It's become increasingly clear that training is critical to drive customer success and build on the lifetime value (LTV) of customers. And there are a number of tools that can help companies provide the right education to the right users. But of course, these tools are not often free.
Training professionals may understand why it makes sense to invest in this area. However, it’s not always easy to get other stakeholders on board. If you want your CFO to approve investing real dollars in yet another software tool, you need to build an effective business case.
Continue reading to learn more.
Often, CFOs see customer training as just another cost line on their P&L and one that should be minimized however possible. The key is to understand what your CFO is looking for and how to frame the issue in a way they understand. Specifically, walk them through how customer training (and the tools to support that program) will create value for the company that far exceeds the money spent on implementation. So, how do you do that?
There are several common value propositions that underlie investment in a customer training program. Here are the key ones:
1. Building lifetime customers
By far, the most common business case for a customer training program is to build lifetime customers by increasing retention and reducing churn. This is fairly compelling, especially in businesses with recurring revenue. Think about it this way: even if you spend a significant amount of money acquiring new customers, with training, most of them will continue to pay in subsequent years, justifying the upfront investment.
Still not convinced? The math checks out. If your churn rate is X%, then $Y of revenue is being lost every year. With this in mind, measure the percentage of your customers taking training, and the resulting reduction in churn rate.
Note: the bigger your company, the bigger the impact you can have with an LMS. However, smaller companies can still lay the groundwork to scale quickly.
2. Lowering customer service costs
To address this point, consider how many customers you have, and how many contacts are at each account. Then, do the math.
- What is the average cost per contact for your company?
- What percentage of users take training?
- For users who take training, is there a reduction in inbound support tickets?
This last point is particularly important, as it saves time across customer-facing teams. And of course, like any big software investment, the value scales as your business grows.
3. Streamlining training
On a similar note, if your company is still utilizing instructor-led training (ILT), you may want to mention the potential savings associated with on-demand training.
- How many trainers are you employing in directly training customers?
- What is the fully loaded cost per trainer (don’t forget things like benefits, taxes, and facilities cost)?
- Are there other incidentals (like travel and materials)?
Add up all these line items, then invite your CFO to think about how much of this budget could be re-allocated toward other projects, once you have an LMS in place. As your business continues to scale, the ILT model may simply not be sustainable.
Presenting to your CFO
The three value propositions above are not the only ways to demonstrate the ROI of customer training. For instance, depending on your program, it may make sense to factor in training as marketing, training as revenue generation, or a combination of other strategies designed to reduce churn and decrease customer touches.
In any case, you’ll want to put together a written summary of your proposal, along with a quantitative exhibit that lays out your models and assumptions. Then, meet with your CFO.
In this meeting, compare the value being created with the proposed investment. Include both the software cost, as well as content creation costs and any additional headcount, if applicable. Remember, it’s a two step process. Step one is to get buy in on the overarching framework and value proposition. Step two is validating and assessing assumptions. Don’t be concerned if you need to make adjustments on the fly - just bring your laptop and have an honest conversation.
At the end of the day, your CFO is looking to make smart investments. Clearly articulate why you think the company should make this kind of investment. Lay out your story and share your model. When the CFO starts digging into assumptions, you know they’ve bought off on the high-level value proposition. If you use this strategy to really show how your program is going to create value, the CFO can quickly become your biggest advocate, instead of a blocker for your program.