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Question for Tyler (or anyone who signs contracts with their customers): What's the minimum deal size that you'd want to have a contract with a customer? If yo
by cj 12y ago
Question for Tyler (or anyone who signs contracts with their customers):
What's the minimum deal size that you'd want to have a contract with a customer? If you're a $50/month SaaS, it probably doesn't make sense, but I could see the benefits as you approach $50k+ / year deals.
Is the primary benefit to lock in the customer (ie. annual commitment)?
- greattypo 12y agoI'd recommend using contracts when you have sales people involved. That typically describes products that cost >=$5k/year (at least for inside sales). The primary benefits for you are: predictable usage, predictable revenue, and easier commissions. It also turns out that most companies prefer/expect to buy these products this way.
- patio11 12y agoIt is at about $10k ACV for negotiated terms, and driven primarily by cost concerns. Below $10k, the cost of contract negotiation and signing blows out the sales model. Your reps would need to close ~25 deals a month, and that is hard when redlined are flying back and forth. Contracts of adhesion you'll have from $1. The primary benefit of negotiable contracts to a SaaS business is unlocking deep pockets which require specific, custom language to buy anything (or anything "expensive.") Edit: For bonus karma, spot the error I made while posting before first coffee.
- jonahx 12y agos/redlined/redlines
- peterjancelis 12y agoWhy would your rep need to close 25 x 12 x 10K ACV = 3 million USD of customer value each year to make it profitable? Shouldn't 25 per year suffice?
- patio11 12y agoThis was indeed the goof-up. If $10k is a typical contract, you're probably looking at 40 to 50 sales a year to hit quota. If $10k is the minimum buy-in, 25 a year is probably fine.