NBT #4: Stop Signing Annual Contracts
Plus, high-level thoughts on CRM systems.
“It will be $500 per month, but we’ll give you a 20% discount if you sign up for a 3-year contract.”
How tempting!
RESIST!
You’re a startup and you’re cash-strapped. I get it. A good discount is always appealing. But one counterintuitive way to lose a lot of money is by signing up for those “annual discount” packages with B2B SaaS vendors and infrastructure providers.
It is painful how often I see startups burning through cash on monthly subscriptions and services that are no longer relevant 3 months after they signed up for those services.
Startups are constantly changing. The things you needed last week may not be the things you need next month. So why the hell would you lock yourself into long-term financial commitments?! Just don’t.
Your teams will also be in flux as you hire more people and new functional leaders. The marketing and operational infrastructure that you need long-term will largely be dictated by:
The people on your team and how they prefer to work together
Your ideal GTM motion, which will take time to figure out
Your ideal customer journey, which will also take time to figure out
And here’s the thing about contracts:
You generally cannot re-negotiate NOT paying the rest of your contract just because your company evolved or changed
You can always re-negotiate from a monthly contract to an annual contract and ask for a retroactive discount in exchange for converting into a long-term customer
Just think about the incentives for B2B SaaS companies and vendors. They have zero incentive to help you renege on a long-term contract, but they have every incentive to try to keep you as a long-term client. In other words, they will not work with you to renegotiate an existing long-term contract, but they will work with you to meet you in the middle and help you convert to a long-term customer.
As you’re reading this, I’m sure you’re thinking that this is all obvious. But I can’t tell you how many CEOs I meet with who have blown through tons of cash on long-term contracts that they no longer need and are desperately trying to get out of.
One question I get often is:
“Should we implement Salesforce or Hubspot, or something else?”
There are tons of blog posts about this, and I think Zapier does an excellent job of explaining the major differences between Salesforce and Hubspot here.
But here’s my high-level take:
If your marketing and sales team are highly synchronized / intermingled, you will likely benefit from having both teams on Hubspot. This is because Hubspot has sales CRM features that are powerful enough to empower sales and BD teams, and it excels at providing marketing tools like landing page creation, email drip campaigns, etc. that connect to your sales CRM.
If your sales team and marketing team are highly independent of each other and you want very detailed, robust reporting on the sales side, you may be better off using Salesforce as it’s more highly customizable to various sales funnels.
If you’re a lean startup and your marketing and sales people are the same people, don’t waste your money on either! Get as far as you can with more affordable tools such as Pipedrive, Folk, Mailchimp, Mailshake, Loops, Airtable, etc.
I strongly believe that things should feel like they are breaking before you upgrade to expensive, paid services and platforms. If you feel like, “Wow, we outgrew this system 3 months ago,” then that’s a positive thing. You’re ready for the grown-up systems. Until then, save your cash. You don’t know when the next financial crisis will hit and VCs tighten their purse strings, you don’t know when you’ll have to pay a massive amount to fix technical debt that is not allowing you to scale properly, etc.
Stick to the monthly subscriptions. Trust me, you’ll end up saving money, time, and stress. And your newly hired functional leads will thank you for not locking them into shitty systems that you signed up for with an inadequate amount of expertise to make a wise decision.