Dear SaaStr: Should I Include Professional Services In My ARR Calculation?

Q: As a SaaS company should you include professional services in your ARR number?

Include professional services in your total revenue run rate.

But — break it out.

Here’s a great example from Qualtrics:

You can see here at a $723m run-rate, that $535m is from software / SaaS and $198m is from services. You can also see the relative ratio of the two, and that Qualtrics, while it does have substantial services revenue, is still primarily a software company.

Report is this way. It’s clear, fair and transparent. And still gives you credit for all your revenues

You can see Veeva, at $2B in revenues, does the same thing. Clearly and crisply: