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.

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