Archive for the ‘SaaS’ Category

Software Deals Using the Customer’s Form

Ever try to license software or provide SaaS to a Fortune 500 company or some other high profile company? Did they insist on working from “their paper”? You know enough not to simply hope for the best and sign whatever contract they put in front of you, but you also don’t want to delay further a months-long sales effort over the paperwork. What do you do?

The Customer’s Form Contract

You want the deal, so you tell them to send you the draft. BigCo sends you its contract. It’s a long, complex document that rivals the King James Bible. You send it to your lawyer, who spends an hour or two reviewing it. The lawyer comes back with a list of concerns that go something like this:

  • The intellectual property terms don’t apply to the deal you’re trying to close. You simply want to provide access to your SaaS platform, and the contract has your company assigning over all of its IP – effectively preventing you from offering a SaaS platform to your other customers.
  • The security terms are totally overbearing. You’ll only receive publicly available, anonymized information, but the contract has your company submitting to monthly penetration tests, annual SOC 2 Type 2 audits across all five principles, and background checks on all your employees by a third party of your customer’s choosing.
  • The renewal and termination provisions give your customer a right to terminate at any time, for any reason, with a pro-rata refund.

You then call your counterpart at BigCo and negotiate the renewal and termination provisions, while your lawyer rewrites the intellectual property and security terms. You’ve now spent your own relationship capital negotiating a key term, you’ve spent money on legal expenses, and the revisions haven’t even been sent to your customer’s attorney yet. Worse still, you’re beginning to wonder why they sent over a contract that requires this much hassle.

Here’s the problem: When they told you they wanted to work from their paper, you felt like you were in no position to negotiate. You spent a long time to get the deal to that point, and the economics were finally set. Your counterpart may have even said, “Our legal can be a pain. I don’t like having to deal with them, but it’s how we do things at BigCo.”

A Better Way Forward

Assuming you are even willing to work from their form, consider an alternative. Imagine instead that you told your counterpart at BigCo, “Certain legal items are really important to us. They are X, Y and Z. If we can work from a contract with those included, I’m confident the lawyers can hammer out the rest and we can quickly get this deal done.”

So what are X, Y, and Z? Here’s a sample of issues that are critical in many software deals:

  • Intellectual Property – Are you assigning your software (literally giving the code and full ownership to your customer), licensing it and reserving ownership rights to yourself, providing user access to a SaaS platform, or something else?
  • Data – If you’re providing a SaaS platform, who is responsible for the content of the data uploaded into it? Who owns it? What can (and can’t) you and your customer do with it?
  • Termination – Under what circumstances can your customer terminate the agreement?

Obviously that’s not an exhaustive list, and critical issues vary from deal to deal and company to company. Ideally, you already know your X, Y and Z.

When you communicate key legal concerns the moment you are willing to concede on using their paper, you send some important signals to BigCo:

  • You’re willing to work with them if they’re willing to work with you.
  • You know that the legal terms matter, and you know which issues are especially critical for your deal.
  • You want to learn quickly whether they will insist on dealbreaker terms.
  • You will expedite the process to get the deal done.

If your counterpart at BigCo also wants to get the deal done soon, your message will reach BigCo’s legal department. And if BigCo’s legal department takes cues from your counterpart, you’re much more likely to receive an agreement that actually applies to your deal. This saves everyone time and money in the long run.

But suppose your counterpart doesn’t want to close quickly or doesn’t relay your message, or suppose the legal team doesn’t take cues from your counterpart. Suppose the contract you receive from BigCo’s legal department isn’t any better. Are you really any worse off than if you had not tried this approach?

by Paul Temple | Permalink | No Comments

 

Closing the Software Deal – Part 2

Closing software deals with less legal hassle demands more than just a good agreement – it requires a well-informed and well-equipped sales team. If your company offers SaaS or licenses software to other businesses, consider these additional tips to close deals quickly and at a lower legal cost.

Build a Legal FAQ

Your team should know most of what’s in its agreement and why it’s there. Customer stakeholders who are not attorneys are quite likely to ask your sales team questions that are both ‘legal’ and important to the deal, long before an attorney is involved. Getting the answers right demonstrates your company’s experience, preparation, and ability to ensure customer success, all while speeding the deal to close. Getting the answers wrong – or not knowing the answers – simply decreases the likelihood of closing the deal or increases customer acquisition cost for no good reason.

A few examples of questions for which most sales teams should know the answers, particularly in SaaS deals:

  • What are the details of your SLA? Do you offer credits or refunds? If so, how are they calculated? What’s been your uptime historically? When do you schedule routine maintenance? Are you using third party hosting providers? If so, who?
  • Do you use data uploaded by your customers into the platform for any reason other than providing your service? If so, what are you using and why are you using it?
  • Are customers able to download their data from your platform? If so, how quickly can it be done? In what formats? Where are you storing that data?

You may even find it helpful to develop a ‘legal’ FAQ written by your attorney with guidance from your sales leaders. Sales leaders can ensure the FAQ includes answers to the legal-related questions they commonly field in the trenches, while your attorney can ensure the answers reflect what’s in your agreement. When new questions come up on a recurring basis, your attorney can also update your agreement where appropriate.

Create a Decision Tree & Fallbacks

Assuming you’ve closed enough software deals to know what is and is not negotiable in your agreement, how can you be more efficient? When you’re part of a small startup, virtually everything filters up. But, as your company grows, that cannot continue when the number of deals grows as well. What types of matters need to be on your plate – and what types of matters can you leave to the head of sales? Are you leveraging what you negotiated in prior deals?

They say the most important question in law is, “Who decides?” That’s absolutely true when closing a software or SaaS deal. If certain issues are commonly negotiated and you concluded they are minor, then consider whether it’s more efficient for your company to leave those issues to someone else. If other issues are more significant, then make clear who does and does not have the power to negotiate those items.

When you leave certain issues to someone else, provide alternative provisions that you and your attorney wrote and approved. You can even create an alternative version of your contract with footnotes for each of those alternatives.

Train the Team

Obviously, these solutions will not matter if your team does not know how to use them. But by this point, you may be asking yourself whether they have the time for what amounts to legal training. After all, they are busy trying to close deals, and they want to stay focused on the big picture.

If you’re convinced that some basic tools and process can help your company close software or SaaS deals with less legal hassle, put those tools to good use. Build an FAQ and iterate on it. Document a decision tree. Provide written alternatives. Critically, take the time to train your staff on how to use them. An hour of legal training and negotiating during employee onboarding or annual meetings can prevent more expensive back and forth months later. At the very least, the materials become simple resources your reps can leverage if they don’t remember the details.

by Paul Temple | Permalink | No Comments

 

Closing the Software Deal

Is your software deal stuck in legal limbo?  Need to get it closed to ‘make numbers’ before EOQ?  If your company offers SaaS or licenses software to other businesses, consider these three tips to close deals with less legal hassle.

Don’t bury the lead

SaaS agreements and licenses that do not make the fees obvious to your customer’s counsel do no one any favors.  If the deal means your customer will pay you $25,000 or less per year for three years, and their legal counsel can quickly see that, counsel will very likely treat it accordingly – hopefully with a lighter touch than a deal 20 times that size.

If you instead bury the dollars and cents deep in the agreement, or worse still – put them on a separate file your customer’s lawyer never receives – the lawyer may be more likely to spend more time and more money aggressively negotiating with you.  $25,000 worth of negotiation for a $75,000 deal makes no sense.  For large deals, expect a thorough review no matter where you put the financial details.  But don’t encourage your prospective customer to spend more on legal expense than makes sense relative to the deal size.

Also, take a moment to describe your platform in the agreement.  In my experience, agreements from some hot names in tech right now lack minimal descriptions of their platforms.  If your customer’s attorney knows nothing about the offering, you’re much more likely to wind up negotiating issues that are totally irrelevant to your deal.  That’s nuts.  Take a moment to describe the offering, if only at the most basic level.  You will save your team and your customer valuable time and legal expense.

Know your market

Are you selling into a regulated industry?  If so, do you know what regulatory burdens your customers face, and if they’re changing?  Does the platform you’re pitching impact your customer’s ability to comply?  If you don’t know the answers to these questions, you’ll find out sooner or later – perhaps painfully.

For example, if you’re selling into the healthcare industry, you should know whether your offering will impact your customer’s ability to comply with HIPAA.  You should know what a BAA is, and you should be prepared to answer why your company will or will not sign one.  Another example . . . if your offering will gather information from people residing in the EU, you should be aware of European privacy law and potential changes that may impact you and your customers.

Don’t wait until your customer’s counsel brings up these and other market-specific issues during negotiation.  Draft a deal that accounts for them and be prepared to explain your thinking.

Plan for what comes next

If you’re like most in the software business, you live and die with churn and LTV.  You’re much less likely to see positive movement on those metrics if you don’t have a clear plan to ensure customer success with your software or platform.  In other words, you need to meet customer expectations about your offering.  Great software companies exceed those expectations.  Others let sales teams close the deal and throw it over the wall – leaving things like implementation or integration to another day.  Don’t be that guy.

One way great software companies set expectations is with a plan that the customer approves early in the relationship.  This doesn’t make sense for every provider, especially low price providers, and the plan doesn’t require every little detail.  But for high-touch, high-end solutions, customer users and leaders should play a role in crafting a plan that the customer approves.  Be open to this, even if it impacts CAC in the short-term.  It saves both you and your customer time and money in the long run, establishes trust among their users and your staff, and reduces the risk of buyer’s – or seller’s – remorse.  Critically, you’ll be more likely to start customers on a path to upsells, renewals, and referrals.  If your platform isn’t just “plug and play,” and your sales team already poured time and money into cultivating the deal, take a little extra time to set clear expectations and consider an early sign-off on the same.

by Paul Temple | Permalink | No Comments