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Dear SaaStr: When Should a SaaS Company allow Month-to-Month Contracts vs Requiring 12-month Commitments? | SaaStr

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Annual contracts combined with prepaid cash are a huge benefit. You get all the cash up-front (this is how I went cash-flow positive, in fact), and your churn almost by definition goes down. Because the earliest chance the customer has to churn is 12 months hence. Get them whenever possible. 😉 But … It’s a false choice. So there is a natural continuum. If you offer bigger companies a natural incentive to sign up annually, they will. And later, you can even force them to and make it the only option. But if you ask tiny businesses and individuals to pay for a whole year upfront, they will hesitate. Figure out who you sell to, and why, and offer the options each customer segment wants. (note: an updated SaaStr Classic answer). Easy Payment image from here A bit more here: The False Choice of Prepaid vs. Monthly Contracts CEO & Founder Email Address Get from $0 to $100 Million in ARR with less stress and more success. Privacy Policy Q&A Blog Videos Podcasts Acade

Dear SaaStr: When Should a SaaS Company allow Month-to-Month Contracts vs Requiring 12-month Commitments? by Jason Lemkin | Blog Posts , Marketing , Q&A , SaaS Product Pricing Q: Dear SaaStr: When should a SaaS Company allow Month-to-Month contracts vs requiring 12-month commitments? I think this is a topic where you get a lot of bad advice. Annual contracts combined with prepaid cash are a huge benefit. You get all the cash up-front (this is how I went cash-flow positive, in fact), and your churn almost by definition goes down. Because the earliest chance the customer has to churn is 12 month

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