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The Role Forward

Nick Tarnoff on Finance's Role in Driving Customer Retention

In this episode of The Role Forward, Nick Tarnoff, the VP of Finance at SupportLogic, gets into the importance of customer retention and how to improve it. Nick and our host Joe Michalowski discuss the metrics for retention analysis and some of the challenges with retention.

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Episode Summary

In times when a growth-at-all-costs mentality, companies funneled as much money as possible into customer acquisition. Retention was always important, but not the primary focus.

But now, as companies get more cautious with their capital, there’s a brighter spotlight on customer success and retention. Great customer retention is key to efficient, sustainable growth.

In this episode of The Role Forward, Nick Tarnoff, the VP of Finance at SupportLogic, gets into the importance of customer retention and how to improve it. Nick and our host Joe Michalowski discuss the metrics for retention analysis and some of the challenges with retention.

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Featured Guest

Nick Tarnoff

VP of Finance, SupportLogic

Nick brings over 15 years of financial leadership experience across technology, e-commerce, and financial services industries, focusing on financial planning and analysis (FP&A), strategic planning, and capital allocation. Most recently, Nick led finance for SAP SuccessFactors, directly supporting C-Suite leaders. He brings a highly collaborative approach to SupportLogic, focusing on designing a streamlined and efficient finance function.

Key Themes from the Episode
  • Companies should view customer retention as equally important as customer acquisition. You need to be able to nurture customer relationships so they stay and become long-term contributors to your bottom line.
  • Investors want to put their money into companies that have sticky products and services. This is why a metric like net dollar retention is always critical for SaaS businesses. Customer churn isn't just a loss of current revenue — it's the loss of potential future revenue.
  • Finance leaders may not be directly responsible for customer retention, but they can play a key supporting role by providing financial resources, analysis, and guidance for teams that own these initiatives.

Episode Highlights from Nick Tarnoff

14:47— Metrics for Retention Analysis

“We primarily focus on the main ones: net dollar attention, gross dollar attention, CAC, LTV, LTV to CAC ratio, CAC payback, payback period’s a big one; making sure your ability to be profitable and to get deal level profitability is critical. One of the things that we’ve had to look at is customer retention — on a not just dollar basis but logo basis as well. 

So, we look at the main things and then cohort it out a little bit by starting ARR size to be able to see our 100K customers, how are they expanding, how are they behaving against our 250K or 500K customers. One thing that we’ve had to do is we made a rotation from license-based and seat-based sales to adoption and consumption-based transacting this past year — middle of last year. And so, one of the things that we’ve been working on — working our way through — is, ‘How do we project LTV forward for variable revenue where we don’t have a hundred percent certainty on what that customer’s going to be spending 12, 18, 24 months from now? What are the data points that we need to collect so that we have a proxy for what that expansion looks like?’”

18:18 — Retention Analysis Challenges

Where you start to run into challenges is when a renewal gets delayed because sales is involved, or renewal gets delayed because there was late engagement from a renewal executive, whatever it may be, and you start to see lagging trends. At a bigger sample size, those things normalize. At smaller sample sizes, you’ll start to see NDR drop or gross dollar retention drop, and making sure that you’re aligned with the business and understand kind of the qualitative reasons behind it of, ‘Hey, we’re in the midst of a renewal discussion, but we’re trying to upsell, or we’re trying to do an expansion.’ Either pull them out of the NDR set or assume they’re going to renew at X percent. […]

The challenges are where the data doesn’t tell the whole story, and it forces that collaboration; it forces that asking the question. Go to the person or the team that owns renewals but also owns the expansion or upsell discussions. Use the data around you; you may have to join some data sets, but make sure to ask the questions so that you can create an informed narrative and an informed opinion.”

27:46 — Investing in Customer Support

“We had a number of folks in engineering who were being borrowed for their time; we had a number of CSMs in the organization, but we didn’t have a bug fix team, so our Chief Customer Officer, Judy, when she joined, that was one of the earlier things that she said, ‘Let’s add a customer support team that does all of the little technical bug fixes and can take a lot of things off the plate of some of our other more technical resources that we need in different places.’ So, she took a look at the holistic customer support or customer success organization, including some of the engineering folks; we built out a full onboarding team. So, she’s done a great job of sectioning out: what are the roles and responsibilities and what do we need in terms of building that customer life cycle. From like ink to live to adoption and usage, and thinking about, ‘For each customer that we land, what is the burden placed on her team or on the team and the different roles there?’ And then, being able to map that forward — if we acquire 15 customers a quarter, if we acquire 20, if we acquire 25, here’s what we need to ingest but also creating flexibility that if we either acquire more or less, we have the ability to adjust that.”

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