ChurnZero's You Mon Tsang on the link between onboarding & lower churn

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Patrick Campbell

Dogs are pretty important to me. I could never be with a spouse who doesn't like dogs. It would be an enormous, huge red flag. And while you may differ as a cat person who I probably despise, I'm just kidding. It's totally fine. Sort of. If I'm going to be in a committed relationship.

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Patrick Campbell

With someone, though.

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Patrick Campbell

They have to have an appreciation for the pups. At the very least, if she tolerates dogs, then it'll work. And fortunately, I'm happily engaged to a wonderful woman, Jenny, with whom I share an adorable dog named Sloane. She's Sloane, the SaaSs dog on Instagram. If you ever want to take a look. And to get to the point, though, well, dogs and baby SaaSs typically only come into play together with a dog friendly office.

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Patrick Campbell

Red flags are still something to look out for when it comes to operating your business. See what I did with that transition? Their high churn is obviously a huge indicator of a problem, whether for investors or prospective employees or just your business in general. When it comes to the health of your company. If a company has high churn, don't expect a lot of those right swipes.

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Patrick Campbell

Now, today's guest you must saying is the CEO of Churn Zero, a customer success software for growing SaaS and subscription businesses. In our discussion, we talk not only about churn but also who owns it and is responsible for mitigating it. You know, we love a good churn episodes. All that and more coming up next. For profit well recur.

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Patrick Campbell

It's Protect the Hustle where we explore the truth behind the strategy and tactics of B2B SaaS growth to make you an outstanding operator. On today's episode, Human Saying dives deep on churn. We talk about innovation in customer success, establishing a retention focal point, optimizing retention. What most companies miss with retention and who owns churn and expansion revenue?

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Patrick Campbell

Who are you? What are you guys do?

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You Mon Tsang

Yes, I'm Newmont's and I'm the founder and CEO of Churn Zero and we help SaaS businesses fight customer churn. That's awesome. Yeah, we saw the customer success professionals and, you know, help them understand their customers and are there account healthy or not lead them to the right customer experience. Right. And just do the right thing for the right time for them.

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Patrick Campbell

Yeah. And what I love about what you've all done besides the fight churn, I love that fight churn. You got to get one of those flight churn. I love absolutely. I what I love about you guys is that there was that kind of customer success 1.0, which was like the early stage of the market. What the heck is this thing?

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Patrick Campbell

And we're still kind of defining it. And you kind of, at least in my opinion, you're part of the second wave of like, okay, we kind of learn the wrong way and some of the right ways, and now you're like the evolution, but why do you agree with that? And to what is customer success now versus kind of the the loud marketing of that we've seen previously?

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You Mon Tsang

You always follow, you know, the folks who are there first. Right. And by the way, I've been there first. Yeah. All right. I've been in markets where I was first and I was just educating people all day, every day, like, you know, until I was, you know, sweating blood. Right. And and it's a hard job, right? It's rewarding.

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You Mon Tsang

Right. And there are folks who who've done that and it's remarkable. So one kudos, right? Because as the pioneers or the ones, you know, who did a hard job, why we got into the market was we saw that, you know, the first generation was really about dashboards and giving people more information. And, you know, like you and I have been in sales, marketing and sales and marketing.

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You Mon Tsang

People have this unbelievable technology to help them understand their prospects, drive them through the funnel. Right. Hit them with the right time, right. Score them right. And and then you close when you know and you have all this technology backing you up. And then once you became a customer, all that you wouldn't blind you. Okay, here's a dashboard, here's a pen write, here's an email, here's a file, go get them.

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You Mon Tsang

And so we just felt like, you know, a lot of the progress that, you know, the technology that was brought to bear on sales and marketing, you know, like, like who should get the best technology, the customers. Right? Like, you know, so so I think we brought sort of that mentality to that raising. How do we bring best practices around workflow, you know, about data by putting that data to use right in an automated way, you know, supporting the team.

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You Mon Tsang

It's not a new idea, but we're just we just brought it to customer success. So, you know, so what I'm seeing with customer success is, you know, it's still a new department, right? And if you talk to most of the VP's and the leaders there, they're first time managers, right? And so I think there's a lot to do around making sure they're going to be the best right at their jobs and they're going to have the best analysis and have the best insights that are going to do the best.

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You Mon Tsang

Right. So, you know, the most make let's make them the most professional department in the entire organization. Yeah.

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Patrick Campbell

I like how you put that, because one of the things that I noticed about some of the early software in customer success, it was as if and I don't mean this in a negative way, it's going to sound a little negative, but some of the early software was like, Oh, HubSpot, let's just copy and paste that and make it for customer success, right?

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Patrick Campbell

And it was one of those things where as it's it's a different as you kind of alluded to it, it's a bit of a different beast like in terms of like what the incentives are and what's necessary because it's not about the start of the relationship, it's about the ongoing relationship right. And that gets super complicated that you can't just like, you know, copy and paste the start of the relationship playbook.

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Patrick Campbell

And so where have you seen kind of customer success evolve? Maybe not from a tech perspective, but like I feel like customer success is always like the forgotten stepchild sometimes, or at least it was like you're seeing more and more brands take it seriously. But the issue is I see is like it's still fighting for budget. Like I know public companies that are trying to buy you guys and they're just still fighting.

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Patrick Campbell

And you guys, you know, you're not the cheapest thing, but you're not crazy expensive, right? And so it's one of those things where it's just one. Why do you think that is? And then too, like, have you seen that change or are you visioning that changing?

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You Mon Tsang

Yeah, I mean, that's right. You know, when I started a company, it wasn't clear, you know, that this was a thing, right? You know, it's like, you know, because we were betting on two things, right? We're betting on the growth of customer success. Right. Which meant that it's a real thing and it's growing. And then to we were betting that if you had customer success team, you would buy customer success technology, right?

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You Mon Tsang

Those are two things you were betting on. Yeah, right.

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Patrick Campbell

Which are fair assumptions, whether you have the data or not.

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You Mon Tsang

There's a gray area and the first one which is is customer success, I think. Right. Like if that didn't work out well, then we're just like a nice little company, right? You know, servicing a niche audience. So what I've seen is that I don't worry about that anymore. Okay, So the drumbeat of customer success being a thing, staying a thing is real, right?

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You Mon Tsang

So totally adored by VP sales, right? He's very observant. So he hits every booth at Tassler, right? So we're SaaS or now, right, when he hits every booth. And he said to me yesterday, he goes, You know, this is the first year where I see more vendor servicing.

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Patrick Campbell

Customer facing.

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You Mon Tsang

Customer, right? You know, post closed and pre closed. Right? So there's.

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Patrick Campbell

That's a really good observation.

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You Mon Tsang

Isn't that good observation. Yeah. So he's like, yeah. So he's like, okay, you know, because every year is like the sales and marketing, sales and marketing, so the marketing and then a little bit customer and this is a year he said to customer servicing companies and they've seen sales and marketing service and companies. So I just think the drumbeat is there and I think every year it gets stronger and stronger.

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You Mon Tsang

Look, I mean, in the end, if you're a public company, if you're really a public company, right, Yeah. 80% of your revenue is already baked in as it's like, why are you not devoting the vast majority of your spend on servicing those people? Right. Because the net new is as new is always that new was always sexy. But I mean, come on, you know, once you're once you're a public company, like that drives a smaller amount of growth.

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You Mon Tsang

And these guys.

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Patrick Campbell

Do. It's fascinating, too, because probably the reason there's those public companies that are still trying to figure that out is because they're still being run by like old school thinking like like we see that as well, where it's like getting someone who's like a four year old company to understand monetization, to understand churn, to understand these types of things in our spaces are like, it's a lot easier now.

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Patrick Campbell

The budgets aren't always great, you know, because those are smaller, younger companies. But the larger companies, it's almost like they're they're still being built out of like the SaaS 2.0 model, which got them there. But obviously what you can see there is and always will get to the next place.

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You Mon Tsang

And there's always momentum, right? Momentum. So I think that's. On why it's.

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Patrick Campbell

Marketing momentum are so powerful.

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You Mon Tsang

Yeah, just take a look at your average scale, your average person in charge, your customers. Yeah. And they tend to be a little younger. Yeah. They tend to be a little less experienced. Right. And so they just don't know how to pound the table as effectively. Right. And so it's just a matter of by design.

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Patrick Campbell

They're not like that either. You know, they're not the necessarily the hardcore sales guy or not.

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You Mon Tsang

Yeah, you're not right. But even so, like there's also a, you know, maturity level right to that. And so, you know, if I said if I said to you, Hey, Patrick, I want to hire a CCL, you know, can you help me all? By the way, I need someone with 20 years experience like, well, no one has access.

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You Mon Tsang

No one has 20 years experience here. Right. Well, you can find a Ciara with 30 years of experience. And so I think, you know, some of that didn't actually work over time. Right. So, you know, look, when ecosystems develop, you know, it takes time. And then as long as you feel like each year there's more is better and is stronger, then you can feel good about you can feel good about it.

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Patrick Campbell

When you're also seeing the pass and you see there's probably a really interesting framework. If we wanted to like study the rise of markets or the rise of roles, right, where there's a path where it's like, is this thing important? Yes. Okay, where does a budget come from? Then There's always a little bit of friction of like, why isn't this just part of this org rather than like its own org?

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Patrick Campbell

Then you start to see like, is there a path for that person to grow to an actual executive level? Because that's a thing that like, you know, what is that path for me succeeding as a, as a, you know, a contributor, right. And you're starting to see with customer success roles in some of these larger companies, the chief customer officer or whomever is ending up being the successor to like the CEOs, which you didn't see previously.

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Patrick Campbell

You also you always saw like maybe a CRO, maybe a ops person, and now it's like, I think we're in this age of customer centricity, which someone, you know, coined at some point, not us, but like that's why I'm very excited for your space. Basically. Yeah.

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You Mon Tsang

No, I think you're right. You know, you always kind of wonder like, you know, where are all the CEOs coming from? Like what? Past, you know, the shiitake right up the ranks. I would make a bet. Right? Like in 15 years, you go back and say, okay, all the the new CEOs that were minted in the last year, 15 years from now, like a lot of them will come up to the CTO ranks.

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Patrick Campbell

And I think the other thing that's that's a tailwind for you in this and this theory is the focus on net revenue retention, which is like all the rage, right? Like it's all the rage now and it's like, I know you're probably thinking this, I think this to very cynically of like, yeah, should've been the rage ten years ago, but like, it's.

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You Mon Tsang

Like, it's like, come on, like, I really just talking about this now.

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Patrick Campbell

Well, but that's how, you know, that's how markets go. But I'm kind of curious, like so first, maybe loosely, if not, this is a defining like net revenue retention. Why is it so important? Why do you think it's important now? Like what? What are your takes there?

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You Mon Tsang

So never any retention is really just taking all the revenue that you bring into a time period, right? Some people do it monthly, some people do it annually. But like just, you know, it doesn't matter, right? Like all the revenue that you sort of went into the time period with and then you are you turn some customers and hopefully not a lot you by your contract if your customers so they pay you low last for some reason but then you'll expand others right.

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You Mon Tsang

And then you'll upsell others and cross-sell others. Right. So within that cohort that you came in with, totally lose some shrink, some increase some upsell, some on the other side of that. Why when you did a calculation of what came out versus what came in is your net revenue retention.

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Patrick Campbell

So I just want to point out it's very rare a CEO actually understands definition. I almost was like, do I want to put them on spot? I knew you would know it, but it's kind of funny. I definitely ask people and they're like, Oh, which is like, I'm.

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You Mon Tsang

Basically the problem is it's not a gap. It's not a you know, exactly generally accepted accounting principles. So people do weird things, but within our anyway, Okay, So that's the first thing. Like, like I've seen people, I've asked this is like, well, how do you do know ours? And they do it some way. Well, I think.

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Patrick Campbell

It's because churn they like to there's lots of definitions of like there's a standard like churn definition and then people get creative, especially on the road to going public. And sometimes they should write like, I think if you have a very episodic type customer, you should kind of like handle that a little bit differently. But sometimes it's like this feels a little and Romney like when they do it.

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Patrick Campbell

But anyway, that's me saying.

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You Mon Tsang

No, no, no, I've seen is like you don't count churn customers you're an are like I don't that doesn't make any sense anyway so it's you know relatively simple. Are you keeping your customers and are you getting more from them. More from them? Yeah. And so it's become like you said, like it's all of a sudden the rage and it's like, whoa, it feels like it should have been there ten years ago.

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You Mon Tsang

And so I've been raising money for two decades, three decades now, to the point like when I raise money early on, you didn't talk about, you know, churn and retention until you got that term sheet signed. Right. And then you were going into due diligence thing. Well, by the way, you know how how are you doing? Yeah. And so it was always the last thing you talked about.

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You Mon Tsang

Right. And then it sort of started to slowly flow, especially with SaaS coming along like it got on your dashboard, right? And then it got to be like higher up in your dashboard, right? So it is interesting, but now it's a qualifying metric. In other words, I don't give a damn what else you're doing, how interesting your tech is, how much growth you have.

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You Mon Tsang

If your net revenue retention is poor, you're out. Okay, So it's a it's a top two metric that gets talked about in the first 15 minutes of every single conversation.

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Patrick Campbell

The other one being gross.

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You Mon Tsang

Like over one being writing about number one. Yeah. Okay. But if you have good growth and bad in our are like, they're like, bad.

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Patrick Campbell

Yeah.

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You Mon Tsang

Thank you. Why and why don't we talk when he makes it. Yeah. If you have great and R and I actually I think you know like if I had to choose like you know two companies huge growth bad and R decent growth great in R I would definitely would I would to do the latter right.

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Patrick Campbell

Ironically like fixing the growth part is easier it's not.

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You Mon Tsang

Easy. I mean nothing's.

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Patrick Campbell

Easier but.

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You Mon Tsang

Yes but think that this seems like a healthier comparison. Yeah. This is more of a foundational company that which you can actually build something on or this one still has some really problems to fix here. So yeah, it's what you're saying.

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Patrick Campbell

So why, why do you think this has been like has it been the fact that there's now just so much out there? This is like another way that they can judge what's good or bad. This is in this case, is it that the market just demands it? And we saw companies not be able to like, buy their way to success anymore.

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Patrick Campbell

Like why? Why do you see this as a level of elevated number now?

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You Mon Tsang

So I think this subscription economy has really been, you know, the key. So back when we used to sell, you know, in the on prem software, it was always the big chunk of the money came upfront and I got eight, 15, 18%. You know, I made this fee every year, right? So I really cared about selling into first thing and then the other thing.

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You Mon Tsang

Okay, 15 80%. That's great. Of course I want, I want that. But man, it's nothing compared to year one, right? And oh, by the way, if you didn't use it now. Okay, whatever. Like on a shelf. Yeah. So I mean, I think that was sort of, you know, and that mentality drove software business, grew the software biz, made it huge.

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You Mon Tsang

Microsoft, whatnot. And I think that has so much momentum in the way we thought about new sales versus customer sales. It took a long time for us to finally, like woke up, you know, you wake up and realize what, No, that doesn't count back discounts, right? Because you had to renew your customers every month or every year however you do it.

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You Mon Tsang

And so it just became slowly, slowly, slowly became obvious, I guess. Right. So it is weird that it took so long, but now it's here until a new model comes along and a new business model comes along. I think, you know, ours is definitely here to stay.

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Patrick Campbell

It's kind of funny, like I have not raised I've been involved with raising money and with other companies. I've worked for it, but I haven't raised personally. You've raised a lot. We've at least noticed because we oftentimes talk about the like the harder, higher impact growth stuff, right? You've seen our content and you write a lot about churn, which I would argue is like the same thing, right?

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Patrick Campbell

It's like, this isn't the new sexy TikTok campaign or like the new sales model or the new way of look at sales. It's very much like the stuff that's a little harder. It's not a lot harder, but does have the impact, right? And I think what what I've seen is whenever there's a little bit of a market like dip, like whenever like, oh, it's, you know, and you see this in TechCrunch, like, oh, the valuations are going down a bit, that type of thing, which is it's been a while.

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You Mon Tsang

You seen that last year, right? Yeah, yeah, yeah.

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Patrick Campbell

Last year because everyone freaked out. Everyone was like freaked out for at least like a month and everyone's like, We're going to go.

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You Mon Tsang

Yeah.

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Patrick Campbell

But the thing is, whenever you see that, you start to see like, Oh, what are your unit economics? Kind of, Oh, that's right. And then all of a sudden when we get to a better market, it's like, Oh, interesting. We're we're just going to go back to just what is your growth? Right? But this is the first market where at least from a raising perspective, it seems like a little nuts, Like valuations are really good, right?

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Patrick Campbell

Like to the point where some people I know who raise cash like this crazy, they were in a really good market for raising money. You're hearing about net dollar retention. Obviously. Why do you think that is? Like, is it is it just because, like everything you just said, like it does that context I gave about the raising money because it's sad to talk about like the VC side of this, but it's important for our ecosystem.

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Patrick Campbell

And so I'm just wondering if they they discovered like that's where the multiples are coming from and so therefore they're going to lean into that hard anyways.

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You Mon Tsang

Yeah, you know, I think like what becomes obvious is, you know, like now I've been on on the sales and marketing side for many years, right? And you know, at some point, you know, chasing that huge growth year over year over year, especially on a bigger and bigger base at some point becomes super hard. And then if you're so if you're losing, let's just say, you know, your your team has net revenue retention of hated by every dollar retention that revenue retention break we're talking about the same thing although dollars vary us so just come on man you got to say revenue anyway so you say net your retention anyway so I think you know

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You Mon Tsang

so if you're losing 20% of your base every year, so guess what? Your sales team has to recover that 20%.

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Patrick Campbell

And then so and.

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You Mon Tsang

Then some grow, right? And so if I'm asking myself team to say, okay, well look, next year I want to grow 20% right? Next year to grow the company 20%, that's a great growth number. See us is going to lose 20. Okay, you got to get 20. So I have to grow 40, right. Just to make the. Matthew Yeah, but if you're saying, oh we're going to retain 100%, oh no, we're going to get 105%, you know, we're, we're going to expand then sales has only grow 15%, right?

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You Mon Tsang

And so therefore, like this, VCs know because sales is hard marketing is hard, that's a lot.

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Patrick Campbell

Harder. And it was.

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You Mon Tsang

Minority that was like growing. 40% is a hell of a lot different than growing 15%. Right. To achieve the same thing, which is a 20% net growth right. So I think it's just I think it's just math.

00;18;38;07 - 00;18;38;22

Patrick Campbell

People get it.

00;18;38;22 - 00;18;41;22

You Mon Tsang

Someone just someone just finally did the damn math. Yeah.

00;18;41;22 - 00;19;08;21

Patrick Campbell

Yeah. So we were doing the math before of establishing like what net revenue retention is great. I'm on board. What do I do? How do I, where do I optimize like this? Imagine we've analyzed each piece and we know where each piece is. Let's assume that like there is. Well, maybe I'll ask this. Like, is there oftentimes one area that's a lot more obvious to start with and others.

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You Mon Tsang

Be a little worried about, you know, how nrd drives your behavior? Okay. You know, because sometimes you it's sort of you read the press and you're like, oh, my goodness. Like Snowflake is doing 160% and Slack is doing 140%. And these guys are there. So know what kind of company you are, right? So let me give an example so slack.

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You Mon Tsang

Let's say I say you're slack and I'm a sap. So you got.

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Patrick Campbell

Younger. Older. I know.

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You Mon Tsang

That's right. That's right. So you go as slack into, say, a big company PG and you sell to a team of 20 people. Yeah, right. And that's your for sale and that's then that's the way you do it, right? Because that's the way Slack works. And then you grow Well, you better frickin have an incredible in R right, because every right, because it's because it's off the land and expansion.

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Patrick Campbell

You go to 2000 and then 20,000.

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You Mon Tsang

You got.

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Patrick Campbell

To be insane not to have 160.

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You Mon Tsang

I'm as happy a you can't buy a team. Then you got use an enterprise sell okay that you're buying the whole can Caboodles can take a year for to do it you're going to get an RR of a jillion percent. Yeah I'm sure they are. Of 105% maybe. Right.

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Patrick Campbell

You're already selling the seats up upfront.

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You Mon Tsang

I sold it all upfront. Right. And someone just. Just like, be careful of like who you're comping yourself against. Comp yourself against.

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Patrick Campbell

Benchmarks are terrible are.

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You Mon Tsang

Right the right type of company So like.

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Patrick Campbell

In defense of that defense I guess like I have definitely seen companies game this way and they don't and I don't think they think they're gaming it, but they don't realize that like what they're doing is is good for like a narrative, but not necessarily great for like the future. Right. And I think that they yeah it is.

00;20;43;23 - 00;20;55;09

You Mon Tsang

That's when you really good point that's when you optimize like like to a trend you know to the wrong way right so so you're like you know so you're like I'm this yes oh everybody was great and ah so I'm going to charge.

00;20;55;09 - 00;21;00;16

Patrick Campbell

You less. Do you, do you look at like a secondary metric, like lifetime value or ARPU then is that the idea.

00;21;00;17 - 00;21;10;10

You Mon Tsang

Yes. I think that how you hedge against you can write like I look at lifetime value efficiency of spend, right? These are things I think are important. All right. So so let's say you you know, if you're trying to increase every that.

00;21;10;10 - 00;21;11;08

Patrick Campbell

Aside that's.

00;21;11;08 - 00;21;32;09

You Mon Tsang

I guess I'd like you know really good point Whatever is a good metric for you. You know, when I tell people, like, if you don't know where to start, like the top three places to start our onboarding, onboarding and onboarding, okay, those are the top three places to start. And and that's because, you know, like most pieces of software or services or whatnot I give, they're not engage right away.

00;21;32;19 - 00;21;49;17

You Mon Tsang

If you don't have a good experience right away, if they're not, you know, sort of shown how you know or make it easy and how to do it right away, then you just got it. You're just in the hole. You just in them one hole, right? So there is no doubt to me that that is where everyone needs to get, you know, get it right now.

00;21;49;17 - 00;22;08;22

You Mon Tsang

That means a lot of different things for a lot different people. For some people, it's you make the product so easy to use that there's no onboarding. You just like press free buzz, Oh, I'm getting value right away. Like in maybe an Uber, right? Like, you know, like those are amazing apps, right, that make it easy and others like as app let's just use an app is like, yeah, you got to install that damn thing you have to train 2000 people, right?

00;22;08;22 - 00;22;13;24

You Mon Tsang

You got all the data in there and that's just a much longer thing. But either way you still got to make it right.

00;22;13;26 - 00;22;38;13

Patrick Campbell

That's actually a really interesting forcing function or learning function. You know, it's almost like and I haven't really thought about this because you see a lot of these tools that help with onboarding, you know, other from a product led basis or even on a touch full basis. Right. And what's really kind of fascinating is that if you study in SAP, what are all the things they have to do because there's so much inertia to get something implemented and then there's probably a lot of stuff you can learn from more of like a product led growth type onboarding, that type of thing.

00;22;38;13 - 00;23;04;02

Patrick Campbell

So and I think onboarding is a great, great start because it slows the speed for lower active cancellations as well as expansion revenue, because if they're doing the right things, then all of a sudden making they can really expand. So do you have like, you know, we're not going to get into a three hour discussion of onboarding, although you and I are probably enjoy it, but like, what is like what are what are some of the like pitfalls people see with like onboarding and some of the things that like, you know, they do really well.

00;23;04;09 - 00;23;24;23

You Mon Tsang

For most emerging companies, right? They probably haven't figured out like the the best path. Right? And you know, because I've hired one onboarding person and this person is doing that and so they're doing it slightly different ways, right? So one is, you know, really try to make it a repeatable process, right? So that's a very simple thing, right?

00;23;24;23 - 00;23;41;05

You Mon Tsang

So there's an appeal process where you have real goals at specific time intervals, right? It's like, Hey, look, you know, I need this thing to happen by week one. I need this thing to happen by week three. You know, I need this thing and I need this. I need to go live by week eight. Let's just say whatever it is, right?

00;23;41;05 - 00;23;58;12

You Mon Tsang

And then put out the path to that, the place that makes that happen. And then track it right and just say no. Like, hey, today or this week, how many people are off plan on their onboarding. Right? And if there's and they're they're off plan on onboarding that this is the play that we run, you know, to deal with this customer or that customer.

00;23;58;12 - 00;24;14;29

You Mon Tsang

And so, you know, like most things, right, Especially if you're if you're scaling mode, it's, you know, it's just making process and tracking the process, right? It's you know, it's almost like sales, right? Like sales is very like methodical. It's like, okay, what stage are you And all you're, you know, oh, you're in presentation mode. Okay, this has to happen, right?

00;24;14;29 - 00;24;17;18

You Mon Tsang

Oh, oh, you're in proposal mode. This has to happen.

00;24;17;20 - 00;24;20;15

Patrick Campbell

You didn't send that thing up. You got to go. You got to make sure you do that for.

00;24;20;27 - 00;24;36;24

You Mon Tsang

By the way, you know, onboarding is so different. Like, if I'm a.S.A.P, maybe there is no plan like the, you know, like I have to set the plan something. Everyone's different, right? Like, okay, like, okay, for this company, it's, it's plan A and this plan this plan Z, you know, companies have a repeatable process. Like make it repeatable.

00;24;36;24 - 00;24;42;05

You Mon Tsang

Yeah.

00;24;42;05 - 00;24;52;07

Patrick Campbell

When you look at the other aspects of net revenue retention. So we're thinking about onboarding, whether come some of the other things that like most companies are, they're not doing enough of or aren't doing at all.

00;24;52;12 - 00;24;56;18

You Mon Tsang

You know, it's hard to do net revenue good with every retention. You don't have anything else to sell.

00;24;56;19 - 00;24;57;18

Patrick Campbell

That's yeah, that's a big one.

00;24;57;19 - 00;25;12;15

You Mon Tsang

You can't go too far and create a bad experience where like it's like, I'm going to sell you every, everything is an add on and everything. Oh, oh, oh, no. You want to go to Silver you to do this? You got a goal, then you need to do that. So there is really a there really is. By the way, I think additions actually is a great way to segment the market.

00;25;12;15 - 00;25;26;24

You Mon Tsang

Right. I do think, you know, having add ons is a way for you to like capture different components. So the audience who are paying less and paying more. So I do think it's valid, right? But the drives and every retention is like, I'm going to make this, you know, we need to get more. You need to get a higher one.

00;25;26;24 - 00;25;38;21

You Mon Tsang

So like this new feature is now going to be an add on, right? Or that, you know, I'm going to put that only in enterprise and gold. And so on one hand, when you when you start off, you know, you instinctively put everything in one one the dishes are.

00;25;39;12 - 00;25;40;12

Patrick Campbell

Say they have so much stuff.

00;25;40;12 - 00;25;53;24

You Mon Tsang

I mean, not so much stuff, but, you know, I don't really have enough stuff, right, as an MVP. So you have to make that. But once you make that beefy enough, right, you really do have to think about product and packaging, Right? And then never having retention goals naturally drives. Yes, they're.

00;25;54;15 - 00;26;16;01

Patrick Campbell

Kind of interesting because the SKU thing I think is really important and you do see some folks in the early stage of like the net revenue retention revolution that they are early SaaS like I remember Salesforce and DC to pick on Salesforce obviously. Yeah, but Salesforce, we bought it as like a43 person sales team, which is an outrage.

00;26;16;02 - 00;26;35;29

Patrick Campbell

Buy it because we but we were a little more sophisticated. So we had HubSpot as well. They gave us access to the integration, so we technically hook up the account, but if we want an API calls, we had to be up on the next plan. Absolutely, which makes no sense because it's like you don't if you're not putting data through the API, like why would you give me access, right?

00;26;36;11 - 00;26;54;15

Patrick Campbell

So that's like the nickel and diming. And I think that what we found, at least in a lot of pricing data, is if you have a feature or some aspect of your product, like one rule is kind of if it's in, it's here or it's across the board and less than 40% of people are using it, that's kind of where you should start looking and then doing a little research.

00;26;54;15 - 00;27;07;06

Patrick Campbell

A lot of times those types of features can be pulled out and then sold as add ons because you really want to find something that not everyone really cares about, but the people who really care about it are willing to pay for it and are more than happy to pay for it, which is, you know, the last little asterisks.

00;27;07;06 - 00;27;23;10

You Mon Tsang

I mean, I read that from from from you guys. I think that's a really great way to think about it now. So. Oh, okay. So the debate so it's so it triggered by the question about that, right. It's like you don't know that. You're right. So at one point you wake up and you're like, okay, in my let's just say my bronze plan, like it was 40%.

00;27;23;14 - 00;27;31;18

You Mon Tsang

So I'm yanking that off right as an add on. And then what do you do for the people who are using it? Then apparently they get to grandfather that in It kind of depends.

00;27;31;19 - 00;27;53;01

Patrick Campbell

Right. Because sometimes I mean, this is kind of the classic like the the similar question is what if you're giving something away for free and you start charging for it? Right. And you know, you know, even if you lower your price, you'll actually end up getting some churn because people are reminded. And the secret is, is like, was that churn because people actually didn't want the product in general and you're just forcing them to make a decision now?

00;27;53;01 - 00;28;12;19

Patrick Campbell

Or was it something that like you've messed up? Right. So I think in that case, the easiest thing to do is just legacy. Like they just keep it for a year for whatever the price was. I think that in some cases where we've seen this done with just pretty average, if not above average communication, you'll see some general churn.

00;28;13;01 - 00;28;28;08

Patrick Campbell

So like these people just didn't want the product anymore, but you won't see a lot of churn and there's something called a legacy discount where it's like, hey, basically, you know, I'm going to ham this up a little bit, but like, hey, you've been with us for so long. Congratulations. It's amazing. We're so happy you've been with us.

00;28;28;19 - 00;28;44;02

Patrick Campbell

For everyone who's new, the price goes to here. But for everyone else, you, you loyal person, you know you're going to keep this for the next six months at this price. And then we'll we'll knock it off. And like that, it seems kind of like dumb, but like it works really well. It works really well. I mean.

00;28;44;02 - 00;28;57;06

You Mon Tsang

There's there's a you know, I actually I was thinking about, you know, we have some customers who are buying us for the third time now. Right. And I'm thinking about getting them like a jacket, like a like a maybe like is it like, what do you think? Like a three timer? You know.

00;28;57;06 - 00;29;04;08

Patrick Campbell

I get them like patches or something. I think it'd be great. No, I like that because that's that's a good sign of a product to like. Oh yeah.

00;29;04;08 - 00;29;05;05

You Mon Tsang

You bring it in you.

00;29;05;05 - 00;29;12;28

Patrick Campbell

Yeah. We see now it's with some of our products where it's like someone gets there, they're in the role, they have the authority and like these are the first things they do, which I mean.

00;29;12;28 - 00;29;28;03

You Mon Tsang

That feels like the longevity starts to happen then, right? Like you now have something. At first you're like, okay, this is are we going to survive, right? Like, is this is this a worthy company? And offset is like, okay, this is a this is a lasting company. Yeah, right. Those are sort of the stages that I sort of think, well.

00;29;28;03 - 00;29;44;21

Patrick Campbell

I think that the product market fit aspect is that getting from survival to the next stage, The lasting company I think is where when you start seeing those signs that you just described, that's when you're like, Oh, interesting, like we can mess this up, but also like there's something here that's going to drive or something which is really powerful.

00;29;44;21 - 00;29;57;16

You Mon Tsang

I think, you know, yeah, there's a difference between making it to product market, fad scaling it and then in and during company. I think those are different. Yeah.

00;29;57;16 - 00;30;05;28

Patrick Campbell

Do you think so? So a couple of interesting questions then. Customer success, do they own churn expansion, both.

00;30;06;17 - 00;30;22;16

You Mon Tsang

Customer success almost always on Well, not almost always. I gotcha. But more often than not. ONS Absolutely on renewal. Yeah. Like more than 50% of the time close to 50% at the time owed expansion. Okay. So basically more of the same or similar.

00;30;22;16 - 00;30;23;23

Patrick Campbell

Upsells, gross sales.

00;30;24;05 - 00;30;44;26

You Mon Tsang

Expansion. So basically more seats. Okay. So yeah, why not? So yeah, and I think cross-sell, which is like, okay, yeah, but here's the new new thing like, like if your sales force is like, okay, I sold you the sales module, but I'm now going to sell you the marketing module and the support module and the CPQ module. Like those cross this call, those cross sells, right?

00;30;44;28 - 00;30;57;14

You Mon Tsang

New, new thing. I say less than half, you know, goes to us and most of that goes to an account manager that's dedicated on sales expansion sales or actually goes back to sales itself. Right.

00;30;57;14 - 00;30;58;10

Patrick Campbell

So about churn.

00;30;58;13 - 00;31;08;06

You Mon Tsang

I mean, at the very least they are honest on churn and at the very most they get this almost commission to on on, you know, the whole thing. Right.

00;31;08;06 - 00;31;11;22

Patrick Campbell

So two controversial customer success question.

00;31;11;22 - 00;31;13;13

You Mon Tsang

Yeah, sure let's go quota.

00;31;14;07 - 00;31;14;18

Patrick Campbell

Our no.

00;31;14;18 - 00;31;26;14

You Mon Tsang

Quota. You have to have some variable, right? That's what I believe, right? And what I've seen is anywhere from 55% of your property as variable all the way up to 50%. And I've seen that. I've seen that. It's expressing that spirit.

00;31;26;21 - 00;31;27;22

Patrick Campbell

But it's something I said.

00;31;27;22 - 00;31;44;26

You Mon Tsang

Yeah, 5%. I mean, they're really customer satisfaction people, right? So 50%, they're salespeople. Yeah. Okay. What do you want? What do you want? What do you want? And then I actually think that happy medium, which is kind of a sorry, a weak answer, is like 20, 25%, right? Like because customer people are not salespeople.

00;31;44;28 - 00;31;46;05

Patrick Campbell

And they shouldn't be expected to be.

00;31;46;05 - 00;31;54;19

You Mon Tsang

They should be. And so I don't want to comp them like salespeople, right? Because, you know, you really want them to treat the customer well. You want to badgering them from some.

00;31;54;21 - 00;32;05;05

Patrick Campbell

Decisions versus like, sure, yeah. And then when I know when is hard because it depends on a lot of factors, but when should you have that first customer success hire?

00;32;05;11 - 00;32;08;20

You Mon Tsang

So, you know, Jason Lampkin says is a single digit higher. Have you heard that?

00;32;08;26 - 00;32;09;19

Patrick Campbell

I've heard that, yeah.

00;32;09;28 - 00;32;18;18

You Mon Tsang

So that's your first one. People First night. Yeah. Yeah. So 0129 is your customers person. So yeah, I think I think that's actually right. Single digit higher.

00;32;18;18 - 00;32;35;22

Patrick Campbell

And do you think that do you start with because I think this is a classic like single digit hire problem you start with either like the director level got a lot of experience or do you start with someone who's been doing it a few years and is more, more individual contributor who can take on more functional stuff?

00;32;36;11 - 00;32;45;19

You Mon Tsang

So I normally prefer sort of someone who's done it before, who's on the costs of, you know, managing people got it right. So they're not.

00;32;45;19 - 00;32;46;17

Patrick Campbell

Quite there, but.

00;32;46;17 - 00;33;07;14

You Mon Tsang

They play your player coach, right? Yeah, I a player manager, right. So I think that's ideal. Now if you just raise a good jillion dollars and go do that, your seed round that you do your act there, if you are a little bit more concerned about, you know, like when you have a viable company, then you just want, you know, you want maybe hire someone a little more junior because you know, you need to conserve cash so your mileage will vary.

00;33;07;14 - 00;33;20;17

You Mon Tsang

But I would say in general, all right, if you are a sort of SaaS company, you know, hire someone who's done a few times, right? So you don't have to manage them too closely. And then the second you have your second or third person, you have someone there who's capable of of taking them.

00;33;20;17 - 00;33;24;06

Patrick Campbell

On where are we before this? Like, what was what's your story like? How did you get here? Oh.

00;33;24;17 - 00;33;38;13

You Mon Tsang

Well, I've been in the software business for decades now, right? So I started off in the business intelligence. Yeah. Do you use data pivots these pivot tables in Excel? So I was at the company. I was the product manager for a product called Data Pivot.

00;33;38;20 - 00;33;59;23

Patrick Campbell

Yeah, which was the pivot come. I know data on sense. I only know data pivot. I never used it. I only know data pivot because I'm kind of fascinated by like early SaaS and early like software companies and the old school like VP's at Digital in Boston, who are now like all of these advisors and stuff, like they would talk about like the old school guys.

00;33;59;23 - 00;34;01;21

Patrick Campbell

I've never used it, but I wasn't aware.

00;34;01;21 - 00;34;03;02

You Mon Tsang

I was the product manager for that.

00;34;03;02 - 00;34;04;08

Patrick Campbell

So you're the guy who created that?

00;34;04;08 - 00;34;11;22

You Mon Tsang

That's wasn't wasn't what I created. I was a part of it, you know, because I was, you know, I joined a start up that had it and I became the product manager for it. And and so in the early, like.

00;34;11;22 - 00;34;13;21

Patrick Campbell

My description is made you sound super old. Nice.

00;34;13;28 - 00;34;31;04

You Mon Tsang

I'm super, obviously, you know. So I started there and, you know, I land in Silicon Valley in the early nineties and so I just caught the bug and, you know, I really loved the innovation. You know, I wanted to be able to do things and see my actions lead to results. Right? And that's the.

00;34;31;05 - 00;34;32;09

Patrick Campbell

Last Preneur Trigger.

00;34;32;09 - 00;34;36;16

You Mon Tsang

Yeah, yeah, yeah. Right. Because it's, you know, you use like you do something and something happens. Yeah.

00;34;37;01 - 00;34;39;04

Patrick Campbell

And you have control somewhat over that.

00;34;39;04 - 00;34;51;18

You Mon Tsang

You have some control, right. And so and so. Yeah, this is my turn. Xero is my fourth company, right? I've been in B2B for a long time. This one I've, I've just talked to a friend. It's like, okay, you know, I've set aside the next 15 to 20 years for this one.

00;34;51;18 - 00;34;55;12

Patrick Campbell

Yeah, I always joke about it. I got one more in me. This is my first one and I got one more.

00;34;55;13 - 00;35;02;13

You Mon Tsang

I know you guys who I'll tell you like you think you're like, when I started the company, it's like, All right, I don't need to do this again. Right?

00;35;02;27 - 00;35;03;27

Patrick Campbell

We get that. It's right.

00;35;04;15 - 00;35;23;22

You Mon Tsang

But I want to do it again, right? And then finally realize, like, I'm just not going to fight myself. I'm not going to look at, you know, like the math. I just I just want to do it again. Like I'm more energized doing it than not doing it. So the second that and by the way, my you know, my advice to use like the second that the you're less energized by it that's when you that's when you say I got to do something else.

00;35;23;26 - 00;35;39;07

Patrick Campbell

Got it. Yeah. I think you always come back though. Or at least you're always what I found athletic trainer is you're always doing something that's like entrepreneurial. It might not be like raising cash on a SaaS company, but you're like, Oh, we're going to make this the best coffee shop in Nashua, New Hampshire. That's right.

00;35;39;13 - 00;35;42;04

You Mon Tsang

Boy, that's that counts, right? Oh, Maurice, I'm more than girls. Right.

00;35;42;04 - 00;35;45;05

Patrick Campbell

So what was your first job and what did you learn from it?

00;35;45;05 - 00;35;56;15

You Mon Tsang

So I started working really early, probably when I was eight. Eight, eight. Yeah. And so my dad was a manager at the Chinese restaurant. And so I did take out work. Right. It was less.

00;35;56;15 - 00;35;59;10

Patrick Campbell

Of a choice. It sounds like family business. You just kind of well.

00;35;59;12 - 00;36;11;27

You Mon Tsang

It wasn't like he didn't own the place. He just wanted me because I was. I grew up in New York City, Chinatown, and it was kind of a rough neighborhood back then with lots of gang activity. And he's like, totally worried about me. All right.

00;36;12;01 - 00;36;13;01

Patrick Campbell

I'll take you to work.

00;36;13;01 - 00;36;27;20

You Mon Tsang

I'm taking you out, you know, like you going to come on to Long Island with me right to work where I would drive, you know, 2 hours to the restaurant and we're going to work. And so I was my first job, and I did it until I was 21. Right. And what I. At 20.

00;36;27;20 - 00;36;28;27

Patrick Campbell

One. Oh, yeah. Same place.

00;36;29;06 - 00;36;30;15

You Mon Tsang

Same place. Wow.

00;36;30;20 - 00;36;32;07

Patrick Campbell

So you had ten years of experience.

00;36;32;07 - 00;36;51;02

You Mon Tsang

When I graduated, I was actually financially independent. Not that I could buy a house or pay rent, but but when I was 16, I was like, All right, I'm just going to make all my financial decisions from here on out. Rascal. It's it's not always the greatest lesson, right? Because I was around other immigrants, right? And it was like you knew that if you had nothing else, you could work hard.

00;36;51;06 - 00;37;05;03

You Mon Tsang

Yeah, right. And there was not like, if you were not the smartest person and if you even if you didn't have the best connections, you know, there's one thing you can control, right? To make yourself successful, and that is, you know, the amount of that, the effort that you put in.

00;37;05;14 - 00;37;14;26

Patrick Campbell

Well, I wasn't quite my dad's a roofer was a roofer. I wasn't quite getting pulled under the roof to work. But I remember getting told the job sites I.

00;37;15;09 - 00;37;17;05

You Mon Tsang

Was dragging around. Right? Probably.

00;37;17;16 - 00;37;28;03

Patrick Campbell

Oh, I got to do this. And I think it's a classic, you know, that blue collar kind of mindset of like, you know, like life is work, you know, It doesn't always have to be hard. Thankfully, but like, life has, you know, purpose, you know?

00;37;28;03 - 00;37;37;09

You Mon Tsang

And I do have to pull myself off of that, right? Like, I don't want my child to be doing that. Like, I don't I don't expect that from my kids. I don't really want that for my, you know, like it was just too much.

00;37;37;19 - 00;37;53;04

Patrick Campbell

Well, that's kind of the funny part, right? Where people a lot of that is what, you know, that that that imprinting has like made you who you are and successful but you look at it as like, yeah, that was great. You must rationalize how great it was. But then you're also like, I want to protect the disappearing from this.

00;37;53;04 - 00;37;59;18

Patrick Campbell

Right? Right. Which then I don't know if you worry, but I haven't had kids yet. And this is a worry of, you know, classic don't actually have the kid, but still worried about it.

00;37;59;18 - 00;38;00;20

You Mon Tsang

Worrying about your kids.

00;38;00;21 - 00;38;01;22

Patrick Campbell

Yeah. Yeah. Well, no.

00;38;01;22 - 00;38;04;13

You Mon Tsang

Like we're going when you wait until. Yeah. And then you worry about them.

00;38;04;13 - 00;38;06;25

Patrick Campbell

We're getting into the territory, right? That's what as.

00;38;06;26 - 00;38;08;11

You Mon Tsang

You can say. All right, let's talk about this.

00;38;08;16 - 00;38;09;04

Patrick Campbell

Like, congrats.

00;38;09;04 - 00;38;09;14

You Mon Tsang

Right?

00;38;09;23 - 00;38;14;00

Patrick Campbell

All right. No, like, right now. Like, okay, Are you ready to know where you are? And I'm like, yes.

00;38;14;00 - 00;38;15;13

You Mon Tsang

What are you worried about? Let's talk about.

00;38;15;18 - 00;38;16;18

Patrick Campbell

You. No, but more.

00;38;16;18 - 00;38;27;05

Patrick Campbell

Of the like, you know, are you worried about making your kid softer? Right. Like, that's an interesting, you know. Yeah. Direct way to say it. But then you're kind of like maybe you're okay with that because you're like. I don't want my kid to have to go through what I went through, that type.

00;38;27;05 - 00;38;30;27

You Mon Tsang

Of thing, you know? Yeah, well, like, I'm no expert, but your kids are going to be who they are.

00;38;30;27 - 00;38;31;16

Patrick Campbell

Yeah, that's true.

00;38;31;16 - 00;38;34;05

You Mon Tsang

Yeah, they one, they come out, they're. They're 80% for.

00;38;34;05 - 00;38;35;23

Patrick Campbell

I'm sorry. Oh you're sorry.

00;38;35;23 - 00;38;48;23

You Mon Tsang

My. Yeah. Sorry. About, like. Like you have this much influence. You know, I always tried to do. I don't know. What's your management style like, you know, like, how would you, how would you describe it? Do you have, like, a way to describe it?

00;38;48;29 - 00;38;55;07

Patrick Campbell

Very direct, but when needed. Empathetic. Yeah. That's how I describe it.

00;38;55;07 - 00;39;11;00

You Mon Tsang

It's all so I'll use. I'd like to use metaphors, right? So I think early on and I need some. You need a change, right? Like I use a lead dog, Right. Okay. Like you're leading the way, right? You're showing the way, but you also pulling along with everyone else. You're pulling just as hard as everyone else, if not harder.

00;39;11;00 - 00;39;19;29

You Mon Tsang

Right. And then by when the company gets bigger, Right. You just cannot be there. Yeah. You know, like. Like. Are you the musher? Right? Are you the lead dog? Right.

00;39;20;15 - 00;39;25;13

Patrick Campbell

And from that perspective, I'm way too much of a lead dog. And I'm learning that lesson right now.

00;39;25;13 - 00;39;35;16

You Mon Tsang

And I learned that lesson. Right. Because, you know, it's interesting. I mean, there's just there's a lot because you're you sounds like, you know, you want to work hard. You worried about making your kid soft, Right. So you just want to get.

00;39;35;16 - 00;39;40;00

Patrick Campbell

To a point where I'm like going to do something to make them not, but just more like, you know.

00;39;40;07 - 00;39;46;27

You Mon Tsang

You're going to make it more you know, you're going to say you're going to get a roof now, man, it's you're five years old. It's time for you to get well. That's but that's what's.

00;39;46;27 - 00;40;00;22

Patrick Campbell

Funny, right? Like, I was like, you know, I was like, when do I like I get my work permit? Is there an exception to get a work permit? Oh, when you were like, Yeah, when I was like, no, I was like 12, you know, because in a group of Wisconsin you can work farms and stuff, but you can't like, work in a restaurant or something like that.

00;40;00;22 - 00;40;01;27

Patrick Campbell

Well, you legally, but.

00;40;01;27 - 00;40;03;26

You Mon Tsang

You just have to do the under the table paying.

00;40;03;26 - 00;40;08;11

Patrick Campbell

No well, you know, I didn't my, my dad, you know, big union roofer is like now, you.

00;40;09;03 - 00;40;09;12

You Mon Tsang

Know.

00;40;09;24 - 00;40;16;22

Patrick Campbell

He's like not into that. He's always like, you know, I am probably saying some things our little, little Midwest blue collar guy, let's just put it that way.

00;40;16;22 - 00;40;23;02

You Mon Tsang

But I have a I have a nephew like buying a he's getting stuff people don't want and reselling them I eBay so.

00;40;23;07 - 00;40;30;03

Patrick Campbell

It's such a great hassle. I was so good but I wouldn't I couldn't have thought of doing that when I was a kid. You didn't have the tools in there.

00;40;30;03 - 00;40;35;12

You Mon Tsang

Yeah, but that's just fantastic, right? It's like, Oh, you should now that, you know, the 12 year olds can do that. Yeah.

00;40;35;20 - 00;40;37;00

Patrick Campbell

Abolishing imaging.

00;40;37;00 - 00;40;37;27

You Mon Tsang

Now, where.

00;40;38;10 - 00;40;39;29

Patrick Campbell

Where can people find you and anything you want to plug.

00;40;40;03 - 00;40;56;05

You Mon Tsang

Yeah. So, you know, like if you are thinking about in r r right, you know, think about really helping your customer success team achieve it. Right. And so if you don't, if you're not using a customer successful, use it, right? There's a time for it. There are great options out there. You know, turns you on, happens to be one.

00;40;56;05 - 00;41;13;27

You Mon Tsang

So consider us as well. But I would say to start right you know empower that team that is going to be driving the valuation of your company. Right. With the tools that they need to do their job. Well, I like that. So I think as simple as that, if you're listening as a founder, CEO, like don't don't skimp on that.

00;41;13;27 - 00;41;20;06

You Mon Tsang

Right. 5 to 15% of your expenses should be devoted to, you know, the CO.

00;41;20;15 - 00;41;21;21

Patrick Campbell

I like that. Awesome.

00;41;21;21 - 00;41;25;28

You Mon Tsang

Thanks, man. Yeah, thanks, Patrick. It's great to talk to you.

00;41;25;28 - 00;41;49;01

Patrick Campbell

It's a huge shout out to you, man. Sang for doing the episode. Now you have what it takes to tackle churn. Today we talked about innovation in customer success, establishing a retention focal point, optimizing retention, what most companies miss with retention and who owns churn and expansion revenue. And if you want to support profitable and the show, we would greatly appreciate it if you left a five star review of the podcast or the equivalent rating.

00;41;49;01 - 00;42;04;19

Patrick Campbell

Wherever you listen and watch the podcast, gods tend to like that sort of thing, and we like to appease the podcast gods. Thanks for listening. Make sure you subscribe to and tell your friends about Protect the Hustle. A podcast from Profile will Recur the largest, fastest growing media network dedicated to the world of subscriptions.