The multi-year deal switch, step 1 – build trust before popping the question
Most buyers of services in the enterprise space expect to sign up for 12 months.
That's the norm.
If your sales teams want to change that, you need to make sure they are trained to really understand the customer's requirements.
Our goal is for salespeople to become a trusted advisor, understanding the client's pain points. That way, they are not just selling a commodity, they're selling a solution.
Believe in your product and it will rub off on clients, too
Building trust with clients early on in the sales process is super important. But you also need to believe in your product.
If you're authentic and have faith in the product you're selling, you're more likely to succeed when explaining that you can offer a three-year or even a five-year deal.
Once you have built up a relationship with a client, just bring it up – there's no secret 'way in'. Tell them you offer the possibility for multi-year deals and explain why they should consider it.
The multi-year deal switch, step 2 – hammer home the benefits of a multi-year deal
In many cases, the buyer and procurement team won't be used to multi-year deals. So you have to explain why it could work for them.
One of the biggest benefits when we offer multi-year deals is price stability. You are locking in today's price for the next three or even five years.
Every other company they are dealing with will be adapting their pricing every year – and it's going to go up.
A multi-year customer isn't affected by those price changes, which gives them valuable stability. This is especially important in times of recession, as many countries are in right now.
Your offer saves clients time and money!
A multi-year deal helps your buyer to plan costs and can also help them to save time, too.
That's because every buying decision at a large company takes time. If your product is coming up for renewal, you have to go through procurement again – but not if you're signed up for a number of years.
If your solution is important to your client's core infrastructure – as ours is – it makes it easier for someone to sign off a multi-year deal.
They don't want to change suppliers every year, so if your solution is the right one, there should be less resistance to signing up for a longer term.
The multi-year deal switch, step 3 – anticipate the doomsayers
The biggest barrier is insecurity from the other side. The client might be asking themselves, "Can this system really fulfil all of our requirements?”
They might only feel 70% sure it's right for them – and they're worried about going through implementation and finding that your solution is not what they needed.
This all comes back to openness and honesty. If your product isn't right for them, you should back away from the sale.
But if it is, and you believe in it, one way to get a longer deal over the line is to offer an exit clause. Depending on the company and the deal size, we occasionally offer these, offering a client a way out after eight months, say. We can only do that because we believe in our product and are absolutely confident that the client is too.
Get-out clauses are easier to swallow if you believe in your product
If we identify that we're not delivering on what we said we would after the designated period, the client has the possibility to hit the brakes.
This shows the client that we have full trust in our product and that we are also respecting our relationship with them.
It also shows we don't just want to lock clients in at any cost – we want to build a relationship. And just for the record, we have zero churn among enterprise clients.
Another option you have is discounting.
You always want to win a deal because of your product, but equally, you can't live in a dream world. If you're in a competitive market, some clients will expect a discount before signing a multi-year deal.
But if the account executive is doing a great job and selling all of the benefits of the product – plus the price stability – you might not need that to get the deal through.
The multi-year deal switch, step 4 – try and convert your existing 12-month clients into 60-month clients when the contract is up for renewal
Up until recently, almost all of our deal sizes were for 12 months.
What we're finding now is that when 12-month deals are coming up for renewal, clients are taking the opportunity to lock in their contracts for 36-60 months.
It means they have price stability, which is really important when companies are looking at ways they can be more efficient and cut costs.
If they can lock in a product they already use and are happy with at a price that won't increase, why wouldn't they?
New clients will help you maintain price growth
From our own point of view, we are able to lock in prices because, as a SaaS company, we have a lean, resource-light business model which enables us to operate in a very cost-effective way.
So we know we can guarantee price stability – plus, we are also continually adding to our new customer base, and as with all businesses, our price list evolves and increases.
It means we're able to maintain our gross margin.
If there's a downside to multi-year contracts, it could be that they may take you longer to close the deal. You have to communicate a much higher number to the client, and they might have to trigger a different sign-off process because the volume is going up.
So, it could increase your deal cycle – but I think the benefits outweigh the costs.
In fact, if you have trust in your sales force and your product, I think it's a calculated risk that every B2B firm should take.
/ Sascha Ploebst
VP of Sales at Storyblok