Yes, it’s the other “s” word — services. SaaS services are frowned upon by many institutional folks and usually valued far lower than subscription revenue. Even recurring services revenue finds itself way down the valuation curve. In some cases, this disdain for services may be warranted. In others, it’s misplaced. The irony is that the market’s reluctance to fully value services in SaaS companies can push some founders and CEOs away from strategies that could well make, rather than break, their software valuation.

When SaaS Services Make Sense

Cash is King, But That’s Not the Most Compelling Reason

First of all, it’s important to remember that services generate cash. I was on a call the other day when a SaaS founder mentioned how he used services to generate quick cash whenever he needed it. The predictability of subscription revenue is great, but it doesn’t create that kind of make it and bank it shot in the arm. The challenges are staying focused on the software business, not getting hooked on those services hits, and delivering the services at a high margin. The latter means not selling hours.

So while cash flow may be a good reason to sell some services atop your SaaS revenue, the best reason is retention. I ran an enterprise martech SaaS and can attest that services improved onboarding, engagement, usage, and retention. SaaS buyers, even at the SMB scale, need help to make the best use of tools. And their chances of renewing are far higher when they see full value from an indispensable part of their business life. Many SaaS solutions don’t become indispensable on their own. They need a bit of help, and services deliver that help.

To Monetize or Not to Monetize SaaS Services

If cash is the second most compelling reason to welcome services into your SaaS revenue mix, then it may be expendable. One of the nice things about having a valuable services offering is that you can barter it away without eroding your subscription revenue. I have always lived by a policy of one price for everyone. Consistent pricing translates into a better sales process and more predictable sales cycles. That said, I am always ready to add value when a deal demands flexibility. One of the best ways I’ve found to do that is services.

When you add value using services that improve adoption, usage, and retention, you improve the customer experience, improve the likelihood of renewal, and show that you’re willing to give to get the business. Obviously, that giving should be judicious and restrained. But within those parameters, giving away some services that ultimately help you renew the customer down the road is a pretty good trade.

Categories of High-Value SaaS Services

Let’s define high-value in terms of both the customer and the business. That’s not to say there can’t be a services offering that only benefits the customer, but thinking of them as double-edged swords is much more likely to help your subscription revenue. To make it easy, let’s say that a high-value SaaS service is one that deepens software adoption. That’s pretty plain and simple. Those were words we lived by at ion interactive. We wanted services that made our tool indispensable. Here are a few ways to make yourself stickier with services.

SaaS Onboarding

Stickiness starts with usage. And usage begins with purposeful, high-velocity onboarding. When expectations are accurately set in sales and marketing, onboarding should be set up for a smooth ride. But there’s often some friction that can lead to stalling. Quality onboarding services can minimize the friction to help a customer get fast and clear value from your SaaS. I had a meeting with a fellow CEO yesterday who shar...