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In today's competitive SaaS landscape, the strategic integration of services can make the difference between a company's success and its stagnation. While services are often viewed with skepticism, particularly in the startup world, they play a crucial role in driving growth, ensuring customer satisfaction, and maintaining long-term business viability. This blog explores the key insights from a recent podcast discussion between Jeff and Jonathan Corey, CEO of Precursive, on the essential role of services in software businesses.
The Role of Services in SaaS: More Than Just an Add-On
Understanding Services Revenue Streams
One of the most compelling points made in the podcast is that the top software businesses by revenue all have significant service revenue streams. This fact underscores that services are not merely an add-on but a critical component of a successful business model. Services such as professional services, implementation, and ongoing support are essential for customer onboarding, retention, and the creation of additional revenue opportunities.
Professional Services and Implementations
Professional services and implementations are complex but necessary for the effective deployment and use of software products. These services help bridge the gap between what the software can do and how customers can leverage it to meet their specific needs. By offering tailored services, companies can ensure that their customers achieve the desired outcomes, which in turn drives customer satisfaction and loyalty.
Strategic Benefits of Integrating Services
Enhancing Customer Onboarding and Retention
The onboarding process is the first critical step in the customer journey. A smooth and efficient onboarding experience sets the tone for the customer's entire relationship with the software provider. Professional services teams play a vital role in this phase by ensuring that customers understand how to use the software and integrate it into their existing workflows.
Moreover, successful implementations reduce churn by addressing potential issues early and providing customers with the tools and knowledge they need to succeed. This proactive approach helps build trust and positions the service provider as a valuable partner rather than just a vendor.
Unlocking Additional Revenue Opportunities
Services are not just about initial implementations. They provide ongoing opportunities for revenue generation through upselling and cross-selling. For example, once a customer is onboarded, there may be opportunities to offer additional training, customization, or advanced features that meet evolving needs.
By continuously engaging with customers through professional services, companies can identify new needs and offer relevant solutions. This ongoing relationship helps to deepen customer loyalty and increase lifetime value.
Overcoming Challenges in Service Delivery
Aligning Sales and Service Teams
A significant challenge highlighted in the podcast is the need for better alignment between sales and service teams. Salespeople often struggle to position services correctly, which can lead to mismatched expectations and implementation issues. To overcome this, companies need to invest in sales enablement and ensure that their sales teams understand the value of services and how to sell them effectively.
Implementing a Clear Methodology
Having a clear and consistent methodology for service delivery is crucial. This includes standardized processes for onboarding, project management, and ongoing support. A well-defined methodology helps ensure that all team members are on the same page and that customers receive a consistent and high-quality experience.
Financial Implications of Services
Impact on Revenue Recognition
The financial implications of service delivery are significant. Efficient and timely implementations are essential for revenue recognition, which affects a company's financial health and investor perceptions. Delays in implementations can lead to delays in recognizing revenue, which can impact financial reporting and valuations.
Supporting Sustainable Growth
Services play a vital role in supporting sustainable growth. By generating revenue from services, companies can reinvest in their business, fund new initiatives, and support ongoing innovation. This responsible growth approach helps companies avoid the pitfalls of overextending themselves and ensures long-term viability.
Building a Culture of Continuous Improvement
Investing in Talent and Training
To deliver high-quality services, companies need to invest in their teams. This includes hiring skilled professionals and providing ongoing training and development opportunities. A strong services team is a key differentiator in the market and can significantly enhance customer satisfaction and retention.
Adapting to Changing Customer Needs
The software industry is dynamic, and customer needs are constantly evolving. Companies need to be agile and responsive, continually adapting their service offerings to meet new challenges and opportunities. By maintaining a close relationship with customers and staying attuned to their needs, companies can remain relevant and competitive.
Integrating services into a SaaS business model is not just a strategic choice; it is a necessity for long-term success. By focusing on customer onboarding, retention, and the creation of additional revenue opportunities, companies can drive growth and build lasting relationships with their customers. Overcoming challenges in service delivery requires alignment between sales and service teams, clear methodologies, and a commitment to continuous improvement.
For companies looking to thrive in the competitive software landscape, embracing the strategic importance of services is a crucial step. By investing in professional services and implementations, businesses can unlock new opportunities, ensure customer success, and achieve sustainable growth.
Transcript:
Jeff 00:00
Welcome back, another person has pulled me out of my podcasting, retirement more so because we recorded an episode that was deemed not acceptable. So I've convinced Josh, come on one of my online sparring partners that I've met on the internet as a term I know you like as well, never to be called John Jonathan Corey, the CEO, and I always mess up Precursive. I always say percussion, too. That's an old man software thing.
Jonathan Corey 00:25
We just tried to come up with a name that people would really struggle.
Jeff 00:29
Yeah, that's a great scream, just so we know the realm of what you're talking about here. What do you guys do over there.
Jonathan Corey 00:35
So we're a software company, we're a partner, actually, of salesforce.com to our app is built on the force.com platform. And it's used by typically mid market, and enterprise software services teams to manage all elements of services, delivery, professional services, delivery, services, sales, implementations, all of that good stuff.
Jeff 00:56
We're both on the same side of things. But we have slightly different lens of things at all. I love reading your opinions what you say as its blends services, for SaaS, which can be a dirty word, at least I find in the startup world. And I'm always like, go look at what Salesforce is doing good works for them. I know you've got some market trends that you're always researching, give people a little landscape and people that might be listening to this. Maybe they're at like a five to $10 million software company. And they're being told like, No, we shouldn't do services. And if we do that, it's only via partners. We are a SaaS company.
Jonathan Corey 01:28
Yeah, I actually one of the things that I read was that the top 50 software businesses by revenue was the one commonality they all have services revenue struggling so many of them often do also have a partner ecosystem, Salesforce, Amazon, many of these companies do this like this romance, a reality of services, the way that I would frame it, to a certain extent, it people are a little bit unsure about it, because it is a business within a business. And that's key, if you're running a services organization is very similar actually to running a sales organization.
Jeff 02:05
Absolutely. I always felt like I was on my own islands, don't bring any plates or glasses and everything will be good.
Jonathan Corey 02:11
Definitely. The reason why they're very similar is you have to have a go to market, you're scaling a team that becomes potentially quite a large team. If you're in the sort of stage that you described, like five to 10 million, depending on what type of thing that you sell, you might have three people doing implementations, you could have 20. And so you very quickly become one of the people in the business that's got one of the largest teams. Yeah, but that also means that you have a line on the p&l, and you have a cost line on the p&l. And you may not be profitable, which then becomes pretty clear pretty quickly in the roles. It's not an easy world to figure
Jeff 02:50
I remember, when we went public at Bright Cove, CFO pulled me aside and said, just to let you know, one of our statements is going to be that our professional services team will be profitable for the first quarter that we're live in. I'm like, That's great. So I need this.
Jonathan Corey 03:04
Exactly. Exactly. That's definitely one of the big trends. I don't come from software at all. I when I got involved in this business, I wasn't selling technology. I wasn't in technology. So first time I worked in SaaS, so I had to do a huge amount of learning myself. I came from professional services. So I worked for a company called CB it was they wrote the Challenger sale first. So I worked selling subscription services, which was for into fortune 500 footsy type companies. And then I sold consultancy services, and saw the problem there that our software solves. And again, was very earnest and trying to figure out what happened after I sold stuff. Because the thing that I was selling was typically large scale transformation. And therefore there was add on work or additional work that was going on. So I was just interested in that post sale world, the reason why service is rising much more to the top now CES is having that crisis of faith moment as it were, where a service is becoming much more important to many businesses, because people have actually figured out, holy cow, this is the first step in the customer journey, probably the most important step in the customer journey. But also, we can see that we need this to unlock additional revenue opportunities or cross sell opportunities or upsell opportunities if we sell multiple products to our customers and services just has such an outsized impact on that.
Jeff 04:26
Just as a side note, when I look at CES in the way you described, PS being like a sales organization, I'm always like, why can you guys just adopt that? It's revenue, its renewals, its monetary, you've got a big team. What comes up after that? It's the whole relationship and commercials.
Jonathan Corey 04:43
That was this period that I've lived through in my career in SAS growth at all costs, responsible growth. Now we as a business, have an investor and my first pitch to that investor in my first pitch to them, I said, Look, I believe in responsible growth, they are a private equity fund. That's something that they want to hear. But it's also something that you need to deliver is knowing how to live within your means. One of the reasons why implementations and services are so important is the Silicon Valley proverb, leaky buckets don't flow. And one of the main reasons for churn is onboarding implementations going wrong. Because you're still going to have product market fit issues that you're dealing with as a business, you might have missed selling, or someone's bought something earnestly that they thought was a pain. But actually, it turns out not to be so that's all still going to happen to you. You still got stakeholder changes, you've got m&a That might disrupt your relationship. So you've got all of these things that could that are environmental factors that could impact your retention rates, your GRI, your NRR, yep. And then you've got this one controllable, which is with the good fit customers, or people that you've worked really hard to acquire, you've got to make that implementation successful.
Jeff 05:59
As a smart man once said, retention starts and implementation.
Jonathan Corey 06:02
And the thing is, it's really f****** hard. Sorry, yeah, you can swear on the show, I get to put that either makes it look like an NWA album. So absolutely, it is really hard because you are running a business within a business, you go through these different stages of maturity, you have to have a methodology. And the kind of the examples that I would give it in sales, you've got a sales process, which is the steps you go through with a customer. So I don't like the term discovery, but everyone has it in the industry. So
Jeff 06:29
everybody knows what that is, right?
Jonathan Corey 06:31
Everyone needs limits, I prefer diagnosis
Jeff 06:33
diagnostic sounds very fancy and almost British,
Jonathan Corey 06:35
you should know your customers problems before you go in the room with them in sales, you have the process that you go through, and the buyers gonna also have their process. Even buying today, there are so many commonalities. Now, if I look at buying cycles, because people, they're doing them with their clients, and therefore they adopt it with vendors, but then a process without a methodology in it around that. That means that translates over into services and implementation, which is the you can have a project plan in your customer onboarding tool or your PSA, you can have these project plans doesn't matter when or if you're using a spreadsheet. That's not a methodology. That's not how that engagement is going to be managed. It's not coaching on the ground,
Jeff 07:17
I keep seeing that it's a project plan in the middle of the sandwich.
Jonathan Corey 07:21
Exactly. We've had this challenge ourselves internally, I'm not going to say that we're perfect, but we've put so much time and effort over the last 18 months, because we've jumped several levels, we've gone from dealing with smaller projects to dealing with much much bigger projects and transformation programs, direct with partners with multiple technology vendors, and we were good at project management, we were good technically, but we had a lot to learn in terms of an engagement methodology, and being prescriptive, and stakeholder management and all of this type of stuff. And this, again, comes back to that narrative, Jeff of this is super complex stuff. The way that I try and help people to think about it is you have almost like this anatomy or a set of pillars to it, which starts with your go to market starts with your operating model. So who do you serve? How do you deliver value to them? How do you meet customers where they are in terms of their maturity, you've then got underneath that is like the framework, it is the framework for delivery. So that includes a project plan, but it includes everything else around that. So the methodology, the pricing, the packaging, then you've got people pillar, which would be resourcing your talent management, your career pathing. And your running potentially you as you scale and grow, and you go from being 10 million to being 50 million to being 100 million. Suddenly, this team is 50 People 100 People with
Jeff 08:49
a lot of subject matter expertise, that probably is an all around the organization as well, too. I love the fact he brought up career paths because I immediately saw the ones that we had to draw out, I feel that it's had the most importance when I was running professional services. What does that path look like? Oh, you could start here. But you could go over here, you could go wind up, you could start in support, you could start as a BA, you could be a PM, you could be an architect, you could do all these different things. 100%.
Jonathan Corey 09:14
And then you've got like a link to that. Then you've got incentives, you have got development plans, because you've got this continuous deal flow, which is projects your backlog. Again, very similar to sales. The project is like the deal cycle. So you it's a very similar world
Jeff 09:30
clarifying question on that. Yeah, in this world that you're talking about? Is services absolutely needed? Or could the customer take it on themselves? And you're just saying, Hey, you can do this all yourself, but we're the best at this so we can get this live for you faster. We've got the confidence. We've got the team.
Jonathan Corey 09:49
The biggest trend has been companies trying to build applications and platforms that are super, super easy to use and very turnkey. witching it up. And even in those organizations where it is a more of a switch on, let's say a more of an activation than it is deep, heavy configuration customization, you nearly always need an overlay. I've never seen anyone who's made it like self service motion,
Jeff 10:18
most likely in b2b, enterprise software, when suddenly you're dealing with dirty data authorizations, I'm sure you've got a long list of factors that could contribute to why you need experts, instead of just saying here are Doc is over here.
Jonathan Corey 10:32
I definitely seen vendors and we pulled from some of them where we've done it ourselves internally. Usually, there's an element of guidance to that, which can be ces lead, that's one you won't necessarily have an implementation team. But as you say, as soon as you move up market into bigger deployments of that very same software, those companies have got an implementations group. This is the thing is you mate, you'll find companies where they'll have within that same business, that same product or proposition, they'll have a segment of customers where they are switching it on or isn't it is a self implementation led by the customer, but also hundreds of users. Yep, says that very same solution being deployed across hundreds or 1000s of users. And there is absolutely always usually an implementation of that just put simply because you've got to coordinate things like user activation, user training, all of those types of things, whether that's led by the vendor, or the customer, or there's a hybrid approach, I definitely think that there's, as you move up market, you're gonna have some form of implementations. I've never seen it not there.
Jeff 11:39
So we have the chalk line somewhere where it between implementation and professional services.
Jonathan Corey 11:45
So usually, the evolution is us usually, this is what I get, this is just what I say, yeah, so usually, the company will start and again, same as with us, in CS lead to begin with. So it's CES, and it's led by the CSM, then what I usually see is they then create an onboarding team. And the team might be called onboarding. And then there's a team of specialists within their or its hybrid, like they do a bit of CES and a bit of onboarding. Again, nomenclature can vary, but then it's sometimes often becomes implementation. And that implementation, again, I would say, usually is not necessarily charged for all that certainly isn't. bios, MB. Yeah. And then there are occasions where it isn't, but I the early stages of call implementation, then they begin charging for it. It's eight for implementations. And then at a certain point, often they will rename that to part PS.
Jeff 12:41
Absolutely. I've just to make things easier, just configuration implementation. Customization is professional services, at least when I'm talking to boards that aren't liking professional services, you we certainly bump into them when they're smaller than the maturity model. They Oh, no, are like you said, everything's got to be easy. And everything. I'm like, Okay, let's call it go in configuration, you've got a standard set of parameters, get some requirements, set it up. Versus this is going to be a really long project where we have to go in and scope do some estimations I find that's where I like to draw the differentiation,
Jonathan Corey 13:18
delineating between the two is really important. Yeah. So as you say, if you conflate those two, and you don't distinguish between them, or you don't understand them, and when they're happening, then you get yourself into trouble. Going back to your question about have you seen people where it can be just this very quick switch it off the North Star is you want the implementation and the sequence of things that happen to be very consistent. Yes. Package A ball very, like just a consistent experience. And then understanding how much of the time do we need to do something custom and being really clear about, like, firstly, understanding how often is that actually happening or not, and not kidding yourself about the fact that actually, all of our panelists, and it's really,
Jeff 14:03
once in a while, you won't be hiring white developers for your implementation team, you'll be using a to b NRA. And it'll be the product team, maybe because you don't have the facility or he might bring in a partner to go build something special? Because, like you said, how often right, so
Jonathan Corey 14:19
that's an interesting one that you've raised. So I do also see we were talking about some of the teams. I also see models where you've got a sort of a pm community, and all a bunch of developers. And that's delivery, it's here and then custom Dev and it's usually absolute chaos
Jeff 14:37
I inherited many of those new build up better, better structures around them. Right it's again, like you say, it's brings it back to what you're saying verse with the project plan versus a methodology. It's, I see the same sort of thing. Oh, you gotta have some devs that we have some PMS are in the beginning, they have devs that are doing the NPM which is just terrible
Jonathan Corey 14:56
thing. So again, going to your point around like the role of the investment community in this again, it's really important to like if you're running a business, or you're running a services organization or an implementation organization, or you're the CRO we the CR, CIO, and this is r&d, you, one of the things that I advocate is that you really want to get alignment with your board, and all of the investors about what the role of implementations or services is. So are we an arr? enabler? Are we delivering positive margins? Are we selling services with this attach rate? Or is it all of the above? So do we need to actually be per your story? Where are we at? We're telling everyone is going to be profitable. Now. That's a very common sense shifting beneath your feet moment, which is you go from you can lose money. Yeah. Now you got to deliver me
Jeff 15:52
start off as in, just get customers live in 100%, referenceable, do whatever you got to do. Yeah, maybe you guys could lose a little less money is the sort of the next stage. Yeah. And then it's suddenly like you're adding into the p&l, and you're adding money back into the p&l. And that's you want to be a profitable group.
Jonathan Corey 16:08
Yeah. And that's something that we see all the time, it's services necessary evil, so very technically focused about implementation, then there comes this level of awareness, we're actually this is a differentiator, implementation experiences a differentiator, the referenceable customers is really important. Actually, we do care about, could this be monetized? And would that cash be able to fund investments in our business? Yeah, I, so like you going back to like career pathing training, like, was difficult to fund all of these things, if you're not generating money from services, because you're gonna have to get it from somewhere,
Jeff 16:43
Some just popped into my head, I apologize. Because we had a well, however, we're going to go through. I've found this I've certain I've, one of the other reasons I like to delineate between implementation and services, especially when we're talking about these boards, they don't like the complicating factor, they don't like the look that it's complicated to do. I found also in when you're selling as salespeople, there's a language of professional services that I try to avoid, to reduce the appearance of this is really hard. So if you're going in and you'd like all our stuffs, 20,000 years, 20 to 50. And that sort of range of maybe we have a flat fee of 5k. For implementation. When you start bringing in services words like statement of work, just even saying professional services, people just, they see, from my experience, love to hear yours. They remember that bad project, they remember where a big four came in and did a million dollar scoping. And that thing went six ways, you know, sideways, that's a little bit why I wait till you're a little bit further along. In the Insight partners, by the way, is a great graph on this where it starts off as implementation and then you hit this revenue bucket, and then suddenly, what services
Jonathan Corey 17:57
I hear this all the time. So I talked to services, leaders and law, and the persistent narrative amongst our community is we really struggle with getting our salespeople to sell services, either correctly or properly. And I was talking to someone about this at a conference in in Florida a few weeks ago, where they were I really feel like, the sales team is not really able to position services very well. And I was like, tell me, like why sustain, they have to make it easy to position. So but and they see they can't really go back to our discovery piece they like they're not really very good at identifying really the pain and the challenges and the impact of those challenges. And therefore, they're not able to position services. And I'm like, that's not a services, positioning services problem that is a broader sales enablement,
Jeff 18:47
outcomes versus feature selling things for
Jonathan Corey 18:50
Correct, so to your point, if you're selling, you're selling a product is $20,000. With a 5k implementation, there might be less scrutiny on the implementation, the minute you get to being 20k feet 30k 40, 50. There's a lot of scrutiny on it. These days, most of the companies that we deal with in mid market, I would say as soon as you get to 80 to $100,000 is going up to the CEO. Yep, my every single time, every single time. I certainly goes to the CFO every single night. So therefore, like the cost of services, again, if that's positioned internally as Oh, hey, it would be nice for us to have this feature. For x y Zed. I would venture that deals not getting signed off regardless of how much your services fears. Whereas if it's look, this is the outcome that we're looking to achieve as a business and there here is the financial impact of achieving that outcome. And it's going to cost us 50k and software of 50k and services that signed up. I think the services issue is less of a services issue. It's more of a sales capability issue as if we haven't really now problem in the pain that the customer is wanting to solve the financial impact of solving that problem, then I don't really care about your implementation anyway. I'm not really listening, like asking that question, for whatever reason, just to give you the time of day as a salesperson. Whereas if I'm really keen about solving this problem, I'm super interested in what happens post sell? No, you'd be like, how can we prepare? We had this with a client recently where they were so prepared. And the solution architect said to me, and they were like, that's the best prepared customer?
Jeff 20:30
Oh, absolutely. And some people don't like it when they get peppered with all the questions. You I'm sure you've seen this well, prepared customers are the better ones, the ones who you're like, wow, it was super easy. They didn't ask a question. I'm like, What? No, that is not good. That is going to drag on forever. Because everything's going to be a big surprise, where they're not going to be invested in the project. And they don't show up as well.
Jonathan Corey 20:53
Here's a question about see then in the companies that you work with an advisor, you're working a lot with the customer organization. So in the majority of the businesses that you deal with, how many of those do you come across where they go, we've got adoption issues,
Jeff 21:07
I will say 90%, because sometimes they get brought into, we just got some investment, we need to scale, what's the infrastructure needed to put it into place from some of the private equity companies that I work with, you get brought in when they've either smashed a bunch of companies together? Or they have an adoption issue? Yeah. And that's when we start pulling it back. And I will look at what was said in pre sales and how everything was positioned in pre sales, so that the implementation can go smoothly getting the outcomes, and then sometimes, you brought it up, a lot of these companies aren't selling on outcomes, they're selling on features. And then I'm like, oh, no, I'm gonna have to turn blue, that's a longer fix. 90% usually have outcome or have adoption issues.
Jonathan Corey 21:47
And then when you do the analysis, I would imagine that when you unpack it, a relatively large proportion of that is all linked to implementation. Or maybe not implementation of product one, but maybe implementation of projects two or three.
Jeff 22:04
Absolutely in for variety of reasons, whether it be bad process, or bad handoffs and transitions, but usually I do see junior teams try that aren't well prepared. The worst thing you can do is have a CSM be a project manager, because there's just so relationship based they don't know how to use any of the basics of project management and then then the issue start compounding after that, the biggest thing I see is this subservience where they are so afraid of pushing the customer and I'm always trying to do change management with them, which is saying, it's okay to push them you're pushing them to get their money's worth faster in escalating is good because it shows you're paying for this, you're just not able to use it. Hopefully, people are charging their MRR ARR once the contract sold. Now, if they're not, then there's a much, much bigger problem. What I see is a big bookings problem when they have said we're not invoicing until we're alive. And then what is live?
Jonathan Corey 23:03
So there's a few things that are really interesting topics. And one is this persistent issue, which is the how do you make that more seamless transition from sales and into delivery? A lot of that just starts with Are you well aligned with your teams internally? Do you tool? Do you actually have handover meetings? Or is in it? Yeah, that's exactly you relying on sales,
Jeff 23:23
have two slides that go into the sales deck that make it really easy for them to talk to it, don't overcomplicate it, and then be a good sales partner. And get on these calls and listen and ask good questions. Those make the deal happen faster, but don't just start freaking out during the call or after we should not be signing this customer when you're on the phone with the customer. Like, that's interesting. Okay, great. We're gonna talk about that internally, X, Y, and Z. And then you can do the whole like, Hey, listen, this will be a good deal. But we need to do X, Y, and Z in order to get this and then just be rational about it.
Jonathan Corey 23:54
As a few tactics, like actually inserting a lead time is a good idea. Like, you really need to understand like, how long does it actually take you to hand over sufficiently? Let's say you've got one meeting for a handover? Let's say that person leading the implementation, ideally, is reviewing a few of the call recordings with the customer. Yep. I think one of the things I advise people to do is you start naming all of your meetings in the sales process as certain things so for example, we have things called process reviews, where you review the services delivery process for our clients, and we do that across a few different personas that then is in our call recording solution, which means that then it pasted into the handover notes. So you have noted that when we call the first sales interaction, FSI then you have the process reviews and that but think about it, you might have maybe three hours worth of calls that would be useful to review before starting a project. That's a lot. That could be a half a day of EFA in a more complex solution of handover. So again, we can't start next week, if I'm busy next week, and I won't have time to do that. So lead lead times, it is really important to your point around decks, if you have a business case slide or you sell a proposition that's going to have a business case, that is like slide one in your kickoff deck, and it's not the smiley face because they're already on the call. It's, here's what you said. Has anything changed? Yeah. Tell us more about this. Is this a good refresher? Absolutely. My wife is a HR director for an event company, and they bought an HR solution. And I remember the onboarding call. And we're working from home. And so the employee, and it was like, why have you bought from us? And I was like, wow, that is? Exactly. It just happens so often.
Jeff 25:48
That's when my least favorite term and software it gets said, which is, do you guys even talk to each other?
Jonathan Corey 25:53
Have you actually talked to people and there's a lot of those things, that there's also many people's CRMs, like, the opportunities may not capture the information. So I always advise and counsel to try and have, whether it's medical value selling whatever it is in the opportunity. So if you were to read the opportunity, and people actually fill it out, yeah, gives you a very good idea.
Jeff 26:15
Wow, I've got a couple standard plays on and fixing companies and people don't get their Commission's until that stuff's all filled out, they can go hit closed one and get the deal coat signed, and everything when the deal comes in the last day of the quarter. One of those things, as I said, it's sometimes dealing with more junior teams that don't understand the value of doing that. And CFO, everybody's in line with it. And it works, because everybody is usually financially motivated. I'm curious if you're doing this, I really try and get one of our architects or somebody in the pre sales process is like the contract gets sent out for the software. Okay, great. So you don't want to you're not slowing that down. Lawyers are looking at stuff, hey, let's talk about your implementation. It's forward selling a little bit. And then it's also finding out some of these things along the way. And also helping prepare them like giving them some homework to do well, all the stuff is going on.
Jonathan Corey 27:03
If you use a CRM, and you track the time and duration within stages, like I know, for example, in my business, that average contracting time at the moment is about 45 days. So to your point, within that 45 days, you can be doing stuff with the client, Solution Architect plugged in CSM plugged in, get them into the LMS for your solution, product familiarization a bunch of stuff like that. Yeah, hitting on another one of your points. And this comes ties it back to the why from a financial perspective is like the way that businesses are valued, they usually is related to like your growth, your Arr, your gross retention, your net retention and your profitability, but also your revenue. So not just your ARR you're gonna have your bookings, what you've booked your jumping, so ash money is what you're talking about. There's two elements, I'm talking about accounting revenue, so recognized recognized revenue, I recognized services revenue, which as to your point is usually now increasingly linked to when the customer is getting that product. So that might be go live. It might be UHC of the platform switched on, depending on how you're adopting certain accounting rules in your business. It's regulated now increasingly, oh, code SEC was always is one of those ones where it's like at go live that when they make first call, or whatever it is, when I really tuned into this was at Dreamforce. Yep. And I met the head of sales ops for a large publicly traded, they are publicly traded now telecoms business, they had purchased a Salesforce vendor. And I was doing a talk on onboarding. And he said, Look, I want you to meet the CEO. And so that made that my went to this party, they were hosting his fancy hotel kind of bullshit, watching the head of sales upset to the CEO. So don't think that we're talking about the board meeting. And then in the investor call, this guy's got a business that can help us with that problem. And I was like, what happened in the analyst call? And what he told me was, and I've got the transcript, he said, they had bought a business, they'd integrate it into their portfolio, and they were reporting on the numbers. And they had booked 100 million in ARR, but only recognized 40 within that year. And in his words, the analysts had a field day, they were like, you're inefficient. They've seen it before. Absolutely.
Jeff 27:08
I got those questions on analyst calls as well, too. That's what I mean, when I said that I need certain things. It's we need the power to be able to make sure these things like because we got we got caught up on Enron stuff as well to see milestone delivery. There was all sorts of new rules and regulations that we did by favorable pricing. It's brutal. Yeah.
Jonathan Corey 29:44
And then the other thing is final thought and it's like if you're looking to sell your business, when you get valued, you'll be thinking, Oh, I'm gonna get valued on ARR Z, I'll get x y Zed rep multiple. No, you won't. Because you where you think you're gonna get valued? And then when you actually get valued, you'll get valued on? Yes on arr? Partly but on revenue, right? So if there's an I've seen in some businesses like millions and millions of dollars, like delta, like you mentioned, like businesses, 5 million, 10 million dollar business, they only had 2 million in revenue, and the rest of it was spread out over two years. And the investors pulling their hair out, because they're like, We got to take this in. And again, coming back to come back to implementations. Yeah, it's this whole idea of this flywheel of growth, which I never really understood, just fundamentally, sometimes the customer journey slide that everyone's got in their business that goes customer acquisition, onboarding, expansion renewal quite, we mentioned, it's quite worth mentioning, because it's over one year time horizon. I mean, the more I thought about this is like that implementation block, per your point of visit implementation, is it PS is like one step in this choreography. Across multiple years. And actually, when you think about things over a three year time horizon, what is the operational run the state that you want your clients in, at that point in time,
Jeff 31:15
also, very similar to the CAC sort of chart like when you're starting to get value, you're actually your acquisition costs for the customer are starting to, you're getting profitable off of that customer, essentially,
Jonathan Corey 31:24
most of what I'm learning is, if you try and bite off more than you can chew too quickly, and try to cram too much into year one. People can't digest it. Yes. So you're going into the QBRs, pushing this. And it's like, actually, that's where this sort of services portfolio and implementations and then PS or maybe some managed services and these types of things. As you get bigger, you need to have somewhat of a catalogue to help get the client that over a period of time. And it's difficult to do that if you haven't monetized it to a certain extent.
Jeff 31:57
You said you had a couple questions to ask me while we're still recording are those non recordable questions you wanted to ask me?
Jonathan Corey 32:03
How tall are you?
Jeff 32:05
I am almost six foot four. I'm not sure what that is in British measurements.
Jonathan Corey 32:10
And did you play basketball as a young man?
Jeff 32:13
Now coach, my daughter, who is five, seven or five, eight is a 12 year old?
Jonathan Corey 32:20
And what do they think of dad doing random videos in like hotel rooms on social media in like waitressing gown, comparing, what they think that does for a living? I love it.
Jeff 32:33
I mean, as you can imagine, they've probably picked up on vibe by now, what they don't like it is when I take that same energy to the own Facebook group. Where because my daughter's will send me screenshots and text of something that I put onto the Facebook page. And they're like, calling me a legend and all this other stuff. And they're just like, just absolutely dying. But I am quick with the comments on the Facebook group.
Jonathan Corey 33:00
that should not be allowed on the internet.
Jeff 33:02
Well I've been told to ramp it down a little bit. So it's very surgical strikes now. Now
Jonathan Corey 33:07
I have a great deal of respect for you, Jeff, and we will effectives on things is really good because I do think what you're trying to counsel in folks is to have a degree of economic competence. This isn't such a scary thing and to just the post that you put out about if you charge X and Your time's up over why you it's not as scary as it seems. So hopefully today's conversation has helped a few people think through it.
Jeff 33:32
Absolutely. Always a pleasure. And thank you so much. I'm looking forward to chatting some more because I really do enjoy our conversations and I learned a ton hopefully everybody listening was while this was very in depth and I loved it and I a fantastic conversation. So I'm really glad you jumped on here.