How CSMs win with the 80/20 principle
I haven’t met a single CSM who complained about idling times.
But quite often, it’s the opposite of working long hours with little to no breaks.
Followed by a high degree of exhaustion and low impact on top.
A helpful mindset and tool to spend less time, drain less energy, and create better results is the 80/20 principle.
In today’s episode, I’d like to show you 3 effective ways to use it to your advantage.
Common wisdom says that 80% of revenue in SaaS companies comes from only 20% of customers.
The logical consequence would be to spend 80% of your time as a CSM with those.
But does that really happen?
Isn’t it more like you spend 20% with them and 80% on trying to fix bad-fit customers and getting mediocre-fits to lift off?
The first challenge when you are trying to optimize whom you spend time with is the lack of transparency about profitability.
It should not be difficult to source how much revenue they are paying but the costs are more complex.
Working with average costs of service is highly inaccurate.
Because the customers with low service costs are clouding those with high costs.
A simple example:
Customer A: Pays 100$ per month, costs 25$ to maintain
Customer B: Pays 100$ per month, costs 125$ to maintain
On average, you’d make 50$ per month but if customer B would not exist, it would be 75$.
Estimate the time you spend with every customer and add a price tag per hour (you can find helpful tools here).
This is not a science research project so working with approximations is fine.
Once you uncover where you are overinvesting, start shifting your focus toward ROI.
Spending your time with the right customers is great.
But not if you are wasting it being busy with doing “stuff”.
80% of the things you do should go into offensive plays that add value for your customers and only 20% (or less) into reactive and administrative work.
There are many CSMs where the opposite is true and they spend most of their time firefighting, quick-fixing, and band-aiding.
The ugly truth is that most of it is self-inflicted by following bad habits like skipping discoveries, avoiding customer conversations, and not tracking customer results.
All of these bad habits lead to guessing and assuming and every time you are wrong, you are forced into reactive tactical responses under high pressure and limited time.
Needless to say that you should prevent that from happening at all costs.
So you should start running an internal audit where you measure the effectiveness of every service, input, and activity.
Eliminate everything that does not add value directly or indirectly and is not an internal requirement like creating a management report
Measure the success rates of your services and inputs regarding customers being enabled to complete specific tasks or solve valuable problems (more helpful tools here)
Add things that are missing in order to close possible gaps in the customer success journey
As a CSM you are wired to help customers achieve their goals.
Intuitively, you believe that the more you talk, the more valuable input you can provide.
But is that true?
One, if not the most important thing for helping customers to succeed, is to understand their business, its problems, its roots, and its resulting needs.
How can you do that if it’s you who is talking most of the time?
Spend your future customer conversations with 80% listening and 20% talking.
Ask open questions and let your customers do the talking.
Let them walk you through their work life in full detail.
I like to label CSMs as “business therapists” for their customers.
Listening more than you talk is also a powerful way to improve your customer relationships.
They feel heard and they feel that you genuinely care about their professional well-being.
And that’s how you build trust.
There are likely more use cases for the 80/20 principle.
But my intention was to give you a little push out of the door.
Give it a try and let me know how it turned out.