When it comes to signing up for Software as a Service (SaaS) contracts, there are critical factors that often go unnoticed but can have a significant impact on your business. It’s essential to be vigilant about your agreements’ fine print and terms. After decades in this industry, I am still amazed at how many SaaS providers make it so simple to sign up but then surprise their customers with skyrocketing costs or contracts that are difficult to leave.
Using the term scam in this article may be a bit over the top for some of you. There are valid reasons for many or all of these contract terms. I just believe that when a customer is surprised with them, it’s truly a scam. Expectations should be set in any contractual agreement that doesn’t shock a customer later. Let’s delve into some of the often-overlooked aspects that can affect your experience with SaaS providers.
- Minimum Contract Lengths: Many SaaS providers, especially those offering robust account management and onboarding processes, invest substantial resources in acquiring and setting up new clients. While this is understandable, some SaaS vendors hide minimum contract lengths in their terms. It’s vital to scrutinize these terms. If you can sign up with a credit card and immediately start using the service, you should also have the flexibility to cancel your account without unnecessary hurdles. Hidden minimum contract requirements can lead to unexpected financial burdens, especially when a platform fails to deliver on its promises.
- Sign Today, Bill Tomorrow: Your SaaS sales representative can be your best ally until you close the deal. It’s essential to be cautious when promises made during sales are not documented in the contract. Verbal assurances that the billing won’t commence until you use the platform should be clearly stated in writing. Without proper documentation, you may face unexpected invoices and even collections, as illustrated by a real-world example where a signed annual contract resulted in immediate invoicing, causing payment disputes and hassles.
- Agency Packages: Agency contracts can appear enticing, offering benefits like premium support and discounted fees. However, it’s imperative to review the terms thoroughly. One common pitfall is discovering that you are responsible for providing 100% of the support to your clients under the agency package. This hidden cost can outweigh the advantages, potentially making the agency arrangement unsustainable.
- Usage and Overage Fees: Transparent pricing is essential, particularly regarding usage and overage fees. Some SaaS providers offer fair models that reward higher use with lower costs, while others penalize you for increased usage. It’s crucial to assess whether these fees align with your return on investment and whether they encourage or discourage platform use. We once signed up for a platform that offered unlimited seats… only to find out that there were unlimited viewing seats and any other type of activity required a paid user.
- Auto-Renewal: Auto-renewal clauses are a common feature in SaaS contracts. It’s vital to ascertain whether your consent is required for contract renewal. Auto-renewals can catch you off guard, resulting in unexpected charges, especially when you have no immediate plans to renew.
In addition to these aspects, the following factors related to cancellation policies and difficulties in the cancellation process deserve your attention:
- Cancellation Policies: Understand the SaaS provider’s cancellation policy. Some self-service platforms may offer the flexibility of immediate online cancellation, while others may demand 30, 60, or even 90 days’ notice. Being aware of these requirements helps you plan for contract termination.
- Cancellation Process: Consider the ease or difficulty of the cancellation process. Ideally, a straightforward online cancellation option should be available to avoid unnecessary hassles, such as making time-consuming phone calls. I genuinely believe every company that has a simple sign-up should also have as simple a cancellation process.
- Penalties for Early Cancellation: Some contracts impose penalties or fees for early cancellation. Reviewing the terms and understanding if you’ll incur additional charges for terminating the contract before its initial period concludes is crucial.
When engaging with SaaS vendors, meticulously examine contracts, terms of service, and billing terms—understanding the finer details, including cancellation policies, difficulties in the cancellation process, and auto-renewal clauses. Additionally, staying vigilant about hidden fees and support responsibilities in agency packages can save your business from unexpected financial burdens. When in doubt, seeking legal counsel can be a wise step to ensure you protect your interests and maintain a healthy relationship with your SaaS providers.