Peter Gassner, Founder & CEO of Veeva on Making Professional Services Profitable

Name: Peter Gassner, Founder & CEO of Veeva on Making Professional Services Profitable
Uploaded: 2017-09-12T16:43:53+00:00
Duration: 1 min 36 s
Channel: Jason M. Lemkin
Description: In this interview, Veeva founder and CEO Peter Gassner explains his early‑stage rule that professional services should never be given away for free. He…

12 Sept 2017 · 2 min

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1:36

In this interview, Veeva founder and CEO Peter Gassner explains his early‑stage rule that professional services should never be given away for free. He argues that if a service isn’t worth the customer paying for it, it isn’t worth providing at all. Gassner stresses that services must be cash‑flow positive and accretive, contrasting the common practice of using services as loss leaders that erode margins. He notes that rational customers will pay for services when clear value is demonstrated, and that a failure to sell services signals a problem with the service offering itself. Gassner also clarifies the distinction between product‑included support (training, basic support) and extra, billable services, urging companies to lay these boundaries out explicitly. Finally, he warns that giving away services can jeopardize deals, as the loss of revenue from services can cause a deal to “tank.”

Chapters

Didn't give away our people. We had professional services and we didn't give— we had a rule very early.
That's a good thing to chat about briefly. Very early in the company. I give away. You didn't give it away.
Very early. I always had this mantra that, look, if our, if our people are not worth the customer paying for them, then they're not actually worth anything. 'Cause if they're worthwhile, the customer will pay for them. So that was a rule. Hey, you don't give away professional services.
Services have to be accretive.
Yeah, what about if the deal was gonna tank? Well then I guess the deal's gonna tank because the one thing we're doing is not giving away professional services. So that's just a rule.
Yeah, so then that is, because if you look, I haven't done the scientific study, but if you look at a lot of companies when they go public, services are loss leaders, right? They lose, it's negative 20% margin. You can't do 60 on it, But if you can make it cash flow positive, especially in the early days, that's, that's a bit of magic.
It is. It is. And the customers will pay if they get the value.
Well, they don't really push back if the value is there, right?
No, they don't, because they're generally rational, right? They, if they can get more value from that person, then they'll, they'll do it. And you have to look at yourself. If your services are not profitable, gosh, why, why cannot I make valuable enough services? Why do our services cost less than the cost of our people? What am I doing wrong? Yeah. The pressure's on you. It's very simple. I view it as a problem if we can't sell services because we're doing something wrong.
Yeah. I think we all, you didn't, I made this mistake, a lot of us do, is we just want the customers to be happy. Subsidizing services is a natural thing to do. Because if you don't provide good services, it's even worse, isn't it? Yeah. Bad services is worse than not even closing the deal sometimes.
Right, absolutely. But you just have to understand, hey, I'm selling a product. A product comes with a certain amount of service. It might, it might come with customer support, or it might come with training, or whatever you decide it comes with. Okay, you don't charge for that, but there's some things that it doesn't come with, and if you want that, you pay for that. Yeah. And you just lay it out real clearly.