The growth-stage SaaS paradox: Why PS leaders keep fixing the wrong things

In high-growth SaaS, success can mask deeper misalignments.  Professional Services (PS) teams are often pressured to prove profitability before delivery is stable. That’s a trap. 

At Propel25, Justin Manduke, VP of PS at AuditBoard, drew from his time at Medallia, Blend, and Afresh to explain how even great teams get priorities wrong. The core message: doing the right thing at the wrong time can erode long-term value. The key is to understand where the organization is on the growth journey and to pick the right priorities.

Here are the key takeaways from the session.

Understanding the professional services paradox in growth-stage SaaS

At any given time, a PS team is pulled in many directions:

• Modeling capacity to scale without overhiring
• Keeping delivery costs lean
• Investing in automation to drive efficiency
• Educating customers
• Creating implementation standards
• Supporting renewals and growth
• Building customer champions

All of these are valuable. But should services be a profit center? Should PS become a second sales force to maximize ARR? If it’s profitable, why not grow it as large as possible?

That’s where the paradox sets in.

In SaaS, company valuations are tied to recurring revenue, not to service dollars. Valuation multiples reflect predictability, margin, and scale, not the billable hours your PS team can sell. There’s a fundamental tension in SaaS: walking the line between value and valuation. 

This leads to PS teams making common mistakes, such as:

• Modeling for scale too early
• Chasing utilization instead of outcomes
• Optimizing for margin without reliable delivery
  
  

The real job of a professional services leader in SaaS is to create clarity. Services exist to enable product success, not to define it.

This shift is especially critical when leading teams rooted in traditional services mindsets. These teams need help understanding the business they’re in now: one where services are a lever for product adoption, not just billable hours.

Justin outlines some key guardrails to consider:

• Finance or RevOps, not PS, should own revenue and margin targets.
  
  
• Discounting decisions should sit with those authorized to make them, not the delivery team.
  
  
• If PS is constantly flagged for margin or discount issues, either the team lacks clear targets or leadership has flawed assumptions about service costs and pricing.

Rethinking the Rule of 40 for growth, profitability, and the role of services

The Rule of 40, revenue growth plus profit margin, has long been the default SaaS benchmark. But it’s losing relevance.

Today, valuation is better predicted by what some call the Rule of X: a multiplier that reflects how much more investors value growth over profit. For many, X = 2.5, meaning each point of growth contributes 2.5x more to enterprise value than a point of margin.

In short, for high-growth SaaS companies, accelerating revenue still outweighs expanding margin.

Where services fit in

One of the least acknowledged truths in professional services: you shouldn’t scale until delivery is consistent. Margin follows. But too often, teams chase scale or protect margin without a reliable delivery foundation.

This is where the paradox plays out again:

• Discounting services to close ARR can make sense. If growth is 2.5x more valuable, then services are a lever, not a cost center. 
• But under-scoping or over-discounting shrinks margins, inflates customer acquisition costs (CAC), and breaks delivery.
  
  

While mature services orgs with strong margins and predictable outcomes create real leverage, forcing maturity too early limits growth. 

Standardizing before you deeply understand customer needs leads to rigid models that don't flex across segments or industries.

The bottom line: Margin matters, but not at the cost of high-leverage growth. Consistent delivery comes first. Scale second. Margin third. 

Where services fit into growth models

SaaS companies typically operate under one of three models:

• Product-led growth (PLG): Revenue is driven by product usage, trials, and self-serve upgrades. Services are minimal.
• Sales-led growth (SLG): Revenue comes through pipeline generation, complex deals, long sales cycles, and structured onboarding. Services teams support implementation and drive value realization.
• Professional services-led growth (PSLG): Services play a central role in configuring, customizing, and scaling value delivery, especially for flexible, enterprise-grade platforms.
  
  

Many organizations that believe they are PLG or SLG are, in practice, operating within a PSLG model, especially when services are required to unlock real value for customers.

In a PSLG context, services teams do more than implement. They uncover new use cases, inform product direction, and drive customer expansion. But this also introduces operational risk and margin complexity. Growth often involves deviating from the “happy path”, scenarios where projects run over, scope is misaligned, or services are discounted to close deals.

How service leaders can overcome the paradox of growth

1. Know your real growth model

Growth-stage SaaS companies often lean on services, whether or not they admit it. Many “PLG” motions are actually PSLG in practice, where services are critical to realizing product value. Recognizing this is step one.

Don’t buy the narrative that the product alone drives value. If services are doing the heavy lifting for onboarding, adoption, or outcomes, acknowledge that and plan accordingly. You can't optimize what you refuse to measure.

2. Get the order right: deliver → scale → optimize

It sounds obvious, but most teams get this backward under pressure. Delivery must be consistent and reliable before you scale. Scale must be predictable before you optimize for profitability.

This gets harder as different parts of the business grow at different speeds, new products, geographies, or customer segments. But the foundation has to be solid. You can't scale what you don't fully understand, and mistaking early wins for maturity is a fast track to burnout and inefficiency.

3. Build maturity before chasing margin

Profitability must rest on operational maturity. That means clean data, reliable delivery tracking, accurate resource consumption metrics, and realistic forecasting. If your systems can’t tell you where time goes or how long delivery takes, you’re not ready to make margin decisions.

4. Match strategy to growth phase

Early-stage companies should expect learning loops, inefficiency, and experimentation. Trying to force maturity too early leads to brittle processes. Mature companies, on the other hand, should be investing in repeatability, automation, and delivery scalability.

5. Quantify the trade-offs

Services leaders need to clearly explain when discounting drives strategic growth, and when it just erodes margin. That conversation has to be grounded in data and outcomes, not guesswork or internal pressure.

6. Understand that maturity is dynamic

What works today might not work next quarter. What scales in one region might collapse in another. The role of a PS leader isn’t just to hit targets, it’s to know where the business is on the growth curve and adapt the model accordingly.

Check out the rest of our Propel25 recaps here for more insights from the industry’s best.