Q: Dear SaaStr: My Customer Missed the Deadline for AutoRenewal. How Do I Handle This Situation?
Let it go and Move On.
- At a practical level, it is incredibly difficult to enforce the contract, even with a collections firm. Collection firms don’t try very hard, and the threats they make on these type of contracts don’t scare too many companies. You can hire a lawyer, but are you going to sue? I’ve seen that happen only twice, and it’s not worth it. After the time, the legal fees, the headaches — no one wins.
- At a business level, remember that a customer that cancels — even late — means you screwed up. You lost the customer. You didn’t provide enough value to renew. You failed this customer. SaaS is recurring revenue, yes. But it also means you have to re-earn the customer. You didn’t if they canceled. Even if it was a little late.
- And if there is any value left in this now ex-customer, it’s goodwill. They might come back later. Even if they don’t come back, they might have left for a small reason (e.g. a feature gap) and still believe in you. If so, they might still recommend you to a friend at a similar company. But if you take action, they won’t. Treat them well on the way out though, and maybe even they will bring you into their next company. Once you go to threats and/or collections, that’s gone forever.
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Published on August 21, 2021