Jun 9, 2023

Read Time 5 min

Customer Success and finance: 8 metrics to build closer alignment


Good sales teams typically get the budget, headcount and tools they desire because the function is tied to revenue. Finance understands this intuitively, so they are inclined to support budget requests that will help teams close more deals.

However, that’s not always the case for Customer Success (CS) teams even though they are often responsible for renewals and expansions. So said Randy Wootton, chief executive officer at Maxio and Alli Tiscornia, chief customer officer at ChurnZero in our webinar, “Finance & CS: Charting a path to profitability.”


CS teams communicate using a different language than finance. That barrier obscures finance’s understanding of how CS teams contribute to growth and profitability. As a result, CS teams often have to work harder to make the case for headcount, technology and even product requests on behalf of customers.

How can CS leaders address this challenge?

For starters, learn to speak the language of finance. This means more than merely being able to hold a conversation about math. It’s about using numbers to demonstrate the business impact of Customer Success to better align with finance’s priorities.

Research shows increasing retention by just 5% can improve profitability by between 25% to 95%.

8 metrics to position Customer Success as a profit center with finance

While sentiment-based metrics like Net Promoter Score® (NPS) and customer satisfaction are important, they don’t frame CS work from a financial perspective. CS team members at all levels would do well to learn about metrics that can better articulate the effect they have on churn, renewals, and expansions.

To that end, here are the metrics you can use to get started.

1. Annual recurring revenue (ARR)

ARR is the aggregate value of contracts that renew yearly. It can also be calculated by multiplying the monthly recurring revenue (MRR)—that is the total of contracts that renew monthly—by 12. Some experts recommend using one or the other based on the time period that best matches your business cadence.

How it helps alignment: CS leaders should articulate recurring revenue as it is associated with individual CSMs—like a book of business. This will help the finance team relate proposed investments aimed at supporting renewal with business growth.

2. Customer renewal rate

Research shows increasing retention by just 5% can improve profitability by between 25% to 95%. This is why renewals are so important.

Your customer renewal rate is the percentage of customers that renew their contracts within a given contract period, such as a fiscal quarter. This metric illustrates how well the CS team is performing and can help refine renewal engagement strategies.

The metric is calculated by taking the number of customers who renew at the start of the contract period divided by the number of customers up for renewal at the end of the contract period—and multiplying by 100. A healthy benchmark is a 95% renewal rate in a given period.

How it helps alignment: CS leaders should think beyond customer logos and describe this number in terms of revenue in play.

3. Gross revenue retention (GRR)

GRR illustrates a company’s ability to retain customers. It is calculated by taking revenue (excluding expansions) and subtracting revenue churn caused by expirations, cancellations, downgrades, or discounts. A healthy GRR industry benchmark is 80-85% while high-performing SaaS companies often reach 90%.

How it helps alignment: Take a close look at any discounts or downgrades the CS team uses to obtain a renewal. Discounts chip away at profit margins, so it’s important to try to understand the root cause and look for trends. This is very useful for planning CS resource allocation.

4. Net revenue retention (NRR)

NRR is different than GRR because it includes expansion revenue, such as selling additional seats or expanding to another division within a large organization. It measures the CS team’s ability to not just retain customers, but to expand the amount of money those customers spend with you. A healthy benchmark is 100% NRR or greater.

How it helps alignment: Finance will be thrilled if CS leaders can forecast expansion opportunities proactively. This will ward off a target expansion number that finance comes up with—which you then have to go figure out how to meet.

Financial and operating metrics by ARR

5. Churn rate

The churn rate is the rate at which you lose customers or revenue within a certain time, usually monthly (MRR) or yearly (ARR). It’s calculated as the number of customers lost at the end of the period divided by the number of customers at the start of the period.

How it helps alignment: CS can provide answers as to why customers are churning. Was it a competitive steal? Did pricing go up too far? Are their features missing the customer wanted? These insights will inform resource adjustments to reduce churn.

6. Customer acquisition cost (CAC)

The churn rate is a good segue to address CAC. This is because CS teams tend to be oriented on renewals and renewal periods, but churn can happen in onboarding too. Since SaaS companies often have a payback period, if a customer churns in onboarding, you haven’t just lost revenue, the company is also taking a loss.

CAC is the sum of the total marketing, sales and service spent in the previous period (month, quarter or year) divided by the number of new customers won in the current period. As such, CAC helps define the payback period.

How it helps alignment: Most CS leaders won’t know what the CAC is, but the finance team will, so this is a relationship-building conversation. Further, it supports your case for more actions supporting renewal and expansions.

One persuasive technique is to compare expansion CAC to new customer CAC. This is because the probability of selling an expansion to an existing customer range is between 60% and 70%. That’s much higher than for new sales, which have a range of between 5% and 20%.

7. Customer lifetime value (CLTV)

CLV or lifetime value (LTV) is the average recurring revenue per customer multiplied by the average customer lifetime. It’s difficult to provide broad benchmarks because these metrics vary based on contract size, CAC and average lifetime.

How it helps alignment: This ensures CS completely understands the payback period. It also illustrates why certain CS actions or resources are necessary to ensure customers stick around beyond that time frame.

8. CLTV:CAC ratio

LTV and CAC are interdependent and expressed in a crowning metric called the CLTV:CAC ratio. This effectively compares the lifetime value of a customer with the cost of acquisition. It is calculated by dividing the LTV by the CAC.

How it helps alignment: This is one of the most important metrics because it aligns both finance and Customer Success with the customer journey.

Know your numbers

Understanding how finance measures the performance of teams and the wider organization is the first step to forging a closer alliance. If you want finance to take your budget requests seriously, know your numbers and be ready to back them up. Use a common language to explain your logic. The more comfortable finance is with the metrics behind your plan, the more confident they’ll feel supporting it.

During the webinar’s Q&A session, Randy and Alli covered a wide array of topics including what to look for in a churn analysis and what are the pros/cons to a usage pricing model. Get answers to these questions and more in Maxio’s Q&A webinar recap.

Visit and bookmark our glossary of SaaS and Customer Success metrics to explore more terms, metrics, and formulas that every CS leader should know.


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