One of the most controversial subjects I hear raised between Entrepreneurs and Investors is the use of Professional Services in a product company. Why ?
Because both sides of the argument are right for why you should or should not consider the use of Professional Services (PS) in your Go To Market (GTM) Strategy. But there’s no reason to be afraid of employing a services model in your startup. If you can be informed, you can be empowered to put them to use to your competitive advantage.
So here are my 7 golden nuggets and 7 deadly sins to share learnings from my principally B2B software companies, and I welcome other’s experience and feedback.
7 Golden Nuggets
1. Pre-sales facilitation
- Services people are a non threatening (non sales) means to educate your customers on your solution.
- A Professional services and even telephone support services can therefore accelerate your potential customer’s understanding in that part of the sales cycle. See diagram
2. Post- sales implementation & support
- After you’ve closed the deal it’s critical to ensure early & continuous referenceable customer success
- So you don’t get hooked on a services model, PS can enable knowledge transfer to your customers and ultimately make them self sustaining and self servicing
3. Customer breadth of deployment & growth
- PS can enable and ensure your customer continue to get repeat success and scale of initial deployment,
- In the end this increases the customers Life Cycle Value (LCV)
4. Predictable revenue and contribution
- PS is usually billed over a project lifetime, in a pre agreed fashion, providing startups with some predictable revenue during otherwise unpredictable early sales cycles
- PS revenue is a welcome contribution to the Cost of Acquiring and Retaining a Customer (CARC)
5. Free Product Management
- One of my favorite value adds of PS is the direct feedback to R&D on product experience
(My personal recommendation is actually to even consider rotating engineers through services so they get the direct feedback on the implementation and usability of the products they are developing. It can be very empowering all around and customers and engineers love it if handled correctly)
6. Best practices buildup
- PS is one of the best ways to build up your internal best practices and knowledge base for training of new hires, as well as for external training of Developers, Customers & Partners. Per the point above this can be ultimately used to achieve self service for your stakeholders
7. Upgrade acceptance, deployment
- With non SaaS/Subscription products it’s vital to get customers to upgrade the latest releases and deploy them across the enterprise. It not only helps them but it reduces your support matrix and also justifies maintenance payments. And even if you have a SaaS model, ensuring your customers learn to use upgrades and new features is vital to them staying productive and you being competitive in their referencing in the market.
- This again increases the and extends the usage and Life Cycle Value for you and your customers (See blue circle in the Diagram)
That all sounds good, but there are also 7 deadly sins that I think can be argued against PS.
7 Deadly Sins
- Customers get angry, thinking your product should work without services
- You start gouging customers for extra revenue
- You get lazy in fixing product issues in the product versus covering them up with PS
- You become so proud of the revenue PS is adding to your top line, that you forget to pay attention to your business model which may be dragged down by lower PS margins and higher fixed people costs, with lower multipliers
- You Lust after acquiring more customers instead of partners. Ultimately partners that can take services on for you are a much more scalable way to grow your business. But you need to time this. If you haven’t learned the experience directly, you aren’t ready to have a partner take it on.
- Envy between sales and services builds divided loyalty. Be careful to find a way to present an integrated sales and services front to customers to enable their success, and set up appropriate motivations and rewards for your teams to share in that customer success.
- You get hooked on a services model. This is a real risk that I’ve seen from startups who get too used to the predictable services revenues. But remember point 4, put your pride behind you and balance your business model.
In the end my experience has been that as a startup, your initial customer success and reference ability is so critical, that developing a services supported model can be a great approach for many initial go to market models, so long as you take heed of the principles I’ve outlined above.
So don’t be afraid of services, be aware of them and look to use them to your competitive advantage.
For more on Go To Market and where this fits, check out the Go To Market resource page here.