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Here's the strategy this B2B SaaS is using to sell a 2-year $1M contract and get paid upfront.



When you're talking about half a million, $1 million, or $10 million worth of software, you are working with a very clearly defined budget constraint that the buyer has communicated. You’re trying to get to a very specific number.


In this case, it is a 2-year contract with a $500,000 annual contract value or a $1 million total contract value. Their prospect is currently paying $50,000 per month for their current solution. The goal is to come in priced under $50K per month. 


If they sell their $1 million worth of software using a standard 0% interest financing program, the customer would pay about $41,000 per month. That’s a big win for the customer.


But…



The vendor is absorbing all the financing costs, which in this case is about a 15% discount, so they’re only getting paid $850,000 upfront. Not a bad deal by any means, but is there a way they could realize more of their total contract value while still creating a budget win for the customer?


Yes. Remember, we’re trying to get to a specific number. In this case, something less than $50K per month for the customer and something close to $1 million dollars for the vendor. To do that, we can increase the total contract value by $100K to $1.1 million.


Now, the customer will pay about $45,000 per month which still saves them $5K per month compared to their current solution. The vendor is paid $935,000 upfront which represents only a 6% discount compared to their original $1 million contract. 


A Win-Win.



Many are starting to use customer financing to offer monthly payments at the same 10% - 30% premium while getting paid upfront for the entire contract and offloading their monthly collections to their financing partner.


Here’s how it works:


A software company offers their customer a 3-year subscription contract for $150,000 with 2 payment options:


OPTION 1️⃣: $50,000 paid upfront each year


OPTION 2️⃣: $5,125 per month through their financing program


OPTION 1️⃣: The software company is responsible for collecting $50,000 each year directly from their customer.


OPTION 2️⃣: The software company receives $150,000 today from their financing partner, who is responsible for collecting the customer’s monthly payments.


✅ With OPTION 2️⃣, the software company offered financing to give their customer the monthly payments they needed while getting paid upfront for the entire contract without the future collections risk.


It's a win-win for both sides.🤝



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