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Annual Contracts: Maybe Not All They Are Cracked Up To Be | LinkedIn

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I’ve long been a vocal proponent of annual contracts. I felt like when I was a SaaS CEO and had to go profitable, they helped saved my rear. Close, say, a $125k contract, even after a healthy sales commission, that’s $100k+ in the bank right now! And if your burn rate is low (ours was probably $100k-$150k at the time we started to close bigger annual deals), that’s like a whole extra month of runway just on that deal. A multi-year pre-paid contract can be even more magical, and give you months of extra cash in a start-up. This is still true. But as time has gone by, and I’ve worked with more SaaS companies, I’ve also seen the downside of annual contracts at many start-ups as well: Annual deal collections can be tough for start-ups. Bigger companies are good at this, but if you aren’t, you may not get the benefits of an annual contract if it takes you 4-6 months to actually collect the cash. Annual contracts require P.O., bills, “payment terms”, and often, repeated follow-up. Most start

To get all the best SaaStr content delivered directly to your inbox weekly, subscribe for free here . I’ve long been a vocal proponent of annual contracts. I felt like when I was a SaaS CEO and had to go profitable, they helped saved my rear. Close, say, a $125k contract, even after a healthy sales commission, that’s $100k+ in the bank right now! And if your burn rate is low (ours was probably $100k-$150k at the time we started to close bigger annual deals), that’s like a whole extra month of runway just on that deal. A multi-year pre-paid contract can be even more magical, and give you months

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