This is a short transcript excerpt from a YouTube interview (Jason M. Lemkin channel) where Peter Gassner, founder & CEO of Veeva, explains an early company rule: do not give away professional services. Gassner argues services must be accretive and priced so customers will pay if the services add value; if services aren’t profitable, the company should change the offering. The interviewer adds that making services cash-flow positive early is valuable and that subsidizing services can mask poor service value.
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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 gave it 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 because 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 going to tank? Well, then I guess the deal's going to 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 its 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 a bit of magic, isn't it?
It is, it is.
And the customers will pay if they get the value. Well, they don't really push back if the value's there, do they?
Right. No, they don't, because they're generally rational. Right. If they can get more value from that person, then they'll do it. And you have to look at yourself, if your services are not profitable, gosh, 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, and it's.
The pressure's on you. So 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. Right. And so subsidizing services is a natural thing to do because if you don't provide good services, it's even worse, isn't it? 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 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 and you just lay it out real clearly.
