SFB #20-04: Prepared for your big deal?
The Startup Foundations Builder Newsletter
When I was 13 years old, I played the tenor saxophone. I was rubbish. So bad, I could blow into either end of the saxophone with no real discernible difference in sound. One time rehearsing at home, I squeaked out “Ode to Joy” so gratingly, our pet fish died.
“Just fake it ‘till you make it,” everyone said. So, at my first proper school concert, I did just that. I faked it. With two other accomplished student saxophonists next to me hammering out “La Bamba”, I simply karaokied the s*#t out of it - flailing my fingers and puffing my cheeks like a crazy person.
Needless to say, I didn’t make it.
You can’t fake your way through big moments. Be convincing by being prepared.
Q: I’m a SaaS founder and our clients to date have been small self-service deals. Now, we have our first couple of big enterprise deals deep in the sales process. If we win one, I’m not sure what to do next…do I just ask for their credit card?
It sucks when your sales process doesn't match the buying expectations of enterprise customers. But, it's not an uncommon problem for B2B SaaS startups that start out with a product-led and/or self-service growth model. And it's not hard to solve. Rather than trying to fake your way through that first big deal, prepare some options to sail smoothly through it.
Here, we outline a recommended process and options for you, as well as issues and expectations to be aware of when closing larger enterprise deals.
Typical Sales Motions for B2B SaaS
Typically, B2B SaaS companies adopt 3 different motions in closing deals:
Month to month credit card transaction, governed by an online Terms of Service (ToS). Typically, month to month or discounted annual payment based on “standard pricing”.
Sales Order agreement, invoiced transaction (i.e. you provide payment terms), governed by an Online ToS. Typically, negotiated discount for quarterly/annual payments on a longer-term committed subscription period (3-12 months).
Sales Order agreement, invoiced transaction (i.e. you provide payment terms), governed by a Master Subscription Agreement (MSA) which has been approved by customer's legal/procurement team. Typically, negotiated pricing for annual payments and annual or multi-year committed subscription periods.
When to use which method
Month to month credit card + Online ToS
The default if you have “self-service” customers. But also push this to low ACV clients, or clients who do not have a procurement process and are happy to pay on credit card.
Sales Order Agreement + Online ToS
Usually required for larger ACV deals with custom or negotiated pricing, subscription periods and payment terms. Required where customer needs to raise a PO and pay on invoice, and have a simple or no procurement process – therefore do not usually negotiate on standard terms or delve into privacy/confidentiality/data policies. Often for a committed subscription period (e.g. 3-12 months) and an agreed invoicing schedule (e.g. 100% upfront or quarterly).
Sales Order Agreement + MSA
Usually required for larger ACV deals with custom or negotiated pricing, subscription periods and payment terms. Required where customer needs to raise a PO and pay on invoice, and have an enterprise type procurement process, where you’ll typically need to negotiate on standard terms and be approved as a “vendor.” Usually, will not accept online ToS and will require a Master Subscription Agreement, which they’ll often review and provide redline amendments for you to accept or negotiate. The final signed Master Subscription Agreement will override any of your standard online ToS. Any future purchases by the same enterprise (even if different divisions or geographies) will generally be governed by the previously agreed Master Subscription Agreement.
What you need to have in place
Month to month credit card + Online ToS
Ability for customer to enter credit card details online securely.
Process where they “accept” the online ToS during payment.
An online ToS. If you already have this, we’d recommend having it checked and updated regularly by a lawyer.
Sales Order Agreement + Online ToS
A Sales Order which references the online ToS and includes other standard items – see example below.
Ability to raise and schedule invoices.
Ability to provide online signing of Sales Order (like PandaDoc or DocuSign)
Understanding of how to correctly attribute pre-paid subscription income in your accounting system to recognise as per GAAP.
A cashflow that supports providing payment terms to customers (30-60 days is typical for big enterprise.)
Sales Order Agreement + MSA
A Sales Order which references the Master Subscription Agreement and includes other standard items – see example below.
A Master Subscription agreement (generally reviewed by someone from legal.)
Ability to raise and schedule invoices.
Ability to provide online signing of Sales Order (like PandaDoc or DocuSign)
Understanding of how to correctly attribute pre-paid subscription income in your accounting system to recognise as per GAAP.
A cashflow that supports providing payment terms to customers (30-60 days is typical for big enterprise.)
What you might need to think about
A process/system to track and manage renewals. Becomes more complex when you have custom subscription agreements for different subscription terms.
More substantial customer and user onboarding processes: once subscription contract is in place, ensuring you activate the customer to consume your service through nurturing progress through onboarding to “first time to value”.
General Process Flow (for everything other than month to month credit card)
1. Gain general verbal or written agreement from customer to move forward with purchase process. Most negotiation on price/services can happen informally before you write up a formal sales order.
2. Submit Sales Order once pricing is negotiated and ask customer to sign and return as the formal commitment of sale. If customer requires raising a PO (you should already know this before entering procurement process), ensure it’s attached to the signed Sales Order. If you’re customer requires a MSA, expect them to return it to you with suggested changes and amendments (“red lines”). Have a legal or finance professional look over it before you agree.
3. Co-sign Sales Order and send fully executed copy to customer for their records (along with amended MSA if applicable)
4. Commence onboarding procedures – generally recommend a kick off call in which you develop some sense of a “Customer Success Plan”.
Example Resources / Templates – Available Here
SaaS Sales Order Template ToS.docx: Sales Order which refers to and incorporates online Terms of Service.
SaaS Sales Order Template MSA.docx: Sales Order which refers to and incorporates Master Subscription Agreement.
SaaS MSA Template.docx: Only available to MX Growth customers with an active consulting/coaching engagement.
Customer Success Plan Template.xlsx: Only available to MX Growth customers with an active consulting/coaching engagement.
Note, all templates are provided “AS IS”. MX Growth makes no other warranties, express or implied, and hereby disclaims all implied warranties, including any warranty of merchantability and warranty of fitness for a particular purpose, and will not be held liable for any improper use or consequences arising from improper use. Client should consult a legal or financial professional for suitability of use in Client’s unique circumstances. By accessing the templates, you are acknowledging this.
General Advice
For larger enterprise customers who you have not transacted with before, ask your internal sponsor about the procurement process well before it’s time to ask for the order.
For Enterprise customers, attempt to use sales motion 2, sales order agreement + online ToS and only use sales motion 3, sales order agreement + MSA, if customer insists they require a Subscription Agreement.
Your online Terms of Service should reference subscription terms and renewal details. Basically, it should be similar to what you’d see in the MSA, but relevant to typical ongoing credit card monthly payments. See here and here and here for good examples.
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Bigger Deals Means Bigger Product Demands
Adding big enterprise customers doesn’t only add to your revenue, it increases the workload on your product and engineering team. Why? Because:
An enterprise customer can mean a sudden influx of end-users. Can your systems handle hundreds of new user accounts created simultaneously?
Enterprise customers will introduce different end-user personas into your product. Some of these will have different urgencies, use-cases and priorities to your typical self-service customers - and they’ll expose the shortcomings in your product and expect them to be addressed promptly.
Features you’d never thought about before will suddenly become important. Get ready for demands for enterprise single sign-on (SSO), provision of test or development environments, and security features aligned with SOC2.
Often, when startups win their first few enterprise deals, they assume simply adding a dedicated support person or account manager will be enough to meet the resource demand. It usually isn’t. Overlooking the product and engineering resources required will put those big enterprise customers at risk, real quick.
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