Selling is the hard part. Building processes and templates for better SaaS sales contracts is also the hard part. At Contract Sent, we understand the unique challenges faced by small to medium-sized tech companies in negotiating and managing their sales contracts. We understand them because over the last ten years we’ve made a lot of the early stage potential mistakes and had to fix them ourselves. Learning these was the fastest way to know not to make the mistakes again. While our contract management software offers a negotiation and team management solution, we also recognize the importance of equipping startups with practical tips to better SaaS sales contracts from the start. In this article, we’ll look at the top ten tips for better SaaS sales contracts to streamline negotiations, shorten sales cycles, and empower your legal team (basically get them working with a lot less input from your founders).
- 1. Clearly Define Scope and Deliverables:
- 2. Customize Terms to Your Product:
- 3. Streamline Approval Processes:
- 4. Utilize Advanced Contract Comparison Tools for Better SaaS Sales Contracts:
- 1. Turn on Track Changes Early:
- 2. Clearly Identify Reviewers:
- 3. Use Comments Wisely:
- 4. Set Clear Deadlines:
- 5. Review Thoroughly:
- 6. Accept or Reject Changes:
- 7. Keep a Record:
- 8. Use Compare Documents Feature:
- 9. Protect Sensitive Information:
- 10. Maintain Clear Communication:
- 11. Save Backup Copies:
- 12. Finalize with Care:
- 13. Document the Negotiation Process:
- 14. Educate All Parties:
- 5. Task Management for Legal Workload:
- 6. Maximize the Kanban Board for Contract Stages:
- 7. Track Key Metrics For Better SaaS Sales Contracts:
- 8. Version Control is Crucial:
- 1. Use a Document Management System:
- 2. Assign Unique Contract Numbers or IDs:
- 3. Create a Version Naming Convention:
- 4. Track Revisions with Timestamps and Authors:
- 5. Clearly Mark and Date Changes:
- 6. Limit Editing Access For Better SaaS Sales Contracts:
- 7. Maintain a Master Copy:
- 8. Establish a Clear Approval Workflow:
- 9. Use Comments and Annotations:
- 10. Regularly Review and Consolidate Changes:
- 11. Archive and Retain Old Versions:
- 12. Automate Version Control Where Possible:
- 13. Educate Teams on Version Control Policies:
- 14. Regularly Audit and Improve Processes:
- 9. Focus on Key Contract Clauses For Better SaaS Sales Contracts:
1. Clearly Define Scope and Deliverables:
Begin your SaaS sales contract with a crystal-clear definition of the scope of services and deliverables. Ambiguities in these areas can lead to misunderstandings and prolonged negotiations. Establishing a solid foundation from the outset sets the tone for a smoother negotiation process.
Understand What Are Scope and Deliverables for Better SaaS Sales Contracts
The terms “Scope” and “Deliverables” refer to key aspects that define the services to be provided by the SaaS provider and the outcomes or assets that the customer will receive as part of the agreement. These terms help clarify the responsibilities and expectations of both parties. Here’s a breakdown of what they usually entail:
- The Scope of the SaaS contract outlines the extent and nature of the services to be provided by the SaaS provider. It defines the boundaries and limitations of what the SaaS solution will encompass.It may include details such as:
- Description of the SaaS platform or software being offered.Specific functionalities, features, or modules included in the service.Any customization or configuration options available to the customer.Access and usage limitations (e.g., number of users, data storage limits).Service level agreements (SLAs) specifying uptime guarantees and performance benchmarks.Support and maintenance services provided by the SaaS provider (e.g., updates, patches, customer support channels).
- Deliverables in a SaaS contract refer to the tangible or intangible outcomes that the customer will receive during or after the implementation or use of the SaaS solution. These can vary widely based on the nature of the SaaS offering and the specific needs of the customer.Typical deliverables may include:
- Access credentials and login information for the SaaS platform.Customized configurations or settings based on the customer’s requirements.Data migration and onboarding assistance (if applicable).Training materials or sessions for users.Reports, analytics, or insights generated by the SaaS solution.Updates, upgrades, and new features released during the contract period.Documentation and user guides for the SaaS software.Any specific project milestones or timelines (applicable in larger, more complex SaaS implementations).
Both the Scope and Deliverables sections are needed to ensure a mutual understanding of the SaaS contract terms and the respective responsibilities of the parties involved. They help mitigate misunderstandings and disputes during the course of the SaaS engagement, providing a foundation for a successful and productive partnership between the SaaS provider and the customer. It’s essential for both parties to review and agree upon these aspects before signing the contract.
2. Customize Terms to Your Product:
Avoid generic contract templates (they are a great start but you need to customize!). Tailor your terms and conditions to align with the unique features and functionalities of your software. This not only enhances clarity but also demonstrates a commitment to understanding your client’s specific needs.
Contract Management Made for Startups
Set Tasks, Negotiate Faster
Examples of Customized Terms
Here are some examples of how you might customize a SaaS sales contract for the product you’re selling:
1. Product Description:
- Tailor the contract to include a detailed description of your SaaS product, including its name, version, and key features.
- Specify any optional modules, add-ons, or integrations that customers can choose to include in their subscription.
2. Pricing and Payment Terms:
- Clearly outline the pricing structure, including subscription fees, billing frequency (monthly, annually, etc.), and any one-time setup or customization fees.
- Specify any discounts, promotions, or special pricing arrangements.
- Define the payment methods accepted (credit card, bank transfer, etc.) and payment due dates.
- Explain the consequences of late payments, such as interest or service interruption.
3. User Access and Licensing:
- Define the number of users or seats included in the subscription and any pricing adjustments for additional users.
- Specify user roles and permissions within the SaaS platform.
- Address the process for adding or removing users during the contract term.
4. Data and Security:
- Detail how customer data will be handled, stored, and protected, including data encryption, backup procedures, and compliance with data privacy regulations (e.g., GDPR).
- Specify any data retention policies and the process for data retrieval upon contract termination.
5. Service Level Agreements (SLAs):
- Customize SLAs for uptime guarantees, response times for customer support, and other performance benchmarks specific to your SaaS product.
- Outline the compensation or remedies for SLA violations.
6. Support and Maintenance:
- Describe the level of customer support provided (e.g., 24/7, business hours).
- Explain the process for submitting support requests, including response times and issue escalation procedures.
- Specify any maintenance schedules and notification processes for planned downtime.
7. Customization and Integration:
- If your SaaS product allows for customization or integration with other software, outline the process, costs, and responsibilities associated with these services.
8. Termination and Exit Strategy:
- Define the circumstances under which either party can terminate the contract, including notice periods.
- Address data export and migration options in case of termination.
9. Intellectual Property:
- Clarify ownership of intellectual property, including any customizations, modifications, or content created within the SaaS platform.
10. Liability and Indemnification:
- Customize clauses related to liability limits, indemnification obligations, and remedies in case of breaches or disputes.
11. Compliance and Regulations:
- Ensure that the contract complies with industry-specific regulations and standards, such as healthcare (HIPAA) or financial (PCI-DSS) compliance if applicable.
12. Governing Law and Dispute Resolution:
- Specify the governing law and jurisdiction in case of legal disputes, and outline the preferred method of dispute resolution (e.g., arbitration or mediation).
13. Appendices and Exhibits:
- Include any necessary appendices or exhibits, such as data processing agreements, service level agreement attachments, or pricing tables.
14. Review and Approval:
- Establish a process for review, negotiation, and mutual agreement on the contract terms, including signatures from both parties.
- Remember that the customization of a SaaS sales contract should be done carefully to protect the interests of both the SaaS provider and the customer while addressing the unique aspects of your product and business model. This is when consulting with legal counsel experienced in SaaS contracts is most definitely advisable to ensure compliance and mitigate risks effectively for your startup.
3. Streamline Approval Processes:
With Contract Sent, you can streamline the approval process for changes to contract clauses. Implement an efficient workflow that clearly defines who has authority at each stage of the negotiation. This minimizes bottlenecks and accelerates the decision-making process.
Every company needs to do this. Often the bottleneck here becomes a founder or senior manager whose’s day to day is just to busy to address questions of approval from the legal team. An easy way to streamline this is to create a clear and easy to follow approval matrix similar to the one below:
|Legal can approve
|Head of Sales can approve
|Founder must approve
|1x Contract Value
|Up to $500,000
4. Utilize Advanced Contract Comparison Tools for Better SaaS Sales Contracts:
Tracking contract changes gets a bit messy. From redlines to comments and tracked changes there’s a lot to deal with. Let’s have a quick talk about some best practices for using tracked changes to manage your contract negotiations.
Using tracked changes in Word documents is a valuable tool for managing contract negotiations. It allows multiple parties to collaborate, review, and suggest revisions in a transparent and organized manner. Here are some best practices for using tracked changes effectively in Word documents for contract negotiation:
1. Turn on Track Changes Early:
- Begin using track changes from the very start of the negotiation process. This ensures that all revisions, comments, and suggestions are documented and can be easily reviewed.
2. Clearly Identify Reviewers:
- Use different colors or initials to identify each reviewer or party involved in the negotiation. This makes it clear who made each change or comment.
3. Use Comments Wisely:
- Use comments to provide explanations, ask questions, or provide context for proposed changes. Avoid cryptic or ambiguous comments that may confuse other parties.
4. Set Clear Deadlines:
- Establish and communicate clear deadlines for each round of revisions or comments to keep the negotiation process on track.
5. Review Thoroughly:
- Carefully review each change and comment to ensure they align with your intentions and do not introduce unintended consequences.
6. Accept or Reject Changes:
- Use Word’s “Accept” and “Reject” functions to either incorporate or discard proposed changes. Ensure that you understand the implications of each change before accepting or rejecting it.
7. Keep a Record:
- Maintain a record of the various versions of the document, especially if multiple iterations are created during the negotiation process. This helps track the document’s evolution.
8. Use Compare Documents Feature:
- Word allows you to compare two versions of a document to see the differences. This can be helpful for reviewing changes between versions.
9. Protect Sensitive Information:
- If the contract contains sensitive information or confidential clauses that should not be visible to all parties, use the “Protect Document” feature to restrict access.
10. Maintain Clear Communication:
- Keep lines of communication open with the other parties involved. If you have questions or concerns about proposed changes, address them directly rather than relying solely on comments.
11. Save Backup Copies:
- Regularly save backup copies of the document, both before and after significant rounds of negotiation. This ensures that you can revert to a previous version if needed.
12. Finalize with Care:
- When the negotiation is near completion and it’s time to finalize the contract, thoroughly review the document to ensure that all changes have been appropriately addressed.
13. Document the Negotiation Process:
- Consider creating a separate document or summary that documents the negotiation process, including key decisions, unresolved issues, and the rationale behind certain changes.
14. Educate All Parties:
- Ensure that all parties involved in the negotiation are familiar with how to use tracked changes in Word. Provide guidance or training if necessary.
Remember that effective communication and collaboration are essential during contract negotiations. Tracked changes in Word can be a valuable tool, but they should complement clear and open dialogue among the parties involved in the negotiation process.
Where Advanced Contract Comparison Trumps
Tracked changes are a staple of contract negotiation but it’s quite difficult to understand how much your final contract has deviated from your original template. This is where you can take advantage of Contract Sent’s advanced contract comparison tool to identify changes between your base contract template and the final negotiated contract. This feature ensures that all parties are on the same page before signing and that your founders know how much the negotiation has strayed from standard, reducing the risk of misunderstandings and disputes.
5. Task Management for Legal Workload:
Efficiently manage your legal team’s workload by assigning tasks within Contract Sent. Prioritize assignments based on deadlines, allowing your legal team to focus on critical tasks and ensuring that they are always working on high-priority items.
6. Maximize the Kanban Board for Contract Stages:
Employ Contract Sent’s kanban board to visually manage the stages of your contract lifecycle. This provides a quick and accessible overview of where each contract stands, enabling better coordination and more informed decision-making.
Why Does Kanban Help Negotiations For Better SaaS Sales Contracts?
Kanban can be a valuable approach for managing the contract negotiation process. While it may not be the first choice for every organization, Kanban can make sense in this context for several reasons:
1. Visual Workflow Management:
- Kanban provides a visual representation of the contract negotiation process, making it easy to see the current status of each contract and the tasks involved. This visual clarity can help team members and stakeholders understand the progress and bottlenecks at a glance.
- Transparency is crucial in contract negotiation, as it involves multiple parties with different interests. A Kanban board allows everyone involved to see where each contract stands and what tasks are pending, reducing misunderstandings and improving collaboration.
- Kanban boards typically include columns for different stages or phases of work. Teams can use these columns to prioritize contracts based on their importance or deadlines, ensuring that critical negotiations receive the necessary attention.
4. Work in Progress (WIP) Limits:
- Kanban often incorporates WIP limits for each column. This ensures that teams do not take on too many contracts at once, preventing overcommitment and improving focus on completing negotiations.
5. Flexibility and Adaptability:
- Contract negotiations can be unpredictable, with unexpected changes, delays, or urgent requests. Kanban’s flexibility allows teams to easily adapt to changing priorities and circumstances by moving tasks between columns or adding new ones as needed.
6. Continuous Improvement:
- Kanban promotes a culture of continuous improvement. Teams can regularly review their negotiation process, identify bottlenecks, and implement changes to streamline and optimize the workflow. This iterative approach can lead to more efficient negotiations over time.
- Kanban encourages collaboration and communication among team members. It provides a platform for discussions, questions, and clarifications, helping to resolve issues more quickly and prevent misunderstandings.
8. Reduced Lead Times:
- By visualizing the negotiation process and optimizing it through Kanban, organizations can often reduce lead times for completing contracts. This can lead to quicker responses to customers and partners, potentially improving relationships.
9. Metrics and Analytics:
- Kanban boards can be used to collect data on the time it takes to complete contract negotiations, the number of contracts in progress, and other performance metrics. This data can help organizations identify areas for improvement.
- Contract negotiation teams can scale Kanban boards to manage contracts at different levels, from individual negotiations to portfolios of contracts. This scalability makes Kanban suitable for various organization sizes and types.
- Kanban works well for teams that need collaboration, continuous improvement, and help responding changing circumstances effectively. By using this you’ll get your legal team working much closer with your sales and product teams.
7. Track Key Metrics For Better SaaS Sales Contracts:
Leverage Contract Sent’s dashboard for tracking essential contract metrics. Monitor the progress of negotiations, identify potential roadblocks, and make data-driven decisions to optimize your sales cycle. Here are two simple metrics that you should be tracking:
- Payment Terms and Pricing:
- Why It’s Essential: Including payment terms, pricing, and invoicing details is essential for specifying how and when the buyer should make payments to the seller.
- Importance: These terms help ensure that both parties agree on the financial aspects of the contract, including payment schedules, methods, and any applicable taxes or fees. It reduces the risk of payment disputes.
- Termination and Default Clauses:
- Why It’s Essential: Termination and default clauses outline the conditions under which either party can end the contract and the consequences of such termination.
- Importance: These clauses provide a framework for handling disputes, breaches, or unexpected events. They clarify the procedures for ending the contract and may include details on penalties, refunds, or arbitration processes.
8. Version Control is Crucial:
Maintain a systematic approach to version control. Clearly label and organize different versions of your contracts to avoid confusion. This ensures that everyone involved is working with the latest and most accurate information.
Here are some version control best practices that the legal team should follow:
1. Use a Document Management System:
- Implement a document management system or contract management software that provides version control capabilities. Such tools can help centralize contract storage, track changes, and maintain a clear version history.
2. Assign Unique Contract Numbers or IDs:
- Assign a unique identifier to each sales contract, such as a contract number or ID. This makes it easy to reference and locate specific contracts, even when dealing with multiple versions.
3. Create a Version Naming Convention:
- Develop a clear and consistent version naming convention. For example, use a combination of numbers and letters (e.g., “v1.0,” “v1.1,” “Final Draft”) to indicate the contract’s status and iterations.
4. Track Revisions with Timestamps and Authors:
- Include timestamps and author information for each revision made to the contract. This helps identify who made changes and when they were made, which can be valuable for accountability and auditing.
5. Clearly Mark and Date Changes:
- Use tracked changes or redlining in the document to highlight modifications made during negotiations. Each change should be clearly marked, dated, and attributed to the responsible party.
6. Limit Editing Access For Better SaaS Sales Contracts:
- Restrict editing access to authorized team members. Not everyone should have the ability to modify contract versions. Use permissions and role-based access controls to manage who can make changes.
7. Maintain a Master Copy:
- Keep a clean, unmodified master copy of the contract as a reference point. This serves as the baseline version against which all changes and negotiations are tracked.
8. Establish a Clear Approval Workflow:
- Define a clear approval workflow that outlines who needs to review and approve each contract version. Ensure that all relevant stakeholders, including sales teams, legal teams, and management, are part of the workflow.
9. Use Comments and Annotations:
- Encourage legal and sales teams to use comments or annotations to provide context, explanations, or rationale for specific changes. This enhances communication and understanding during negotiations.
10. Regularly Review and Consolidate Changes:
- Schedule regular review meetings to consolidate changes and finalize contract versions. This prevents a proliferation of drafts and ensures that everyone is aligned on the latest version.
11. Archive and Retain Old Versions:
- Archive older contract versions and maintain a record of all revisions. This is essential for compliance, auditing, and historical reference.
12. Automate Version Control Where Possible:
- If using contract management software, leverage automation features to track versions, send notifications for approvals, and streamline the contract lifecycle.
13. Educate Teams on Version Control Policies:
- Provide training and guidelines to sales and legal teams on version control best practices. Ensure that all team members are aware of the processes and tools in place.
14. Regularly Audit and Improve Processes:
- Periodically review and assess your version control processes to identify any bottlenecks or areas for improvement. Adapt your procedures as needed to optimize efficiency.
By following these version control best practices, your SaaS business can maintain transparency, accuracy, and organization throughout the contract negotiation and closure process, reducing the risk of errors and misunderstandings while improving compliance and efficiency. It will be of great help when you need to go through sales contract due diligence.
9. Focus on Key Contract Clauses For Better SaaS Sales Contracts:
Identify and track critical clauses that are non-negotiable or require special attention. Contract Sent’s tracking feature allows you to keep a close eye on these clauses, ensuring that they are consistently addressed and meet your company’s standards.
While the specific clauses in a SaaS sales contract can vary based on the nature of the service and the parties involved, here are three top contract clauses that are generally important:
1. Service Level Agreement (SLA) Clause:
- Importance: An SLA clause defines the service levels, performance benchmarks, and quality standards that the SaaS provider commits to delivering. It sets clear expectations for uptime, response times, and support availability.
- Key Elements:
- Uptime guarantees: Specify the minimum acceptable percentage of service uptime.
- Response times: Define the maximum time within which support inquiries or technical issues should be addressed.
- Maintenance windows: Explain when scheduled maintenance or downtime may occur.
- Remedies: Detail compensation or service credits in case of SLA violations.
2. Data Security and Privacy Clause:
- Importance: This clause addresses the protection of customer data and ensures compliance with data privacy laws and regulations. It establishes trust and legal obligations related to data handling and security.
- Key Elements:
- Data handling: Explain how customer data will be collected, processed, stored, and protected.
- Data ownership: Specify ownership rights over the data and any obligations for data transfer upon contract termination.
- Security measures: Outline the security measures and practices in place to safeguard customer data.
- Compliance: Address compliance with relevant data protection laws, such as GDPR or HIPAA, and any required certifications.
3. Termination and Exit Clause:
- Importance: A termination and exit clause outlines the circumstances under which either party can terminate the contract and the associated procedures and consequences. It provides an exit strategy in case the relationship needs to end.
- Key Elements:
- Termination reasons: Define the conditions that allow either party to terminate the contract (e.g., breach of contract, non-payment, force majeure).
- Notice periods: Specify how much advance notice is required for termination.
- Data retrieval: Describe the process for data extraction and transfer upon contract termination.
- Transition assistance: Include provisions for assisting the customer with transitioning to another service provider or solution if necessary.
While these three clauses are often considered essential in SaaS sales contracts, it’s crucial to remember that the specific requirements and nuances may vary depending on the industry, the service provided, and the regulatory environment. Therefore, it’s advisable to work with legal counsel to draft and customize SaaS sales contracts to meet your unique business needs and legal obligations.
10. Enhance Accessibility Post-Signing:
After a contract is signed, don’t let vital information be trapped in a PDF. Utilize Contract Sent’s user-friendly system to store and organize contract data efficiently. This accessibility ensures that your senior leaders can easily access and retrieve information when needed.
Contract storage is something that seems simple but without structure it can soon become quite chaotic. We have a great blog post on contract storage that you can check out here.
Building better SaaS sales contracts and processes are a focus area that will help you to build a fast and scalable sales cycle. Contract Sent not only provides a comprehensive solution to contract management challenges but also empowers startups with these ten practical tips. By implementing these strategies, you can create more efficient, transparent, and successful SaaS sales contracts, ultimately driving the growth of your tech startup.