Notes from an on-site: Found money

[Rob] (0:00 - 0:16)

And he was like, I already see where you're going with this question. And like, you are still in the trap. You're still in the trap of thinking that professional services has to generate net new revenue, even in a world where it doesn't do that.

It's still beneficial. It's still worth it.

[Dillon] (0:23 - 0:46)

What's up lifers and welcome to The Daily Standup with Lifetime Value, where we're giving you fresh new customer success ideas every single day. I got my man Rob with us. Rob, you want to say hi?

Welcome to the crib. MTV. And we got JP with us.

JP, do you want to say hi? Hi. I've never seen that scalp before.

[JP] (0:46 - 0:47)

Never seen my scalp?

[Dillon] (0:48 - 1:26)

No. I'm your host. I also have a scalp.

Let's see it. Dillon Young, you can't. It's covered in hair.

Anyway, guys, once again, we're here in person. In Mr. Rob Zambito's beautiful home. Thank you for the hospitality.

And that's because we are here post Customer Success Collective. We're here wrapping up our experience after attending the two-day conference. Rob was the emcee, did a fantastic job.

JP was Rob's hype man, also fantastic, clapped a lot, yelled a lot.

[JP] (1:26 - 1:27)

Come on, baby. Where's the energy?

[Dillon] (1:28 - 1:33)

I was just a general contrarian throughout the event. You did good.

[JP] (1:33 - 1:33)

You did good.

[Dillon] (1:33 - 3:23)

I did great. Thank you. There was one presentation that I believe stood out more than any other for me.

And perhaps somebody who owns a business, and I've got to think creatively about ways in which I present and also provide value and derive value from my customers. Rob, I'm sure you do a bit of the same, but you're much better at this than me. I think you can just ask people for money.

This presentation was by Mr. Chris Barnabo. He's over at HubSpot, and he runs, they're a big organization, so I'm sure he's like one of several, but he does professional services over there, runs a team. And he was talking about some of the interesting ways in which they have studied professional services, how they execute on professional services.

And it's funny because part of this entire conversation and what Chris was presenting on was this idea that professional services, particularly in SaaS companies, often gets a bad rap or is viewed as antiquated. It takes too long. People don't want to pay for it.

They expect that the product should be able to do whatever, whenever, when they need it. If it doesn't fit my profile entirely, it's your fault, man. Figure it out.

I'm not paying for you to figure it out on my behalf. And he did a bit of a mindset shift for me in a lot of ways. One of those was, let's flip the script on professional services and instead let's be service professionals.

I think he missed his calling as a marketing guy. I'm just going to say that because that's one of the turnarounds for you.

[JP] (3:23 - 3:26)

We didn't land on Plymouth Rock. Plymouth Rock landed on us.

[Dillon] (3:27 - 4:05)

That's certainly not true, but I understand what you're doing. We're recording here in New England, so I guess we're going to have to call out. But the thing that really landed for me, again, going back to this idea of providing services and creating ways to generate revenue, was the way in which he spoke about the creative financing for professional services.

Historically, it has been, oh, you need an extra feature, you got to pay us 40 grand for it. You got to do this, you got to do that. And instead, what's that face for?

[JP] (4:05 - 4:07)

I don't know nothing about this.

[Dillon] (4:08 - 4:23)

Professional services has, if you have an additional system that we don't already have a native integration to, or you've got a complex implementation process that doesn't fit our standard one, we're going to charge you for that.

[Rob] (4:24 - 4:53)

Or, there's another example that I launched once in my past. We launched accounting services to complement our product. Which was an accounting software?

It was accounting software. And our customers were like, look, I don't want to do my accounting. So we're like, hey, we have a solution for that.

So we actually avoided for the longest time, we're like, we're not going to do anyone's accounting. We swear to God, we will live and die by the fact that we are not a services company. Software only, famous last words, because we changed our minds when we realized that.

[Dillon] (4:54 - 5:24)

What's also, if you have the market, and you're already selling software to them, your acquisition cost for that additional revenue is so low, why wouldn't you? I mean, there's a million reasons why you wouldn't. And there's as many people who get into it who also get out of it, because they're like, we're not really built for that.

We don't have that mindset. That's not the way we want to be valued. Anyway, so the way he explained it was like, people don't want to pay for that anymore.

And yet they still need it. It's not as though their needs have necessarily changed.

[JP] (5:26 - 5:38)

It's like toilet paper. I still need toilet paper, even if I don't want to pay for it to apply. That'd be anyway.

[Dillon] (5:38 - 7:29)

This is not our first recording. If in case you can't tell, he threw up some stats that he then used to create an argument. So the way he showed it was particularly at HubSpot, but it may have been more broad, was those customers who had professional services applied to their account and administered on their account in some form or fashion had a 14% higher GRR rate.

So gross revenue retention rate. Basically, they just retained at a higher rate, renewed their contracts at a higher rate. And so he backed into the math, and he was like, all right, well, if the contracts are averaged this value, and they're renewing at this rate, well, then that means that professional services has this dollar value impact to the bottom line.

Okay, well, if we stay under that in the amount of resources that we use in professional services or that we administer for free to our customers, well, then it's still a net positive. You don't necessarily have to charge them for it to be net positive. And he did caveat by saying that CFOs, you have to have a willing CFO, one who's willing to think outside of the box.

But I thought that that was so interesting. And I think it speaks to the way in which we often have to be creative for our customers. It's not often an A to B sort of solution.

And I took a lot of it as a business owner of like, okay, it doesn't have to be a straight up services for dollars or things like that. We can get a bit more creative. It's almost a bartering system in some ways.

Rob, you've been nodding along this whole time. I can't tell if it's because you're tired, or if you're just so interested in what I have to say. I've talked for a while.

So why don't you jump in here?

[Rob] (7:30 - 8:16)

No, so actually, what I loved about his presentation is he did the whole presentation, we get to the Q&A. And when I'm asking questions from the audience, I asked a personal question. And he just sunned me on the answer.

I was like, typically, I feel like CFOs expect to see 40% margins. And he was like, I already see where you're going with this question. And like, he didn't say it was verbatim.

But he was like, you are still in the trap. You're still in the trap of thinking that professional services has to generate net new revenue. And he's like, even in a world where it doesn't do that, it's still beneficial.

It's still worth it under certain circumstances, obviously. And I thought that that was so great. I was like, yes, sir.

[Dillon] (8:17 - 8:26)

It was almost like Plato's cave. You're still just looking at shadows, man. You got to break free.

You got to realize that there's a lot more out there.

[Rob] (8:26 - 8:26)

Yeah.

[Dillon] (8:27 - 8:50)

And that's an important distinction to make is he did not say you give everything for free to every customer. It's got to make sense. They've probably got to be in a higher segment level, things like that.

But JP, I think you had to step out for this one. But now that I've kind of like summarized it for you, is it tracking for you? Are you understanding that?

What do you think about that?

[JP] (8:50 - 11:17)

Well, the way that I've come to understand professional services is in the context of you have a product that is fairly complex, although that is typically enterprise. Yeah, right. And sometimes what's complex to one person isn't to another.

But you sort of hinted at that with the ICP, right? Someone's at the ICP, there may be a reason. And sometimes that reason could be that that more complex solution maybe comes at a lower cost because there's more on the customer to be able to implement and run the solution.

And so for me, in terms of why is this important? If I have a customer and they buy a solution that my company is selling, it's a 12-month contract, but they haven't stood up the software in three to four months. Well, what am I going to do in Salesforce when I have to go in and increase the risk?

Because that is a risk. Hey, this customer paid for 12 months, but if it takes them four months to finally get the software up and running, and then maybe even a month before they see their first milestone or value, it better be a big value because this person now, when it comes around to renewing, they're going to have to consider some things. And so for me, professional services is this area of, I like to think of it as, I don't want to put this all on the customer.

But I would think if I was going to go buy a TV that needs to be mounted on the wall in my house, and I never mounted one before, I mean- You'd pay a professional. I would pay a professional to do it. Otherwise, I could do it myself.

I'd save the money, but I could end up messing up. So I would rather, if I know that, when I'm in Best Buy, I may talk to them and say like, hey, maybe you could have one of the members of the Geek Squad come out to help me install this TV on my wall.

[Dillon] (11:17 - 11:21)

And sometimes they'll probably run specials or they'll do it for free.

[JP] (11:21 - 11:26)

Yeah. We have a sale on Sony TVs.

[Rob] (11:27 - 11:32)

So why don't you- And that's not even recurring revenue too, but it still makes sense economically.

[JP] (11:32 - 11:32)

Yeah.

[Dillon] (11:33 - 11:59)

Yep. If their margins are high enough for it. They have some understanding of like, you'll be a repeat customer in the future.

In many cases, it can be a breakeven cost if they believe that that is the key to you coming back around instead of these guys don't exist anymore, Circuit City, or you're going to Target instead or something like that. It's a little bit more full service in that case. And more specialized though.

All they do is electronics, right?

[JP] (12:00 - 12:03)

Hey, if they installed my TV on my wall, maybe they can do my bidet.

[Dillon] (12:03 - 12:26)

There you go. No, they cannot. Let me just tell you.

This boy cleaned up. And that is our time, folks. That is our time.

I'll spare you the gory details. It was an absolutely wonderful last few days with my good friends, Daddy's little meatball, Rob Zambito. Five.

[JP] (12:27 - 12:28)

Five dollars.

[Dillon] (12:29 - 12:53)

Five dollars for the loan. I don't even... Guys, can you tell that this is our last recording?

After this, we're going to go celebrate a very long couple of days, but it's been wonderful. I want to say thank you to the Customer Success Collective for inviting us to the CS Festival Boston 2024, allowing us the opportunity to learn and also to play, to record all of these episodes.

[JP] (12:53 - 12:53)

That too.

[Dillon] (12:54 - 12:56)

Love you guys. We'll see you soon.

[Voiceover] (13:01 - 13:32)

You've been listening to The Daily Standup by Lifetime Value. Please note that the views expressed in these conversations are attributed only to those individuals on this recording and do not necessarily reflect the views and opinions of their respective employers. For all inquiries, please reach out via email to Dillon at LifetimeValueMedia.com.

Find us on YouTube at Lifetime Value and find us on the socials at LifetimeValueMedia.com. Until next time.