fidelcashflow

Account Executive

Valued Contributor

How do you buyout contracts?

I have a prospect that is in the beginning(ish) of their contract but they want to use us immediately. Their current contract is a hair more than the new one with us. We are also much much better and providing the value that they were looking for in order to jump ship.

How much should we be buying out?

As a seller, if we bought out half, i'd be fucked. It takes a really big deal down to a decent one. When we spoke through this, the buyer sounded like they wanted us to buyout the remainder AND offer a discount, which is comical. I'd be left with a piece of gum, some string, and a baseball card to collect on commission. My gut is saying to buyout about 30% which is a lot.

What have you seen as standard? I've done this before but it has been reasonable. AKA they are about to give us $50k and want us to buy out the $8k or something left.

How do your talk tracks go on this too? It's pretty apparent that "you bought shitty software and didn't do your DD, we are soooo much better at a cheaper price so why is this our fault?" I clearly can't communicate that 🙈

Thanks savages

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27 comments

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SportsSalesGuy

Tycoon

7

Enterprise Account Executive

You probs already know this but just say you cant do both and that you are offering them a better technology for no change in workflow (meaning they don't gotta learn an entirely new tool...idk if that's true)

And that you are willing to discount to offset the current vendor contract. If that isn't good enough then, even though you said they don't wanna do a multi year, that's your counter, if you want a discount and a buyout, then we need to lock it in for multiple years that's the only way I can get you a discount of that size.
Then either way, you need to show the ROI they are getting (money saved on licensing, operating costs *if applicable*, performance metrics increase and costs associated to that if possible)

Filth

Tycoon

2

Live Filthy or Die Clean

^^^^^ This @SportsSalesGuy gets it. Additional guaranteed years of ARR/MRR is the only way AND make them give you a reference or 3 and a testimonial/case study to blow that competitor you're buying out off your barrio.

jefe

Arsonist

5

🍁

I've...never done this.

But I do want some of whatever this dude is smoking.

fidelcashflow

Catalyst

2

Account Executive

you've never bought out a contract? You just wait until the contract is up? Or don't talk to people in the middle of one?

Sunbunny31

Arsonist

3

Sr Sales Executive 🐰

Speaking for my company, it takes a while to implement, so there’s a transition. I often talk to companies with a year left, expecting a fair amount of time in contracts, then a fair amount of time transitioning them. Mine is a platform play, though, so customers tend to be savvy regarding the need for overlap. Sounds like your case is slightly different.

jefe

Arsonist

2

🍁

@fidelcashflow My experience has been more in line with what @Sunbunny31 pointed out here.

Filth

Tycoon

2

Live Filthy or Die Clean

I have in an old life, was constant part of the gig. I would sometimes sacrifice some GREAT deals by cutting them up and stack up mid/small deals (commish wise) to get bonus incentives instead.
Sometimes you got to get a W and some of something is WAAAY better than all of nothing in my experience or at least was then. Now I'm a bit pickier but if I'm against the wall, I'd probably do the same.

Revenue_Rambo

Politicker

4

Bad MFer

DO NOT buy out without a multi year contract. Especially if the buy out was their idea. Sounds like they are trying to use you to offset the cost of a bad contract with a shit product.

braintank

Politicker

3

Enterprise Account Executive

Why are you offering to buy them out?

Maybe structure a multi-year deal where you "buy out" their contract spread out of 5 years?

Gasty

Notable Contributor

1

War Room Community Manager

I liked this idea too!

fidelcashflow

Catalyst

0

Account Executive

I'm offering to buy out 40% of the remainder. Which is theory would be like a 30% total discount. Multi year is out of the question.

braintank

Politicker

0

Enterprise Account Executive

Why no multi year?

fidelcashflow

Catalyst

0

Account Executive

they literally don't do multi year contracts. I can't do anything about that.

LegacySales

Politicker

0

Account Executive

If you can't do multiyear, this makes the discounting VERY difficult bc of basic math. I'd push them to do multi-year and show them the deal they are getting in Year1 and triple circle it.

In the event that they are looking for a buyout for a 1 year contract, I would show case the month-by-month savings but seems like a stretch.

braintank

Politicker

0

Enterprise Account Executive

Tell them if they want it they'll have to do multi year.

YoureMuted

Executive

0

Regional Sales Director

Everyone who says they don’t do multi-year is lying. Microsoft, Oracle, Cisco, VMware, Dell…. There are multi-year contracts in that company for sure.

fidelcashflow

Catalyst

0

Account Executive

that is totally untrue. My company does not do multi year? So there you go.
Also, I'm not dealing with the likes of any of those companies.....

Justatitle

Tycoon

3

Account Executive

Not in this exact terminology but "You fucked up and now you are asking me to fix your mistake, we're willing to play ball but we need to be reasonable here." Have them state out loud what they are asking you to do so they hear how ridiculous it sounds.

Gasty

Notable Contributor

2

War Room Community Manager

I don’t think you should buy out. + give them discount. That’d be nuts.

If you don’t discount your product and then payoff as a “discount”. That’d make more sense.

I am struggling to understand, why would the customer even agree to this? Just cuz you’re a little better?

Buy it out but be blunt, right? Tell them that it’s not company policy, I am making an exception here.

Show them that it’s not your job to help out the struggling but being there for them when they need you.

fidelcashflow

Catalyst

2

Account Executive

yeah that is out of the question.

yeah the idea is to offer a discount on year 1 that reflects the buy out

we have what the incumbent does not. we are not just a little better. it is pretty significant. so it is not as if they are doing us a favor and giving us money, they need us.
yeah I want to be very blunt about it but the buyer is almost delusional. the proof is right there.

unclespacejam

Politicker

4

ur dad’s brother

Sounds like they’ve got a bad case of buyer’s remorse and are trying to offload that on you.

I’d be VERY careful with this one. Be PAINSTAKINGLY SPECIFIC in your contracting and personally if you’re going to do a buyout, I would call it a buyout, not a discount.

I have dealt with very similar situations. And these types tend to try and finagle the same discount year to year. Don’t fuck yourself like that dog.

Honestly I think a buyout is a wild expectation on their part. And a discount on top? Why don’t they just ask for free software altogether?? Lmfao

Kosta_Konfucius

Politicker

1

ERP Sales

I have never done this, what did the vendor ask for? 50% 25%?

fidelcashflow

Catalyst

1

Account Executive

they tried to get 100% of the remainder.

jefe

Arsonist

1

🍁

Ima reiterate my ask for whatever he's smoking.... pls & thnk u

F5onrepeat

Politicker

1

Sales minion

There’s always been a maximum number of months we were able to “buy-out” or give for “free” that would be dependent on the length of the contract. That number of months would then be added to the back-end of the contract so that the company could recoup the “lost” revenue.

Sunbunny31

Arsonist

0

Sr Sales Executive 🐰

I've seen things like this, or a structuring of the payment - but it's all contingent on a longer term so that what's effectively a discount gets spread out a bit.

YoureMuted

Executive

0

Regional Sales Director

We always offer “buyouts” or credits, in the form of extra discount… that can be either DOL or “free”implementation services.

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