3 Nuggets Every SaaS Company Needs to Remember

Short answer: the three nuggets every enterprise SaaS vendor should remember are: set expectations early, link price to terms, and keep the agreement simple. We represent lots, literally 100s and 100s, of SaaS companies, and there are a few nuggets of useful information we want to share with other SaaS companies when they think about negotiating an enterprise SaaS agreement. Ok, here goes.

1. Setting the Right Expectations.

I find that setting the right expectation of what the customer is buying is the #1 issue in any SaaS enterprise agreement negotiation. It is really about reaching a true meeting of the minds on what the customer gets. Enterprise customers notoriously want things their way or customized for them (and if you ever read their form agreements you will see what I mean), but in the SaaS world it does not work that way (i.e. everyone gets the same thing for a very low price). So make sure that as part of your marketing and selling process you set the right expectation that your customer is getting what everyone else is getting.

2. Price and Terms Are Linked.

This is a high level issue, but it is super important. Think of it this way: when you give an enterprise customer a price quote, it is based on (a) your pricing model and (b) your standard SaaS agreement terms. If you fail to explain this or educate them about it, your enterprise customer may get the wrong impression and assume you can give them whatever they want for that price. The only way to combat this is to tell them that if they want to change the ‘terms of the deal’ then the price will change too. So, in your quotes, consider adding language at the bottom along the lines of:

“This quote is based on [Your Company] standard terms and auto renewal of orders. Any material changes to these terms, or not allowing orders to auto renew, will result in an increase in [monthly/quarterly/annual] subscription fees.”

One caution on that auto-renewal line: how you word and present it has to line up with the FTC negative-option standards. We cover that in the FTC’s Negative Option Rule.

3. FAQs, Visual Charts, Etc.

There are several other ways to communicate your model and set the right expectation. For example, you can create a really good FAQ that explains what your service does and (equally as important) what it does not do. I even have a blog post about this: FAQs as Part of SaaS Negotiations. Alternatively, don’t underestimate the power of a really good visualization or chart, as that is one of the quickest ways to explain what you do. Here is a good example of pricing visualizations or charts: Link.

So remember these three tips before you start any enterprise SaaS agreement negotiation. You can either learn the hard way, or benefit from our knowledge doing lots of SaaS enterprise deals: there are tricks and tips that help shorten the sales cycle. These nuggets are a big part of how a SaaS contract attorney keeps an enterprise deal on the rails. I hope this helps.

Why These Three.

They are the nuggets because they are exactly where enterprise SaaS deals go wrong. Misaligned expectations cause churn and disputes after signing, de-linked price and terms let a customer rewrite your model for free, and an overlong, customized agreement slows the deal and creates obligations you cannot keep across rapid release cycles. Get these three right and most of the rest of the negotiation takes care of itself. There is a deeper emotional layer to this too, which I cover in SaaS Contract Negotiations Are Not All About the Software.

Enterprise SaaS Negotiation: Common Questions.

What are the three nuggets? Set the right expectations early, link your price to your standard terms, and keep the agreement simple. Those three prevent most enterprise SaaS deal problems.

How do I keep a customer from rewriting my terms for the same price? Tell them, in the quote, that the price is based on your standard terms and auto-renewal, and that changing the terms changes the price. Price and terms are one package.

Why keep the SaaS agreement simple? An overlong, customized agreement slows the deal and creates obligations you cannot keep across fast release cycles. A simple, standard agreement is faster to sign and easier to honor.

Resources:

Blog post regarding Price and Terms are Linked.

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice. You should hire an attorney if you need legal advice, which should be provided only after review of all relevant facts and applicable law.