Company acquisitions require customer success executives to be prepared. Whether you know it or not, you’re now competing for your own position against the Chief Customer Officer, Vice President of Customer Success, or Director of Customer Success of the acquired/acquiring company. Ask yourself: are your customer success affairs in order, ready to be reviewed and scrutinized by the acquiring company? Is your customer information impeccable with items such as customer contact data, usage, metrics, customer health, and Net Promoter Scores (NPS)? Is the data in your applications accurate and reflective as your source of truth? Whoever has the better information, people, processes, and tools in place will likely keep their job. If you are on the advanced acquisition team, you need to be prepared to walk into the prospective company and review their information to help you determine how to move forward. But where to begin? While there are a plethora of things to consider, here are four immediate critical steps each customer success executive must take in preparing to secure a new company acquisition. If you are on the receiving end of being purchased, read this to understand what the acquiring company is looking at and how to have your business affairs in order.

#1 - Review Customer Success Data

First things first: you’ll need to review the customer success data. This includes asking yourself some of the following questions:  

• What CRM solution(s) are the other company  leveraging? Salesforce? Microsoft Dynamics? Or a home grown application?
• What customer success solution are they using? Gainsight? Totango? Medallia Strikedeck?  
• How will the other company’s data carry over into your central repository? Do you have a proper way to bring it over? Or are their data and systems better than yours and should you move your data into their systems?
• Will their data skew your numbers? What data is good and what data is bad?
• Is there an opportunity for improvement on the superior system of collecting and reporting?  

Take the time to review this closely and have your data schema mapped out so that you can compare apples to apples during your data review.

#2 - Review Customer Retention

Churn is the lagging indicator of adoption done poorly; renewals are the lagging indicator of adoption done well. Both metrics are very important to understand where the problems lie within the segmentation pyramid (see figure below). This is so you can quickly react to mitigate issues to protect the customer base you are about to receive in the acquisition.

There is a phenomenal report from Key Bank called SaaS Public Company Reporting Metrics. In this report, they studied over 105 companies that were going IPO and looked at how they were capturing the metrics of their renewal/retention rates. What they found is that there was no consistent method for calculating retention and churn metrics. If you look at the metric formula, you will see that there were unique calculations and some creative calculations taking place. Some were designed to make their performance look better than what it really was, and some were just reporting the facts. If your company is going to purchase another company, pay close attention to their renewal metrics so that you can get the whole picture about the customers you are about to acquire. If you have access to an analytics team, have them run the renewal metrics of the acquisition candidate company with the metrics formula that your company uses. This will ensure that when the customers come over to your business, the story is the same. You don’t want to be in a situation where the acquisition candidate company has a retention metric of 99% and then when you port them over into your company, you see that their retention metric is actually 86% because of the way each company calculates retention. If there are churn issues, this means that there are adoption issues. So all of your questions and investigations need to be focused on the motions of adoption and where there are problems in their segmentation pyramid.

#3 - Align and Develop the Charters

If your team’s charters are one of the three Building Blocks of Customer Success, then it is critical to know how the Customer Success team is aligned. Some questions to consider include:

• Are they focused only on Adoption? Or does their responsibility also include the Expansion and Retention Charters?
• If they have the charter of expansion, what does that mean?
• Do they only have responsibility for lead generation, and how does that align with your team or your sales team? Or does their expansion remit also include upsell and cross-sell activities? Again, how does that align with your organization?  

The same is true of the retention charter.  

• Do the customer success managers own the renewal or does that belong to sales or a renewals specialist team?  

All of these need to be identified so that you as the customer success leader can understand how this aligns with your current team. Now that you are informed and aware, developing a plan for training will be important. If there are differences between the charters and the teams, then it will be imperative to develop training plans to ensure that motions of adoption, or expansion, or retention or all of the above are provided. If both teams are equal in charter responsibilities, then this step can be skipped. Or if both teams will run autonomously from each other, then training may only need to take place with you as the executive. You will need to know how to help set up each team for success starting by understanding their processes and ensuring the customer success playbooks are correct.

#4 - Validate the Funding of Customer Success Budgets

Do not assume that just because the candidate acquisition company has a customer success organization, they are properly funded. You could be walking into a situation where they are not funded and the team was quickly put together from various departments. Are they being funded from sales and marketing budgets? COGS Non-Monetized or COGS Monetized? Or perhaps they have funding from G&A Training and Development or G&A customer success operations?TSIA research has shown that 45% of the industry monetizes customer success. You must look at how they are funded and then quickly verify if they are monetized. If they are monetized, what percentage of their revenue is used to fund customer success? What is the value of their monetized offering and are their customers getting a good value? If not, then you will have to identify how to create additional value offerings to help fund the team. That does not mean that customer success is fully funded 100%, but that should be the goal to help with growth and scale.  If the organization is monetized, it is important to do a review of its offerings. Talk with their customers and identify if there are different levels of offerings that could be created and monetized that create additional value.

Next Steps for Acquisition Prep

The key to preparing to onboard an acquired customer success team is to do a great exploratory investigation upfront so that you know what you are signing up for. Of course there are more steps to be taken than this blog has space to cover. But knowing the acquisition candidate company data, knowing the acquisition candidate company data, and understanding retention metrics, charters, and funding are the key first steps in helping inform the actions that will need to be taken regarding people, process, and tools.