It’s an old question: How much professional services (PS) is too much for a SaaS business? Inevitably, if you’re seeking to sell a six-figure-plus solution into a large enterprise, onboarding isn’t just the click of a button. Integrating into existing systems and training are critical for success. However, professional services revenue isn’t valued as highly as pure software companies. Why? A PS-heavy company has to hire people to perform the work, so revenue is a function of hiring pace. The difference in valuation attributed to companies which grow revenues by leveraging technology rather than headcount can be 10x!
So what’s the right balance? Here are things to consider as you evaluate your professional services group.
Beyond APIs
To ace an implementation, you have to nail integration. Your system won’t deliver the same value and impact as your system if it doesn’t talk with your customers’ other systems. Plus, depending on your size, your customers may or may not be willing to build integrations to your product. You need to get beyond APIs and realize that your customers are most likely not in the business of working with APIs.
Lower Churn
Here’s a carrot for great professional services. The better integrated your product is within your customer’s systems, the lower your churn rate will be. You’ll have a competitive edge on anyone trying to replace you, simply by creating significant friction.
Guarantee More Referenceable Customers
Happy customers generate more customers. Having a strong PS team to implement your solution and then thoroughly onboard staff will not only entrench you into your enterprise customers, but you’ll fuel Sales and Marketing with the power of strong references.
The Right Ratio?
There is no perfect answer for this question and it’s largely dependent on the stage of your business. The earlier stage you are, the higher the percentage of revenue can be from professional services. However, as you climb to $5 – $20 million in revenue, a very rough benchmark might be that PS is no more than 25% of your total revenues, eventually becoming 15% as you continue to grow.
Warning
Professional services can become all consuming and take away focus from your core business. Don’t let it be a distraction for your management team. The influx of cash can be appealing but that’s not a sustainable solution. Leverage the good that can come from PS, but be diligent about keeping it to a palatable ratio.
How CodeScience Can Help
Here are two key areas where we can help your professional services team.
1. Complex Implementations – For some of our large customers, we do the most complex implementations. We know their product intimately, and have expert knowledge of the Salesforce platform. We alleviate the burden of having too large of a PS team by seamlessly augmenting staff.
2. Streamlining the Installation Process – We work with our customers to get their installation down to a minute, which in turn decreases the demand on their professional services (except for the large, complex implementations). Check out what we did for SpringCM.
Final Thoughts
There are no easy answers to building your PS strategy. One thing is clear – professional services are here to stay when it comes to successfully implementing enterprise solutions. The path you take to do it is your own.
