Ace SaaS negotiations: A 3-step framework

Spendflo Research surveyed top finance and business leaders from fast-growing businesses across the globe about the status quo of SaaS buying. While finance leaders are worried about reactive SaaS buying and rising costs, they are still blindsided by the complex and opaque pricing, negotiation levers, etc. In fact, a CFO once told us he recently learned the ‘display price’ of a SaaS tool on their website is not final! 

SaaS negotiations can be a new beast for most of us. It can be challenging, especially in high-growth organizations that don’t have the luxury or space to conduct long-drawn negotiations. But it doesn’t have to be. Expert SaaS buyers at Spendflo bring their tried-and-tested 3-step framework to help ace your next negotiation.

Step 1: Develop a considered negotiation strategy

While some principles are foundational, a negotiation strategy can not be one-size-fits-all. For every tool you’re looking to buy, you need a considered and customized negotiation strategy that leverages your strengths to get the best prices and terms. Here’s how you can build one.

Define your goals: Understand user requirements clearly. For instance, the marketing team might ask for a CRM, while all they need is an email management tool. The prices of these tools vary dramatically, so you need to know precisely and clearly what the product needs and business goals are.

Do your research: Take a data-backed approach to your product evaluation. Research the market to understand the pricing — not just the numbers but also the models. For instance, a product with usage-based pricing might appear cheaper initially, but the total cost of ownership can be immense. Learn these intricacies.

Set budgets: Based on the requirements, understand the prices of various options available to you. Explore this tool's potential ROI— cost savings, efficiency increase, speed-to-market, etc. — and budget accordingly.

Know your boundaries: While budgets are the most crucial boundary, there are others too. For instance, consider non-negotiables. In the above example, the ability to send emails is a must-have. However, tracking the website visits of an email subscriber is good to have. Knowing these differences will help you negotiate the right features for the right price. 

Understand negotiation levers: SaaS contracts can be negotiated on various factors. Some of the common ones are, of course, the number of users, competition pricing and long-term contracts. However, it is possible to get discounts with the promise of a case study or collaborative events, for instance. Learn them all.

Thoroughly evaluate quotes: Ask for customized quotes from each vendor you’re considering. Then, compare them on all factors, including pricing, features, security, renewal terms, etc. Sometimes, the most expensive quote might also be of the best value.

Step 2: Negotiate from a position of strength

Once you’ve prepared, it’s time to talk to the vendor of choice. Below are the best practices that our expert SaaS buyers swear by.

Ask pointed questions: Ask direct, closed-ended questions that address your concerns regarding the vendor and the tool. For example, what would be the additional cost of adding contacts/email IDs to the email management platform? Can I pay for the number of emails sent instead of the number of contacts on the platform?

Listen actively: Account executives are trained to paint the best picture about their product. However, not every product is right for you. Therefore, when you ask questions, listen to their answers carefully. This will also help get better deals. For instance, if you hear from an account executive that they are amping up marketing efforts, you could offer a favorable case study for discounts. 

Seek and offer clarity: If terms are vague, get them explained, irrespective of how small or unessential it seems. On the other hand, state your offer/counter-offer clearly and concisely. Clarifying your consideration of competing vendors helps your case land a favorable deal.

Build alignment: Conversations might take different tangents, but ensure they always align with your objectives and requirements. For example, you might be offered additional features for the same price instead of a discount. However, it isn't a good deal if the features are useless to you. 

Step 3: Effectively finalize the deal 

Once you agree on the terms and pricing with the vendor, it’s time for due diligence and closure.

The “It’s a deal!” checklist:

• Confirm that pricing and payment terms align with your budgets over the entire duration of the agreement.
• Avoid credit card payments. Opt for a purchase order process with your vendor instead.
• Eliminate auto-renewal clauses, if any. 
• Review the vendor’s service level agreements (SLAs) for your standards for uptime, support, and other metrics.
• Get the IT and legal teams to review the contract and ensure it is feasible.
• Ensure that all the changes — major or otherwise — are made before the deal is finalized.

Alternatively, get the support of Spendflo’s expert SaaS buying and management solution to handle your procurements effortlessly. Book a demo today.

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