Updated: Jan 24
Your customer onboarding and implementation teams are devoted. They fulfill every desire and demand customers want, even when they require lengthy and specialized manual work. What should be taking six to eight weeks, usually consumes several more. Doing whatever it takes to make customers happy feels good for a while, but those smiles quickly turn into frowns of frustrations when you realize that high touch, white glove onboarding treatment which seems to work so well is eating into your company’s profits and eroding your margins.
I was recently onsite with a company that provides a valuable tool for patients to pay for and finance medical bills through text, on their phones. We brought together customer facing teams and executives at the company headquarters in South Carolina to map out their current customer onboarding process. We uncovered just how long and manual the current approach is. Executives assumed onboarding was taking about eight weeks. The hard truth is that it takes fifty percent longer, on average 12 weeks to go live. Many leaders were dismayed at the length teams go to, to manually tailor onboarding for every customer. The urgency to fix this issue also impacts cash flow, because they are unable to recognize revenue until the product is live with each new account.
Does this scenario sound familiar to you? I share this example because it’s not unique. The good news with this company is that they have high growth projections for 2023. The bad news is all their revenue is quickly gobbled up by long and costly implementations. If they don’t address their onboarding issue, the implementation backlog will grow out of control, frustrated customers will pause and cancel subscriptions, and the onboarding and implementation teams will be overwhelmed and exhausted, all leading to employee as well as customer churn.
How much is customer onboarding eating into your margins and profits right now?
Onboarding often takes from six to 12 weeks for business-to-business (B2B) software products, see the pie chart below gathered from participants in my Orchestrated Onboarding™ Masterclass. My calculations indicate that at many companies the time and resources invested in protracted onboarding can add up to about $30,000 to onboard each new account. That may not seem major if your average selling price is over $100K, but you are in danger of losing money and delaying break-even and profits. when you charge $30,000 or less for your products.
For simple “back of the napkin” calculations, let’s say the average selling price of your product is $30,000. If CAC comes to $50,000, which means it costs you just over $1.7 dollars for every new dollar you bring in, then it takes you 20 months to break even on every new customer, which is not uncommon. However, when you include the missing costs of onboarding, it takes sixty percent longer to break even. Adding $30,000 costs to onboard, to the $50,000 CAC brings you to $80,000 and 32 months before you start taking profits. During turbulent times can you afford to wait nearly three years to break even? Most likely not.
I’m disturbed that many leaders aren’t aware of these run-away costs. When Customer Onboarding and Customer Success teams do everything that customers want and wish you are in real trouble. It’s like playing Pac-Man, where new revenue is quickly devoured. Pac-Man is a maze action video game from the 1980s where the player controls the Pac-Man who must chomp through the dots inside an enclosed maze while avoiding four colored ghosts. In Pac-Man you win when you devour the dots. But in your business, you lose when your revenue is consumed by the manual and repetitive work your teams are doing.
Orchestrated Onboarding™ to the rescue.
Orchestrated Onboarding is a cross-functional approach to customer onboarding that drives customers to value as quickly as possible and at scale. It’s about moving away from ‘the special snowflake syndrome’ to delivering a consistent and repeatable approach that scales as your company grows and keeps your money where you want and need it.
At the medical software company I’m working with, we explored methods to shift away from their 'special snowflake' approach, and reduce onboarding by more than fifty percent, ideally to less than eight weeks. We started by defining and designing a cross-functinal and optimized plan that scales to their 2023 growth projections and limits manual and tailored work. Onboarding starts earlier to set clear expectations and keep customer accountable. Now we are building standard and premium onboarding packages each with a defined scope to limit the custom work and change requests coming from new customers. In the standard package, customers have a few specific options to leverage. When they need bespoke work that goes beyond the standard package, they pay a premium, which covers the costs of required manual work. The new packages greatly reduce the back and forth the team currently goes through with each customer and constrains the onboarding time and costs. By reducing onboarding by fifty percent this company will recognize revenue four weeks faster, which adds up to an additional month of revenue, nearly half a million dollars a year for them. How would that extra cash impact your bottom line?
Three ways to keep your precious revenue now.
Rather than pouring new revenue down the drain with costly onboarding get out of the bespoke business and follow these three better practices: create consistent repeatable processes, segment your customers, and take complete ownership.
Create standards and guidelines. Unless you are willing to charge and your customers able to pay a premium for special care, then create standards and guidelines for what you will deliver for each customer, and then stick to them.
Segment your customers. A company that participated in my Orchestrated Onboarding™ Masterclass delivers the same high touch onboarding with every customer, whether they spend $1,000 or $90,000. This is a bad approach, especially when it costs them well over $1,000 for onboarding alone. It’s time for this company to stop treating all customers the same way and start segmenting high, low, and digital approaches that make sense and lower costs.
Take complete ownership. It's time to show up as peers with customers. Segments, standards, and guidelines will be fruitless if sales reps continue to promise anything customers want, and onboarding teams continue to deliver on those unrealistic commitments. To stop leaking revenue you must keep leadership and team on the right path with the new approaches.
During turbulent and even prosperous times, it’s important to understand what customer onboarding is costing you. When you take action to reduce the time and resources required to onboard new accounts then you ensure the revenue that is coming is, is staying in. Let me know how I can help.
DONNA WEBER is the world’s leading expert in customer onboarding. For more than two decades, she has helped high-growth startups and established enterprises create customers for life. Her award-winning book is Onboarding Matters: How Successful Companies Transform New Customers Into Loyal Champions. Learn more at donnaweber.com.