Brief Context
As a growing B2B Software-as-a-Service (SaaS) business, one of the major challenges that you’ll start to face is managing the increased volume of sales contracts. Scaling a B2B SaaS business often (hopefully) translates to an exponential increase in the number of agreements needed to be negotiated and it will mean you need to manage multiple contracts at once. It’s a crucial issue that has a profound effect on your business operations, speed of sales cycles, and overall business performance.
Firstly, let’s understand why scaling impacts the volume of sales contracts. A B2B SaaS company, unlike a B2C counterpart, often has to negotiate contracts individually with each client. These contracts detail specific service levels, pricing models, terms of use, data security provisions, and more. As you scale your business and acquire more customers, the sheer number of these bespoke agreements naturally rises.
An increase in the volume of contracts necessitates more resources. Your sales and legal teams will need to invest additional time and effort into managing the contract negotiation process. For fast-growing businesses, this may lead to a strain on resources. The potential for bottlenecks in the sales cycle becomes real as every additional negotiation and redlines can slow down the deal closure rate, affecting revenue recognition timelines.
Moreover, the complexity of SaaS contracts often increases with the size of the client. Larger or enterprise sized clients tend to require more customizations and legal carve outs. As you scale and begin servicing bigger clients, you may find yourself facing not just a higher volume of contracts, but also ones that are more complex, non-standard and time-consuming to negotiate.
With this in mind, it’s crucial for B2B SaaS companies to strategically plan for this increase in contractual obligations. Fortunately, there are a few ways you can manage this:
1. Standardizing Contracts:
- Creating a standardized contract template can help streamline negotiations. Although customization may still be necessary for larger clients, a significant portion can be covered by your standard contract, and if you can get this in front of customers before they get their contract in front of you it can reduce the time spent on each deal.
2. Investing in Contract Management Systems (CMS):
- Implementing a robust CMS such as Contract Sent, can help manage the increased volume and complexity of contracts. CMSs allow you to automate parts of the contract lifecycle, track negotiation progress, and ensure key deadlines aren’t missed.
3. Leveraging Artificial Intelligence (AI):
- Advanced AI tools can assist in contract review, identify risks or deviations from standard clauses, and even generate drafts, speeding up the contract negotiation process.
4. Upskilling Your Team:
- Invest in training your sales team in basic contract law, negotiation skills, and risk assessment. A team that can negotiate effectively will be able to handle and manage multiple contracts to deal with the increased volume of contracts more efficiently.
5. Outsourcing:
- Consider outsourcing complex contract negotiations to legal experts. This can free up your sales team to focus on what they do best: selling.
Scaling a B2B SaaS business undoubtedly leads to a rise in the volume and complexity of sales contracts to negotiate. However, with the right strategies in place, you can handle this increased workload effectively. Remember, managing this aspect of scaling is crucial in maintaining the speed and efficiency of your sales cycle, ultimately driving your business’s growth and success.
Building More Scale To Manage Multiple Contracts
When you’re really starting to scale your business, managing multiple contracts with a myriad of clients can start to break even the most well built early systems. When you pass five million in ARR and your business is starting to require you to juggle more contractual agreements and their related complexities as well as rely on the contracts for data there are few extra methods to scale.
1. Outsource Complex Contracts, Insource Simple Contracts
- If your startup deals with complex contracts requiring extensive customization or legal expertise, consider outsourcing. There are many law firms and legal tech companies specializing in contract management of complex negotiations. This allows your internal team to focus on their core responsibilities with fast template contracts for smaller customers while ensuring your complex customer contracts are in capable hands.
2. Regular Contract Audits and Tracking
- Regular contract audits are crucial in maintaining compliance and identifying potential issues before they escalate. An audit involves reviewing contracts to ensure all parties are meeting their obligations and identifying any areas where the contract is not providing the intended value.
3. Have Clear Communication Channels Between Each Team That Uses Contracts
- Clear communication is the cornerstone of effective contract management. Ensure you have established channels for communication between your team (everyone, including sales, CSMs, product and senior management), clients, and any external lawyers or external contract management providers. This helps to keep everyone in the loop, allowing for swift resolution of any issues that may arise.
Effectively managing multiple contracts is an art that SaaS startups must master as they grow. It involves a combination of standardization, technological implementation, staff training, and clear communication to avoid poor contract management. As your startup scales, remember that the contract management strategies that worked with fewer contracts may not be as effective. Be prepared to evolve and adapt your strategies to handle increased contract volume and complexity, ensuring your startup’s smooth transition to a fully-fledged SaaS growth machine.
