Should we allow refunds in a multi-year SaaS contract paid upfront?

Let me add a controversial idea.

Everyone will say No.   Never allow refunds in a multi-year contract.  Sales will hate it if there is an explicit or implicit clawback if they do.  And — what the frack is the point of a discount for multi-year if you can cancel?

They are right.  So generally, don’t do it.

But ..

You are a start-up.  Until you are at $10m, $20m ARR … Close.  The.  Deal.   And — cash is king.

If they’ll pay you three years up front, and you have to take some risk you make them happy — I’ll take that risk.

Assume few of your large customers, the ones that will actually pre-pay for 2-3 years, will churn anyway if you do your job right.

So net, net the risk is low.

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Published on January 21, 2016

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