![]() ![]() How is the department sized? ARR? Jason Lemkin has a rule of thumb of one CSM for every $2M in ARR. WHAT TO LOOK FOR: In COGS if CSM’s do not sell in Sales (OpEx) if they sell.JOB TITLES: include directors, managers, and customer success manager.MARGIN: CS is included in your recurring gross margin.GainSight), regional user groups, promotional swag, etc. TYPICAL EXPENSES: wages, payroll taxes, benefits, customer travel, training, internal use software (i.e.WHAT THEY DO: number one job is to retain customers and identify potential customer expansion.They should be part of your expansion CAC. If they sell and receive compensation for ARR/MRR expansion, then I would code them to OpEx as part of the sales team. The coding of the CSM team is another common question. This team is typically compensated on gross dollar retention or even net dollar retention. They do not sell or hold a quota if we include our customer success team in COGS. The customer success team is tasked with customer retention. BOTTOM LINE: typically, employee-related expenses and travel.WHAT TO LOOK FOR: do they bill back travel? Are they hourly or fixed? Billable utilization? Backlog?.JOB TITLES: include field services manager, project managers, trainers, and implementation consultants.MARGIN: services is included in your services gross margin.TYPICAL EXPENSES: wages, payroll taxes, benefits, billable travel, travel, training, internal software subscriptions, PSA software, etc.WHAT THEY DO: implement and configure software and train customer on its use.Backlog is contracted services revenue that has not been delivered and invoiced. Key metrics for a PS team include billable utilization and backlog. If you sell into mid-market and enterprise customers, you are likely very familiar with the services concept (often called PS or Pro Serv). If you have a lower price point, self-service product, you might not have a services team. However, not every SaaS company has a services department. If your software requires any configuration, implementation, and training, then you most likely have a services department. Service departments are critical to the initial success of your customer. BOTTOM LINE: the support department is primarily employee-related expenses.WHAT TO LOOK FOR: just tech support or also onboarding? Sizing of the department based on call volume/other stats? Remote or HQ?.JOB TITLES: include support manager, technical support specialist handling level 1, 2, and 3 support.MARGIN: the support department is included in your recurring gross margin.TYPICAL EXPENSES: wages, payroll taxes, benefits, travel, training, internal software subscriptions (i.e., Zendesk), etc.WHAT THEY DO: inbound phone, chat, and web support for customer requests, issues, and bugs.If you are early stage where employees wear many hats, they may also handle customer onboarding. These questions could be “how-to” or reporting bugs in your software. The technical support department manages all inbound customer messages, emails, and calls regarding your product and/or services questions. Next, I’ll cover the common expenses associated with each of these COGS departments. Don’t let G&A be a dumping ground for department-specific expenses. I review all expenses by department with each close cycle to catch errant entries. Therefore, it’s important to be diligent on the monthly coding of expenses. ![]() ![]() The department leader must manage and be accountable for all expenses under their control. ![]()
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