Creating, negotiating and managing sales contracts is a pivotal part of a Software as a Service (SaaS) company’s operations. These contracts outline the relationship that you have with your customers, clarify expectations, and protect both parties legally. For these reasons, it’s critical for SaaS companies to create collaborative contract management processes that are effective with a number of different groups during this process. Most of these groups, as with anything in startup companies have competing priorities and sometimes disparate goals. Here are some key considerations to keep in mind and some of the benefits that you can get along the way when you get it right.
Collaborating with External Counsel
Working with lawyers is aways a challenge, but for good reason. They are trained to protect your business and reduce risk wherever possible. This is paradoxical to the existence of any startup company which are inherently built on risk and their ability to push that risk to a reasonable level to maintain an extremely high growth rate. Legal teams work in the opposite direction and can often get to loggerheads with startup companies. The key to building a good relationship is to build an advisory one. The legal teams are there to advise you on risk, not to hamstring you in a way that you don’t feel like you can take the level of risk needed grow as fast as you need to. This is not to say that they shouldn’t strongly advise you against taking unnecessary risk, but they are there to help, not hinder. Here are some tips on how to best collaborate with them and the benefits that come along with it.
1. Understand the Importance of Early Engagement
Engaging legal counsel during the initial stages of contract development, especially if you’re building a standard SaaS contract template or an NDA template, can make the process much smoother. Early involvement allows your legal counsel to gain a comprehensive understanding of your business, its unique challenges, what your customer use cases are, and the specific terms and conditions that should be included in your contract. They can then draft contracts that are tailored to your needs and protect your interests, saving time and reducing potential issues down the line.
2. Define Clear Roles and Responsibilities
To ensure smooth collaboration, it’s essential to establish clear roles and responsibilities for all parties involved in the contract creation and negotiation process. Generally, legal counsel is responsible for ensuring the contract is legally sound, while the SaaS company’s team should provide the business context. This includes conveying unique aspects of the product, its pricing, delivery, and support mechanisms. With this in mind there are a lot of contract commercial decisions that go into a contract negotiation and ensuring that your legal team is aware of where these commercial decisions should be raised is important. Who decisions if a change in contract payment terms from 30 days to 60 days is okay is something that your legal team should know about.
3. Ensure Regular Communication
Communication is the cornerstone of any successful collaboration. SaaS companies and legal counsel should maintain regular communication, ideally setting up scheduled check-ins to discuss contract development and any emerging issues. One of the key things that you need to keep your legal team updated with is the way your product is evolving. Early startup companies are constantly changing their product and this may have implications of how your contracts should be written. Consistent communication is keeps everyone on the same page and ensures that potential problems are identified and addressed promptly. This can include your sales team presenting a demo to your legal team to they understand the product well.
4. Leverage Legal Counsel’s Expertise
One of the benefits of having external legal is drawing on their expertise. Your external legal counsel is there to provide legal advice, so be open to their suggestions and feedback. This is particularly important when negotiating contracts with customers who may demand amendments to your standard terms. Experienced legal counsel can help navigate these negotiations, ensuring you make compromises without compromising your legal and financial security. With this in mind you should look to build collaborative contract management relationships with external legal counsel that have experience in your industry. Finding an experienced SaaS lawyer can be extremely useful in growing your business.
5. Keep Counsel Informed about Changes
SaaS is a fast-paced industry with regular changes in services, pricing models, and regulations. Keeping them informed is particularly important if you’re looking to pivot or move into a different industry. It’s essential to keep your SaaS legal counsel informed about such changes so they can update your contracts accordingly and advise you on potential legal implications.
6. Provide Feedback
The relationship between a SaaS company and its external legal counsel is not a one-way street. Companies should provide regular feedback about what’s working and what’s not. This feedback can help the legal counsel better tailor their services to the company’s needs, fostering a relationship of continuous improvement.
7. Encourage Learning
Finally, while legal counsel should lead contract creation and negotiation, it’s helpful for SaaS company teams to have a basic understanding of contract law and negotiation techniques. This helps them understand why certain terms are included and how to handle preliminary contract discussions with customers before involving legal counsel.
Successful collaborative contract management between SaaS companies and external legal counsel in creating and negotiating sales contracts can significantly contribute to a company’s success. It ensures that contracts are robust, tailored to the company’s needs, and adhere to the prevailing legal framework. This ultimately provides the company with greater legal protection, more efficient contract negotiation, and better customer relationships. Remember, your legal counsel is not just a service provider but a strategic partner in your business growth.
Involving Sales, Founders, and Product in SaaS Contract Negotiations
Contract negotiation is a critical stage in the sales process that involves a lot of your team in terms of outcomes, and for that reason it’s very useful to involve them in the negotiation process or just for them to be aware of what is happening in the process.. While it’s common to leave the bulk of this process to legal teams, integrating sales leaders, founders, and product leaders into these discussions can offer significant benefits. Here’s why this multi-disciplinary approach can give your SaaS startup an edge.
1. Holistic Understanding of Customer Needs
Sales leaders, by virtue of their role, have a profound understanding of customer needs, pain points, and expectations. Their involvement in contract negotiations ensures these insights are taken into account, potentially leading to contracts that are more appealing to customers and that meet their unique requirements more precisely. It also helps them learn what is acceptable in contracts and what is not, meaning they can push back on things early in the process before things get to the legal team.
2. Ensuring Product Alignment
Product leaders play a crucial role in collaborative contract management and contract negotiations, especially when it comes to setting expectations about the software’s capabilities and limitations. They can clarify contract technical terms, answer questions about product functionality, and help prevent misunderstandings that could lead to customer dissatisfaction or disputes down the line. But also, and let’s be realistic, how many times has a contract pulled the product team away from their product roadmap with a custom request for the product that has been embedded into the contract? Giving the product team an early heads up of this can be very helpful.
3. Just Plain Better Communication
Having sales, product, and company leaders involved in contract negotiations facilitates more comprehensive and transparent communication with customers. Instead of relaying messages back and forth through legal teams, these leaders can address customer questions and concerns directly, creating a smoother and more efficient negotiation process.
4. Building Trust and Relationship
Having high-level involvement in contract negotiations sends a strong signal to customers about the value the company places on their business. It shows a commitment to understanding and meeting their needs, which can strengthen trust and cultivate a more robust business relationship.
5. Greater Negotiation Flexibility
When leaders are directly involved in contract negotiations, they can make decisions on the spot, without the need for extensive back-and-forth with internal teams. This allows for greater flexibility during negotiations, which can expedite the contract finalization process and adapt quickly to the customer’s needs.
6. Accelerated Learning
Involving various stakeholders in contract negotiations provides an excellent learning opportunity. Sales leaders get a deeper understanding of the legal aspects of the sales process, product leaders can gain insights into customer perspectives, and founders can get a direct feel for the market. These insights can inform future strategies and initiatives, contributing to overall business growth.
7. Risk Mitigation
A multi-disciplinary approach to collaborative contract management and contract negotiation helps mitigate risks. Sales and product leaders can identify potential issues that might be overlooked from a purely legal perspective. These could include unrealistic service level agreements (SLAs) or feature commitments that the product team cannot deliver.
Involving sales leaders, founders, and product leaders in contract negotiations creates a much more customer focused approach. This not only leads to better contracts but also strengthens customer relationships and provides valuable insights that can drive growth in customer accounts and better renewals. While it’s crucial to have legal expertise guiding the process, enriching the mix with different perspectives can undoubtedly pay dividends.