Speaker 1
Hey. Welcome to taking the BS out of buying SaaS. I'm Mandy McGovern, a leader on Tropic's procurement services team, which is Tropic's services team negotiating on the front lines with suppliers ranging from Salesforce to Datadog and everything in between. We're here to make the software buying and renewal process a little less painful one quick tip at a time.
And today, we're tackling what to ask for in a SaaS contract. Let's get into it. So you were able to negotiate great pricing. Awesome.
But have you taken the time to make sure you've negotiated other favorable terms outside of pricing to make sure you're setting your future self up for success? You'll be kicking yourself at the time of renewal if you skip these asks. Billing terms are often a part of commercial negotiations. However, sometimes these can be overlooked in the heat of negotiating lower pricing.
Suppliers can sneak in unfavorable payment terms like upfront payment on a multiyear term or due upon receipt or net fifteen terms. Taking a few minutes to review these terms and push back for terms that align with your team's requirements will make sure you stay in your account payable team's good graces. One of the most common clauses people miss when negotiating a new purchase or renewal is the auto renewal clauses, especially as some suppliers will hide these terms in their service agreements. Removing these terms upfront ensures you and your team will maintain optionality at the time of renewal and not be bottlenecked into a renewal.
It's important to note that some suppliers will require an auto renewal clause to be included to maintain the existing negotiated pricing or for compliance reasons. In these cases, it's imperative to be aware of what your opt out period is.
Most commonly, sending thirty days notice ahead of the renewal will suffice. However, some suppliers require sixty or ninety day notice. Having a trusted repository with automated alerts like Tropic is critical to ensure you don't miss any opt outs. Negotiating good pricing is a great outcome. However, to make sure you're not back at the negotiation table fighting a steep increase in pricing at the time of renewal, you'll want to include a price cap to ensure future pricing protection.
Some suppliers will include language in their terms that pricing is subject to increase by five to up to twenty five percent at the time of renewal. While some suppliers will not include any specific language yet still implement an increase at the time of renewal. Negotiating a price count of three to five percent provides pricing predictability and protection so you can keep the great pricing you worked so hard for. In the ever changing SaaS space, many suppliers will repackage their pricing models.
They'll implement support fees or apply price increases across all SKUs. In many cases, a pre negotiated price cap will not apply to these price changes. That means it's important for you to negotiate a price cap that encapsulates this and provides protection to the team regardless of the pricing model changes. Consider leveraging the language shown on the screen.
In some instances, these pricing model changes will come at a steep increase with added features and functionality that are not necessary to business. Negotiating language that protects your team to maintain that same necessary functionality at the negotiated price is recommended to ensure you're not bottlenecked into a new package that does not provide value to the business. To ensure you and your team have ample time to evaluate the new package, features, determine what's critical to the business, along with budgeting and negotiating these terms, it's crucial to negotiate protective terms indicating a ninety day notice must be provided ahead of any pricing or packaging changes.
Many consumption based contracts have a lot of assumptions baked into the volume commitment. While you likely took a conservative commitment, things can change over the course of twelve months. Negotiating a rollover clause is highly recommended to ensure you are not losing the volume that you paid for. Most suppliers will extend rollover language so long as you renew at the same or higher volume.
On the flip side, regardless of pricing model, it's important to be informed on how overages are handled. Some companies extend monthly invoices in arrears, others tackle overages with quarterly true ups, and some address usage at the time of renewal. Avoiding monthly invoicing in arrears is highly recommended as sometimes seasonality or unanticipated circumstances can cause a rare spike in usage. Having the ability to audit and right size usage is important to ensure that you're maintaining low costs.
Ensure there are clear terms negotiated into your contract to provide protection from skyrocketing costs.
When growth is forecasted but not a part of the upfront commitment, it's important to negotiate a rate table to ensure you're well positioned to enable growth. Mapping out tiers beyond the contracted volume with discounting baked in to the tiers will ensure your discounting is scaling as you grow. Lastly is co marketing terms. Brand protection is incredibly important. Many suppliers will include co marketing terms in their terms of service, indicating they reserve the right to leverage your logo and name for any marketing initiatives.
Removing this language may be important for you and your company to maintain brand protection. However, if you are open to maintaining this language, it should be leveraged in commercial negotiations to ensure that you're obtaining further discounting for this concession. Having these requirements active in a procurement tool like Tropic contract red flag checklist is recommended to make sure these terms are addressed on every negotiation. What the recommended templates and checklist? Get the kit.
