SaaS negotiation tips: How to close the best deals every time
The process of negotiating SaaS contracts can make a big difference for business success. Get them right and achieve favourable contract terms and save time and money; get them wrong and you’ll waste time and runway, suffer from inflexible contracts, and increase your risk.
SaaS negotiations are even more important as businesses must compete in an ever-competitive economy: inflation remains high as do labour costs. In addition, the UK Spring Budget included an increase in the corporation tax rate. It’s more important than ever for businesses to build efficiency into their procurement processes.
Increased financial pressures on the seller side have led many SaaS companies to increase prices, leaving SaaS buyers in a difficult position. Modern businesses need software to run their business–96 tools on average, according to Sastrify data–so how can SaaS buyers optimise negotiations to ensure their business gets the best deal?
In this article, I’ll run through some proven ways to negotiate better SaaS contracts, especially during a time of economic uncertainty.
7 negotiation tips to close the best SaaS deals
1) Plan ahead
Be sure to allocate sufficient time for negotiations. Initiating SaaS contract discussions early grants you a significant edge, leaving room for any negotiation back-and-forth with the service provider. Additionally, you won't feel pressured to accept a suboptimal agreement due to time constraints, so you can be sure you're actually getting the best deal possible.
2) Prepare thoroughly
Along with allowing enough time, preparation also requires research and foresight. This includes evaluating the current state of SaaS management at your company, looking at the full SaaS stack, noting existing renewal dates, and considering if an enterprise plan is necessary.
One of the most important pieces of preparation is working with key stakeholders in your company to identify which features are “need-to-have” versus “nice-to-have”. All of this advance work will help you craft a strategic plan – and decide how to handle the negotiations themselves – to secure optimal results for your organisation.
3) Don’t assume – ask!
Utilise the negotiation as an opportunity to clarify any questions. Don't make assumptions; if uncertain about anything in your SaaS contract or agreements, ask explicitly to eliminate ambiguity. Document all responses – for example, renewals, usage terms, data management, etc. – in the SaaS agreement.
4) Minimise risk
Keep in mind that circumstances can change rapidly in a negotiation, so you want to plan for the unexpected, avoid assumptions, and aim to make decisions that minimise risk to your party. For example: avoid signing long contracts for new SaaS tools, don’t switch providers based on a feature that’s “coming soon”, and don’t commit to more licences than you need based on projections of future growth. As you move forward, the SaaS agreement can be modified as needed.
5) Be proactive with renewals
Since SaaS vendors are focused on reducing churn and maintaining their customer base, one opportunity to get a great deal is to engage in early renewal discussions. If there are SaaS tools that you know for sure you want to keep, you can proactively offer to renew early in exchange for discounts or better terms.
6) Concentrate on manageable objectives
Breaking up the SaaS contract process into smaller goals allows you to take a phased approach in which you anchor at one stage and move forward from there. The first step in any SaaS negotiation should be to establish common ground, by talking through the bare minimum of your desired outcome.
Here’s an example of the smaller objectives approach: Let’s say your company is also willing to consider a multi-year contract. Rather than mentioning this from the beginning, you can start by negotiating a 1-year contract and mention a longer commitment only in stage 2. At this stage, the vendor has already anchored a discount you can build on or trade for something else – e.g., you’re happy with the discount and would even commit to two years, but would need a contract with quarterly billing.
Concentrate on achieving each milestone and hopefully you’ll achieve more of your objectives and continue to build on them over time.
7) Justify your requests
The salespeople you are negotiating with typically have room to negotiate and offer discounts or different contract terms – but you have to make your case. Your responsibility is to present a logical explanation for why they should grant you lower pricing or more favourable overall terms during the negotiation.
The most likely way to succeed with this is by asking the account manager questions. Lead an open conversation to understand their needs and how you can set them up for success in their own organisation. This might sound strange at first, but it will help you build rapport, win the account manager over, and make him act as an ambassador on your behalf in their business. Salespeople have targets as well, so it's best to understand their motivation and levers and spin this knowledge into an advantage for yourself.
The best SaaS negotiators look to build relationships
Above all else, remember you are negotiating with human beings. Connecting with your point of contact and establishing a solid vendor relationship – with frequent touchpoints – will be a win-win during the negotiation process. If you're using a SaaS negotiation platform like Sastrify, these relationships can be fostered through the help of your procurement expert, who likely has long-standing relationships with the vendors you want to work with.
Whether you’re talking with a vendor you know well or a newer one, try to strike the right balance – some SaaS negotiators come in guns blazing (i.e. too assertive), while others don’t push hard enough (i.e. too friendly).
Working with thousands of vendors at Sastrify has taught me (and my team) the importance of the negotiation tips above. Following these and working with a SaaS buying solution like Sastrify will lead to better pricing, sizable time and money savings, and optimised contracts that meet your specific needs.
Sastrify is a digital procurement platform for Software-as-a-Service products. Founded in 2020 by serial entrepreneurs Maximilian Messing and Sven Lackinger, Sastrify helps high growth companies get the best deals when buying and renewing SaaS subscriptions. The Sastrify platform enables procurement, tech, and finance teams to work together seamlessly, benefitting from best in class buying processes, partnerships with leading SaaS vendors, and an ever-growing database of price benchmarks. Backed by FirstMark and HV Capital, Sastrify supports hundreds of clients globally, including Gorillas, Pleo, and Capchase.