Chapter 8

How to calculate the value of an onboarding team

This is a chapter from The Startup CEO’s Guide to Customer Success and Onboarding.

Common misconceptions:

🚫 Once I understand the value of the whole customer success team, I don't need to worry about the onboarding piece.

🚫 Onboarding helps reduce churn but not increase revenue.

In chapter 7, we highlighted how your customer success team has the ability to impact the customer lifetime value (CLV) of your customers.

Each interaction with customers is an opportunity to help them realize the value you provide. As customers realize that value, they are inclined to leverage more of it and for longer.

A means to accelerating that CLV is good customer onboarding.

Onboarding prevents customer churn by providing an opportunity to educate customers on how to extract the value they came to you for. Being able to meet a customer's expectations this way makes them more likely to grow their business with you, expecting similar results in the future.

Setting this stage first thing during your customers' lifecycle ensures you maximize your CLV, and in turn your revenue.

Impact on CLV example

Let's say you have a customer that pays you $100/month ($1,200/year) for your product or service. And it costs you $400 to market to and acquire that customer.

If nothing else happens, the CLV for that customer at the end of the first year is $800 ($1,200 x 1) - $400 = $800

Now, let's say you are able to educate and train this customer on how to get the most value from your product or service. This results in them spending more money with you because they add another user seat, upgrade a service, expand their purchases, etc.

That "growth" results in the customer spending $50 more per month, bringing their total to $150/month.

The earlier that growth occurs during the first 12 months, the more CLV (or revenue) you can expect to make from that customer.

Here is what adding $50 a month at month 1 after signing up versus month 3 or 6 means for your revenue…

Onboarding CLV impact.png

If the customer grows their business with you during month 1, that is a ~69% increase in CLV versus no growth happening in year 1 ($3,150 vs $2,000). That increase is 56% and 38% for growth at month 3 or 6 respectively.

The key takeaway here is dedicated onboarding can help you accelerate the CLV for each customer, in turn helping you grow your revenue faster.

Value beyond CLV

By helping to reduce customer churn, customer onboarding also helps to reduce the customer retention costs (CRC) we discussed in chapter 7. This accelerates your customer success efforts being profitable for your company.

The first impressions made during onboarding leave a lasting impression on your customers. The better the impression, the longer the relationship. This is the foundation for creating loyal customers.

In conclusion…

Customer success helps you grow your customer lifetime value and drive more revenue from each partnership you form. Customer onboarding helps you accelerate that process, unlocking that value sooner than later for your company. The combination of those two efforts is how you'll remain successful and grow your own business while ensuring your customers grow theirs.

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