s worse is that, while Product, Engineering, Sales, and Marketing can argue for additional budget that leads to increased revenue or engagement, Customer Success is tied to financial metrics like “revenue per CSM” or “Customers per CSM” (efficiency metrics). 

It’s time to flip the conversation from being one around efficiency to one about how the company can invest more heavily in Customer Success to increase revenue. We’ll outline how to do that here, from starting with an understanding of where the CFO is coming from to creating an expense and forecast spreadsheet. 

Short on time? Here’s the TL;DR:

  • Your CFO wants you to care about Cost to Retain Revenue. 
  • To flip from  “drive down costs” to “invest more in Customer Success” you must quantitatively show how investments in CS increase both revenue and profitability. 
  • Use this excel sheet as your starting template budget conversations. 
  • Be prepared for the 5 most common “drive down costs” questions your CFO will ask you.

1. Empathize with the CFO

The Board and the CEO hold the CFO accountable for profitability and (in some cases) overall company growth. Those numbers are difficult to control, so the typical CFO manages a suite of other metrics that allow them to control both profitability and growth.  If a Customer Success leader demonstrates a deep understanding of the underlying business metrics combined with a “company before department” attitude, they’ll build a strong relationship with the CFO at any stage of growth.

At fast-growth companies, the CFO focuses on new revenue acquisition, caring less about CS which is a very small percentage of overall expenses.  

At mid-growth companies, the CFO focuses on the efficiency of the CS team and probes for ways to reduce costs.

At slow-growth companies, the CFO is hyper-focused on CS as the main lever for sustainability and company growth. 

In SaaS, typical metrics include cost to acquire a customer (CAC), lifetime value (CLTV), profit margins, renewal rates (NRR, GRR), OPEX, lead funnels, and many more. These metrics are owned or shared by different departments.  Improving these metrics directly impacts the company’s ability to make money -- and that’s what matters most to the CFO. 

For Customer Success, CFOs love the cost to retain revenue.

2. Understand how to leverage "Cost to Retain Revenue"

So even if they don’t say it directly, the number one metric the CFO wants you to care about is the cost to retain revenue. The calculation is: 


Total CS expenses (people, tools, services)

Total $ managed by CS


Most Customer Success teams' cost to retain revenue is between 5-15%. Meaning for every $1 of revenue, the company will spend $0.05-0.15 on Customer Success expenses. 

The CFO wants to see a decreasing trendline on the cost to retain revenue over time—again, that’s one of the levers they’re pulling to make sure the company becomes healthier. And they want you to be a partner in helping the business reduce this cost over time.

Depending on how effectively you use the framework below, you’ll end up with a budget equal to one of the following:


CS Business Planning for 2021



The CFO reduces cost to retain revenue (e.g. 15% to 13%), then multiplies that rate by next year’s projected renewal revenue. So if you plan to renew $10M in 2021, your budget is $10M x 13% = $1.3M. If you end up with this number, you’ve failed in negotiating.


You commit to increasing renewal rates, enabling you to hit the 13% cost to retain but with more budget. So rather than committing to the $10M renewal revenue number above, you instead commit to $11.5M. Your 2021 budget is $11.5M x 13% = $1.5M.  


You commit to increasing renewals, including upsells and cross-sells but it means increasing the cost to retain to 16%. So rather than committing to the $10M renewal revenue number, you instead commit to $13M. Your 2021 budget is $13M x 16% = $2.1M. This is an $800K budget increase over the CFO’s desired number, but an increase in revenue of $3M, an almost 4x return on investment.  

Pro-tip #1:  Calculate your own cost to retain revenue and make sure it aligns with the CFO’s calculations. 

There’s a chance your CFO could be bundling in other costs not included in your number including CS team benefits, paid time off, travel and entertainment, services, and tools. The CFO might include the cost of Customer Support in their calculation when you’re not. They might look at GAAP revenue managed, not ARR managed.  Catch these misalignments early. 

Pro-tip #2:  Define cost retain revenue calculation for each business segment (SMB, Mid Market, Enterprise). 

You can show the CFO which segments need new investments and which segments are likely to produce the most growth.  For example, the CFO will expect ongoing investments in automation via a pooled CSM or tech-touch model as the company scales.

Pro-tip #3: Get clear about when the budget is available

If you get new budget in December, does that mean on Dec 1 or Dec 31?  Are ramp times for CSMs built into the budget model?  

Pro-tip #4:  Get credit for total revenue managed, not total revenue renewed. 

Both new customers AND customers that churn need CSMs to manage them. For example, an account that churns on 12/31 needed a CSM for the entire year! A simple rule of thumb is that CSM costs should be budgeted for 50% of annual churn revenue.  


3. Build a annual revenue and expense forecast

Use this excel sheet as your starting template for building a revenue and expense forecast. 


Customer success expense and revenue forecast plan


How to use the CS Revenue and Expense Forecast Planner:

Step 1: Fill in your CFO’s forecast in yellow, including:

  • Starting ARR at the beginning of the quarter
  • Net Retention Rate (NRR) forecast at the end of quarter
  • Total CS expenses

Step 2: Fill in your expected increases in green:

  • Your expected improvements in NRR
  • Your desired increase in CS budget

Step 3: Review the charts produced on the right side of the spreadsheet.

  • Specifically, call out the return on investment dollars highlighted in green

4. Be prepared for the CFO to ask these five Customer Succss efficiency questions

The CFO still cares about reducing the cost to retain revenue. Even while you’re showing them your plan to increase revenue and decrease the overall cost to retain revenue number, they’re likely to poke and prod to find other ways to cut costs. Meaning, they’re going to keep trying to shift the conversation from investing in Customer Success to making CS more efficient. 

Here are some “go-to” strategies they might use to steer the conversation, and how you can handle those questions to bring it back to your original focus.

1. “I need you to be more efficient next year, so where are we going to cut costs?” 

An appropriate response could be something like this: “I understand what you care about is making the Customer Success functions more efficient so that we reduce the cost to retain revenue. But reducing the cost to retain revenue doesn’t have to mean cutting costs. In fact, we may even want to increase the cost to retain revenue in exchange for more revenue and profit. I’m going to show you a few options for us to discuss.”


2. “I gave you $x budget for tools this year, where are the efficiency gains?”

The temptation is to respond to this question by examining the performance on “revenue per CSM” or “customers per CSM.” But that keeps the conversation focused on efficiency, and we want to shift it towards investment.  

In addition to showing the expense and revenue forecast you created, respond to this question by showing progress in areas of investment. Demonstrate how previous investments have improved overall business metrics, even if the cost to retain revenue remained constant. You might show improvements in: 

  • Net retention rates (renewals + upsells + cross-sells + expansions)
  • CPV, Health scores, NPS, or customer satisfaction scores
  • New programs launched (onboarding, training, operations and deal desk, etc)

Improvements in the above metrics will impact higher-level trends like the company’s growth rate, portfolio health, or profits—which are all trends the CFO cares about. They also demonstrate how Customer Success isn’t a cost center but instead a department that can drive overall business performance.

3. “What’s your long-term plan to get our cost to retain revenue below x%?”

The best response to this question is to position Success as the key driver of the company’s growth. 

There’s an inflection point in a company’s maturity when its growth rate falls below 100%. At that point, revenue from existing customers exceeds revenue from new customers, meaning Customer Success should become the most important lever to build a sustainable business.

If Customer Success is perceived as a cost reduction center, then the business will never invest the necessary resources to maximize growth and retention. For that reason, any discussion about the cost to retain revenue must include a discussion about investments for long-term sustainability and growth. Customer Success must seize responsibility for influencing and driving expansion revenue (upsell and cross-sell) which, combined with renewals, is called the net renewal rate by most companies.

In planning meetings with the CFO, present a plan that shows how Customer Success will drive improvements in expansion revenue. This could include things like adding account manager roles in Success, focusing CS Ops on expansion opportunities, partnering with marketing to drive better Customer Marketing programs, asking better expansion questions during onboarding, etc. Then ensure that Customer Success receives credit for the net renewal rate in the cost to retain revenue calculation.

Combining growth campaigns with cost to retain revenue is the best way for the business to both meet efficiency goals while also maximizing revenue and profit.

4. “How are you measuring high and low performing CSMs?”

This is another way to ask whether Customer Success is wasting money on low performing people. It's also another way to reframe the conversation around efficiency; the CFO is wondering if you can cut some budget out by releasing low performers without a significant impact on CS performance. 

Respond to this question by showing the CFO what your expectations and standards are for the team including quotas, renewal rates, activity levels, etc. Allow the CFO to challenge your standards (required to get buy-in), but also be prepared with strong responses about why each standard has been set as it is.  

Once the CFO agrees to your standards, and once you commit to holding team members accountable to those standards, you’ll remove this topic from the conversation.

5. “How are you going to handle salary increases for your top talent?” 

This is another efficiency question, only it’s more forward-looking. The CFO is thinking, “I know you want more budget/promotions for your high performers,” so they want to know how you plan to increase salaries while also increasing the team’s efficiency. 

What the CFO wants to hear is that you’ll increase salaries as people take on more quota. But since most of your team is already maxed out on workload, you’ll have to focus on ways to make each member of the team more effective.  

The right response is to show how budget invested in new tools, training, or processes will make CSMs more efficient—those investments will allow each member of the team to manage more customers as the business grows. Even small improvements in team efficiency spread out over a large team create substantial cost savings relative to the cost increases of salary bumps for top performers. 


CS leaders need to flip their conversations with Finance from being about efficiency to being about investing in Customer Success to drive revenue. 

Some takeaways on how to do that: 

  • This first takeaway is out of order, but that’s because of how critical it is: Budgeting is an art, not a science, so every company's budgeting process is different. Understand the budgeting process and make sure your model has the same assumptions and calculations as the CFO’s before walking into the pitch.  
  • Understand where the CFO is coming from. They’re being held accountable by the CEO, board, and investors for profitability and company growth. They manage a suite of metrics to be able to do that—each one is owned or shared by different departments, and they need you to care about the cost to retain revenue. 
  • Many CFOs will approach improving the cost to retain revenue by reducing costs. But if CS leaders can quantitatively show CFOs (with an expense and revenue forecast) how they plan to drive revenue with an increased budget going towards specific programs or hires, they’ll be able to flip the focus from “driving efficiency” to “investing more heavily” in their department. 
  • Finally, even after the CS leader has presented a plan for driving down the cost to retain revenue by investing in programs that drive revenue, the CFO will still want the CS leader to reduce costs. The CS leader should be ready for those questions and prepared to handle them in a way that shifts the conversation back to investing in Customer Success as a strategic revenue driver for the organization. 

In the end, we’re all in sales. Leverage quantitative data while telling a story, and make it easy for your CFO to advocate for you. 

Have you tried something that helped shift budgeting conversations towards investing in Customer Success, that's not included here? Tell me on LinkedIn

Thanks to everyone who contributed to and shared feedback on this piece, including Jennifer Dearman, Matt Myszkowski, Kristina Valkanoff, Andrew Marks (← If you want coaching on the above, talk to Andrew), Maranda Dziekonski, Alex Farmer, Jay Nathan, Jeff Breunsbach, Mike Pundmann, Tien Ahn Nguyen, and Nhi Ha Truong.


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