Mark Suster: Services Revenue Is Exactly What A Startup Needs

“Services businesses are not scalable and the market won’t reward this revenue so make sure that third-parties do your implementation or clients do it themselves. We only want software revenue.”

This is a huge mistake. If you’re an early-stage enterprise startup, services revenue is exactly what you need”, Mark Suster , a 2x entrepreneur, now VC at GRP Partners , says.

Does not this advise clash with the vision of selling products?

No, because “the most important way to sell a product for an early-stage business (or frankly any stage) is to have strong referenceable customers”.

Extolling the virtue of building references through providing services, Mr Suster says, “Referenceable means they are willing to be part of your sales collateral, willing to take calls from key leads, willing to speak at your conferences, etc”.

How do you get referenceable customers?

  • Even great products don’t just roll themselves out. You need to implement them. This often means getting the product to talk with other existing products, implementing the product to match the specific needs of a customer’s internal processes, training, monitoring usage and encouraging adoption.
  • One of the most important things to get an implementation right is integration. The more your product is integrated with other systems, the lower your churn rate will be.

“You’re a software company not a services company! We like software. Just have third-party VARs &SI’s do the implementations.”
Politely listen but ignore this advise. As he says, “Why would you have your most important success factor (successful implementations) outsourced to a third-party where you don’t control quality and who is strictly mercenary (i.e. doesn’t care as much about the successful outcomes as I do)”.

Of course, you can rely on a third party, “if you don’t care about referenceable customers”.

Adapted from One of the Biggest Mistakes Enterprise Startups Make . Visit the link to read the story.

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