ADK

VC Associate

Money Back Guarantee - SaaS

Hey everyone 👋 Yet another research I'm conducting for a SaaS startup (Series-A). Have you worked at a SaaS company that is giving money back guarantee within 30 days? If not, have you lost a deal to a competitor because they were giving money back guarantee? What are your overall impressions for money back guarantee as a sales technique for SaaS?

To give an idea why I'm planning to propose that, company has no direct competitor in Europe because of diverse language coverage. While the problem they are solving is definitely present, most of the prospects are asking for long (3-4 months) POC which is prolonging the sales cycle significantly because they never used a tool to solve the problem so typically they are not replacing a competitor and selling from scratch

👑 Sales Strategy

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23 comments

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jefe

Arsonist

🍁

Never lost a deal due to a money-back guarantee, nor would I ever want to give one.

You're not selling steak knives or microwaves on late night television.

ADK

Opinionated

VC Associate

I've seen strategies that don't even give a trial but give a money back guarantee instead (within 30 days only!) and I'm not also talking about a start-up, some large enterprises are doing that - example: https://www.fireblocks.com/

Will always depend on the objective. thanks again for the feedback 🥂

jefe

Arsonist

🍁

That's madness to me.. but hey, it's not my money

TennisandSales

Politicker

Head Of Sales

i have worked at 2 early stage saas companies where the CEO was thinking about this. (not a large sample size but its all i got)

in both cases the company decided AGAINST money back guarantee. The thought is if you put that in place then the customer will always be thinking about canceling. You dont want that. you need to help build confidence you can deliver before they sign.

if you DO have money back guarantee you need to have SUPER clear and direct parameters that will be met. if its wishy washy you will find your self in a ton of debates.

I also have NEVER lost a deal because a competitor is giving a money back guarantee.

i obviously dont have a TON of insight here but I would work on what can they do to shorten the POC time line before giving it away for free pretty much.

ADK

Opinionated

VC Associate

That's an interesting aspect that I didnt think of, it's very true prospects take things for granted such as sign before the quarter terms after the quarter.

I personally evaluated software that was giving money back guarantee within 1 month and we sticked with it afterwards, it never really crossed the team's mind to try to get out after 1 month either and we were really trying to put together all resources to prove if we were really gonna stuck with the solution. I'm under the impression that prospect is forced to do more to have it work than if it was a paid short term POC that sales/csm end up spoon feeding them more. Like you said, there will be always be different insights in different cases

TennisandSales

Politicker

Head Of Sales

the other option is to do a longer POC but make them pay for it.

do 1 month free POC if you want 3 months its X amount.

antiASKHOLE

Tycoon

Bravado's Resident Asshole

A contract is a contract. not doing anything with a money back guarantee. I have never seen this in a sales role other than small house items or B2C type sales.

MoonDog349

Valued Contributor

Sales Manager

This has to be exclusive to start ups, right? No way is an enterprise software company offering money back guarantees

ADK

Opinionated

VC Associate

Do you mean if they are selling to start-ups or selling to enterprise? They are start-up themselves but mostly selling to enterprises

Sunbunny31

Politicker

Sr Sales Executive 🐰

I think Moondog means that an Enterprise company wouldn't offer a money-back guarantee.

SaaSam

Politicker

Account Executive

Free trials are better than a money-back guarantee, but ideally, you have neither.

ThatNewAE

Big Shot

Account Executive - Mid enterprise

I go by the logic - If you keep 'divorce' as an option, chances of you taking that option would be higher'. If you keep the moneyback option open (which can also turn out to be a deal winner), chances of them taking this route will be higher.

Moneyback is a tricky rebate both for customers and the company offering it.

https://www.entrepreneur.com/starting-a-business/a-look-at-the-benefits-of-money-back-guarantees-in-modern/293330

This might help a little bit, if not a lot.

ADK

Opinionated

VC Associate

Thank you mate, really appreciate it, this was a great resource. Article seems to be referencing money back guarantee *anytime* whereas that's not the idea here, it can never be. The more I researched, the more it became apparent that money-back guarantee seems (within limited duration) is proposed for software when:
- it is very MSP-demanding to do a POC
- prospect's learning curve is steep because there is no software to replace so prospect doesn't really have a lot of idea what to expect which is what we also see here also no assigned budget, decision making, procurement process etc. Behavioural economics refers this as "bias towards certainty".

That's why we're looking at an average paid POC duration of 4 months and together with overall other prospecting, sales cycle is around 1 year for this start-up which is quite long for an average deal size of roughly 60K usd.

I'm actually thinking of using this option as an "anchor" (also behavioural economics) but research is still not completed if the anchor should be set to achieve money back guarantee or the other way around. Happy Friday 👋

Kosta_Konfucius

Politicker

Sales Rep

I had customers cancel the deal under 3 months so I had a clawback for my commish I was paid, but nothing over a money back guarantee

ADK

Opinionated

VC Associate

Your organization is giving T4C?

Kosta_Konfucius

Politicker

Sales Rep

what is t4c?

ADK

Opinionated

VC Associate

Termination for Convenience = contractual right to terminate anytime

Kosta_Konfucius

Politicker

Sales Rep

Yup we do

ADK

Opinionated

VC Associate

Interesting, don't really bump into those a lot. thanks again for the input mate 🙏

Pachacuti

Politicker

They call me Daddy, Sales Daddy

I have lost deals to clients with buyers remorse, yes. And have had money taken away from me too.

If you are doing POCs then you need to set up definite milestones and automatic decisions at those milestones, assuming all is going well. Also, you need to be paid for those POCs - time and materials at least. You need to pay your people. Ask for that upfront.

I don't do unpaid POCs/Pilots/etc. because the widget I sell is already proven. And if it doesn't work, we'll make it right one way or another.

ADK

Opinionated

VC Associate

Yes, they are currently running paid POCs but the objective is if it makes to replace paid and long-ass POCs with a money-back-guarantee within 30 day, 12 month deal instead

Pachacuti

Politicker

They call me Daddy, Sales Daddy

I get it. I don't think that will work. There is probably a compromise in there with a shorter length paid POC, hitting mutually agreed upon milestones, and then sending them a bill when you hit them. If you don't/can't hit the milestones, you both walk away.

ADK

Opinionated

VC Associate

Yeapp true that, not having a POC but money back guarantee doesn't mean company is not trying to make them successful. I think it's given to still define and achieve milestones regardless. thanks again mate

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ADK

Money Back Guarantee - SaaS

23 comments

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