How to respond to request for custom terms for $50/month SaaS subscription?

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#1

Let’s say you have a B2B SaaS that charges $50/month. (It is no coincidence that this describes Feature Upvote :slight_smile: )

A would-be customer requests that you sign their custom documents before they become a customer. It could be custom T&Cs, custom privacy policy, or a custom GDPR-related document.

What’s your preferred response?

  • “Our affordable pricing doesn’t give us scope for custom agreements”. Which translates to “No”.
  • “Custom agreements are available on our enterprise plan.” Which costs $1000/month.
  • “Custom agreements require an upfront once-off fee of $1000, to cover our legal costs”.
  • Something else?
#2

Custom agreements are available on our enterprise plan. Which costs $300/month.

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#3

We’ve gotten this question a few times. Our lowest plan is a healthy $200/mo, and it’s still not worth it to even think about custom terms at that price range.

Our response is exactly your second option:

“Custom agreements are available on our enterprise plan.” Which costs $1000/month.

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#4

Does this actually work? Never did for me. After introducing such a thing, they simply disappear.

I also think customers like this do not worth the effort, even for $10k/mo. If they can’t simply purchase the service, actual usage will be a nightmare with lots of questions, endless problems with everything, asking for custom development, integrations, on-site training, and stuff like this.

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#5

After introducing such a thing, they simply disappear.

It’s important to remember that that’s also it ‘working’ :slight_smile:

To be honest, we’ve definitely had customers in the $1000-$1500 range that were more hassle than they were worth, and custom terms was often a warning sign.

We’ve also had a ton of customers (of all price ranges) who make what we first interpret as “implement this feature or we’ll cancel” type requests. Sometimes we’ve worked ourselves to the bone to implement them, only to get another feature request or for them to cancel anyways.

After a while we started getting careful with our phrasing. Never committing to specific timelines, saying “that’s on our roadmap for the near future”, or in extreme cases even subtly reminding customers that our service is offered “as is”. Then we brace for them to cancel, and they rarely do.

We still implement features based on feedback from talking with our customers of course, but try not to do it for any individual client.

So I think a lot of it is setting expectations even with the best clients. We’ve turned some pretty sour relationships around completely, although we’ve also had some that just didn’t work.

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#6

I just ask why they need the custom agreement. Sometimes it’s just “we always do this, but will buy without”, or “ooh, you already offer a data processing agreement?”.

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#7

After introducing such a thing, they simply disappear

That means you dodged a bullet, doesn’t it? :slight_smile:

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#8

Depends on the custom document.
One of our customer requested me to sign a document saying that we do not employ child labor, adhere to basic workers rights and honor basic environmental protection rules.
I was happy to sign that.

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#9

It might also depend on the customer and the potential to grow the account. Large enterprises almost certainly have a bunch of procurement requirements, some silly, some reasonable, and some that may not have previously occurred to a smaller vendor. If the customer looks like a good growth prospect, a more open ended response to kick off a discussion to learn more might be a good first approach.

I’ve seen a similar situation first hand: a vendor was already in the technology stack for a project at a major enterprise, but the initial need was small (they started on a free plan). The vendor was asked for custom terms.

Instead of trying to secure an initial contract at a smallish value (say $1-2k per year), which was all the enterprise needed initially, they sent in the big-$$ Sales VP who completely trashed the relationship, asking for outlandish sums for things the customer did not need. They were eventually kicked out of the solution altogether, which is a shame, as the account surely had huge potential if managed properly.

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#10

It can depend on who is requesting the custom documents. Usually it is one of two scenarios (although there can be many outliers):

  1. The buyer (real customer) has to jump through hoops imposed by their legal or finance teams. In this case, I’d go with the very highly priced enterprise plan. If it was finance, they may tell the buyer they would rather save the money and accept your agreements. If it was legal, the buyer may pay the higher price and attribute it to their legal team. If the buyer has a lot of influence at their company, they may be able to override the request. If the buyer has little influence, they may move on and not buy even if they want it.

  2. The true buyer has asked procurement or someone else to make the purchase and they are requesting the agreements because they are told to push their own paper on to vendors. In this case, it is best to tell the true buyer (if you know who they are) you cannot accommodate custom agreements so they can override the procurement person. Dealing directly with the procurement person can be frustrating and take a long time because they usually have very little power to be flexible so you have to go over their head.

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#11

A follow-up.

Last week we received another request for some custom documents.

Until now, my response to these requests has been “no”, although politely worded.

This time I tried the enterprise plan approach: “This is available on our enterprise plan”, and quoted a price 10 times our normal price.

The response was “sounds reasonable, let’s talk more about that enterprise plan”.

For me this is both a win and a potential loss.

A win financially and for my business confidence because I discovered I can actually charge 10 times more.

A loss because I foresee months of to-and-fro emails and phone calls, and a time sink. I hate that stuff.

7 Likes
#12

I would reply something like below,

Hi,
Thanks for contacting us,
Our services are on AS-IS basis.
we do accept the feature request and community suggestions in consideration while developing but we are not complied to implement them.
We do not sign/offer legal documents/Agreements per client basis.

In case you think, our services are essential for ease of your business we may introduce you a custom enterprise plan with pre-defined feature set and some extra add-ins in the form of AS-IS service. That is the best we can offer.

Thanks for contacting us.
ASD
CEO of XYZ

#13

@SteveMcLeod that is the way to go. And yes, there will be many emails back and forth.

For your second enterprise client, take one of the last documents from this negotiation (the one before you gave some extra things away) and start off with that one.

After five clients or so you will have a good set of documents that are easily accepted by their finance and legal teams.

Keep this in mind and it will get you through all the boring calls and mails because you know what you will be doing it all for.

@jitendra_shah I think your response does not sound very professional. It gives clients the feeling that they won’t get a very good service for their money. Nobody will buy something that is advertised as “this is the best we can offer”. They want to hear “we will do everything we can to accomodate your needs”. You can always say no or put a high price tag on things. But getting to actually talk with a high end client and hearing about their needs will give you the best input for your product that you will ever get. And they’ll even be paying you for it.

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#14

If you’re in for a bit of laugh on this topic see this twitter thread:

3 Likes
#15

In the end I think it depends on how willing you are to go over the email back and forth.

At the beginning we used to accomodate the custom contract/terms request for free (in exchange for using the logo on our marketing).

Now we ask for a fixed one-off fee that we add on top of the subscription cost.

#16

Something else:

For the first 10 or 20 of those, I’d get curious:

Find out their needs & how necessary that legal stuff is.

Ask 1 question per email:

  1. What plan do you think you need, and how many seats?

  2. Our lawyer charges a minimum of $x just to review the agreement. But perhaps we can address your concerns without involving our lawyer.

What needs are you hoping to address with a custom agreement?

Takes 5m and might convert 10% to a customer.

#17

My response has always been close to your response #1 — “at these price points, we can’t afford custom agreements”. But custom agreements only came up once or twice, the more common request is “we are a university/large-co and we have this procurement portal where you will need to sign up, obtain a supplier number and certification, and report that to our Chief Bureaucrat, who will then direct you to the appropriate person in Accounting that will…”.

I tried to do that dance once or twice, and learned the lesson. No procurement procedures for me.

Also, I do not mention an enterprise plan, because having considered carefully, I do not want to have one. I still want to get to $1k/month price points, but not by serving enterprises. And I do realize that going above $1k/month is probably impossible. That’s fine. I’d much rather have more smaller customers than one or two huge ones that I depend on.

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#18

All of our customers (every single one of them) are enterprises. Some of them are very large. At least a dozen have a procurement portal and a chief bureaucrat. We have never had a single issue with a “process” per se. I’m still curious why “enterprises” are bad (see $1K price point). In fact, our experience is quite the opposite - corporate customers are better trained overall and easier to deal with. They also happy to pay annually.

Custom SLA is a different story altogether. This is why we always outsource it to the partner.

2 Likes
#19

@maximus I think the difference might be that you’re dealing with US-based enterprises, and my experience so far has been with universities in France and an Indian large corporation? I suspect there might be huge differences.

#20

I replied earlier but I wanted to share an example of how this plays out for us.

Here’s a screenshot of a conversation between one of our now clients (a US based business, which is probably easier to manage than a university, government agency, or non-profit as others pointed out), and myself as we started getting them set up.

Sending the email where I discussed our minimum plan size for custom terms was one of those moments that are definitely scary, but it worked out! Hope it helps others and curious what people think. :slight_smile:

image
image2113×1557 141 KB

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