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.
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.