hocktony

smileNdial

Valued Contributor

🚩Termination for Convenience

my mind was blown when i found out that the t's and c's in saas have a huge impact on revenue recognition for the company. so in addition to asking for the comp plan when I start interviewing again, im asking for their license agreement.

this affects how we get paid.

🚩🚩🚩any termination for convenience clauses means the company can't recognize that revenue as ARR UNTIL the end of the first term as opposed to when the contract is signed. usually resulting in the company not paying commish out on that until the money hits their bank account.

this could also include any due diligence terms if they can cancel once the proof of concept is up.

🚩🚩🚩term for con also indicates a young company who isn't confident in their market fit. big red flag.

watch out kings and queens; take the time to digest their t's and c's

🗣 Interviewing

👑 Sales Strategy

☁️ Software Tech

33

29 comments

Sort by:

RealPatrickBateman

Politicker

14

🔪Amateur Butcher🔪

@hocktony Recommending this post for pinning. No fluff all facts.

hocktony

Big Shot

1

smileNdial

Love it!

poweredbycaffeine

WR Lieutenant

9

☕️

This is a low key FIRE post.

CuriousFox

WR Officer

7

🦊

Fine print will getcha every time.

techsales

Politicker

5

Enterprise Account Executive

Wild. Every prospect/incoming customer I work with asks for a TfC clause and it's normally the one thing we absolutely refuse to concede on. Pretty wild that any company would include it in their standard terms.

Sunbunny31

Politicker

3

Sr Sales Executive 🐰

Agreed. It's extremely rare here, and only entertained for the biggest customers. Even so, there are penalties and/or they're still on the hook for the annual fee, so the revenue can be recognized. But it's definitely not part of our standard agreement, and is only reluctantly granted.

hocktony

Big Shot

0

smileNdial

Of course no one but the customer likes this, unfortunately a ton of ae’s will push for it unknowingly since they think it’s just a small term, while it could mean not getting paid on it

hocktony

Big Shot

0

smileNdial

Funny enough, whenever we’ve conceded to it, they never end up coming in… personally it’s an indication that the deal isn’t well enough baked.

My champion at a f50 company managed to circumvent it after back and forth, that’s how I know it’s usually a deeper red flag than just commish payments. Imo.

fuzzy

Notable Contributor

4

CMO (Chief Meme Officer)

@sahil this needs to be called out. Perhaps a Legal crash course for academy?

aSaaSinator69

Praised Answer

3

Business Development

Worked in payroll for 6 months. I would not get paid until they ran their first payroll with our company. Would take months upon months for the product to be implemented and for bigger deals over a year. Couldn’t take advances on commission and we would lose deals in the implementation process. Worst comp structure ever for incentivizing growth.

ADudeBeingAGuy

Politicker

1

Account Executive

Agree. Selling payroll blows.

hocktony

Big Shot

1

smileNdial

I’ve heard it’s a GRIND, but once your book is built; you can make bank. Not my cup of tea

aSaaSinator69

Praised Answer

1

Business Development

The referrals from benefit partners and things like that are what keep their top earning reps there. I think it’s a dying industry unless you work for like UKG I heard they pay handsome

Pachacuti

Politicker

3

They call me Daddy, Sales Daddy

Typically Sales doesn't get paid till the company gets paid. I have not seen a TFC clause in the standard T&C's for SaaS companies, but I see them from clients all the time.

If the client insists on a TFC clause, then the company needs to be paid for time/materials already put into the project and while this rarely happens, Sales should be comp'd based on that amount as well.

hocktony

Big Shot

0

smileNdial

Agreed on payment, the issue is that if tfc is accepted, then the customer can get a retroactive reimbursement for the payment for services not rendered.

So for the company this means they can’t recognize the revenue when it comes to valuations of the company (saas is typically 30x ARR for valuation purposes), so they usually don’t pay out on tfc contracts, ORRRRRR even worse, they’ll pay out the commish on it, but you’re at risk for partial clawback as time goes on

Notmyrealname

Politicker

2

AE

I can understand buyers asking for this but I can't understand why a company selling a product/service would voluntarily include it?

hocktony

Big Shot

2

smileNdial

In a implementation-heavy environment/offering, I’ve heard this could be the norm since a lot is dependent on factors outside the software itself. Just a PSA since I’ve read a few folks comment their customers can cancel within the first x months etc

JustGonnaSendIt

Politicker

2

Burn Towns, Get Money

This is a great callout! I second the motion for pinning.

I have suffered delayed commission due to this in my past lives.

Justatitle

Big Shot

2

Account Executive

henceforth why termination for convenience clauses in contracts are avoided like the bubonic plague.

DungeonsNDemos

Big Shot

1

Rolling 20's all day

Solid content and a reminder for us all. I've had this scenario selling a hard good with net terms invoices but at worst I'd be delayed a month in payment.
If a company had this set for long-term payment saas I can definitely see how a rep could get screwed.

bandabanda

Tycoon

1

Senior AE Mid Market

LEGEND. This is a solid post.

I'm looking over ours now. @hocktony can you elaborate on the 2nd red flag "terms of con"? What am I looking for specifically? (noob here)

hocktony

Big Shot

1

smileNdial

From my limited legal review experience, look for a clause that contains the words “Termination” in it, then look for any terms that would allow a customer to cancel at-will. Either termination for convenience, or termination at will, or any language that allows the customers to “provides the customer the ability to cancel with 30 days notice at any time”…

Those are all different iterations of termination for convenience.

Note: obviously not a lawyer lol I sell software

bandabanda

Tycoon

1

Senior AE Mid Market

Noice, thanks.

Same lol. Also, this is great to know for the future. As of right now, I'm selling to SMB (smaller than traditional SMB category actually). Prospects can self sign up and cancel at any time. So it sounds like the "at-will" thing for me already, haha. But again, great to know for the future and protecting your comp!!

hocktony

Big Shot

1

smileNdial

For sure! Usually for those, you get comped based on their monthly payments vs annual, right?

Then it makes sense.

Only difference is the way they calculate the customer lifetime value is based on MRR vs ARR

dwightyouignorantsale

Politicker

1

Account Executive

😲😲😲 i love when i can learn something in the WR

SirCloseAlot23

Politicker

1

Business Development

Great Post

justatopproducer

Politicker

1

VP OF SALES -US

Great advice!

CaneWolf

Politicker

1

Call me what you want, just sign the damn contract

I removed that from the contracts at a shitty startup I was at when I sent them.

hocktony

Big Shot

1

smileNdial

Ouch, i cringe thinking folks include it voluntarily

Bravado is a community of trusted sales professionals endorsed by their customers.

Products

The War Room Jobs Salary Guide Tech Sales U

Company

About Us How It Works Blog Bug Bounty

Contact

© 2024 Bravado Inc. All rights reserved.

Privacy Policy Legal and Privacy Center Sales Jobs

If you are hired as a contract sales rep by a Bravado customer, we may ask you to prove access to the employee email account provided to you by that customer. This data will be shared with customers to track your sales productivity; customers can use this data to confirm you meet the minimum activity requirements to pay out your ramp stipend and commission.