Tips for Negotiating Non Pricing Terms
8 Non Pricing Levers to Pull During Software Negotiations
As a tech CFO, pricing is one of the most difficult undertakings I’ve personally wrestled with.
The journey to price optimization is complex, but you don't have to navigate it alone.
BlueRocket's pricing experts have all operated companies before. And they’ve used that hands-on experience to help companies like Salesforce, Gitlab, Brex, Zendesk, and Google optimize their pricing.
Readers of this newsletter get a pricing conversation with BlueRocket’s CEO Jason Kap.
Jesse Plemons with one of the all time performances, and pricing seminars, in Game Night.
“3 for 1? How can that be profitable for Frito Lay?”
In my first year as CFO, I only saw the sticker price. Nothing else existed.
Just…get…the price…down.
Since then I’ve learned all the fun levers and areas around the margins to press on during a negotiation. And I find there’s better luck in moving these.
Why?
Incentives.
The rep and their manager are usually measured around the annual contract amount. The stuff outside of that is more malleable.
Here’s a checklist of non pricing terms you should go through before signing any contract:
Payment Terms:
Extending payment periods (e.g., net 30 to either net 60 or 90 days)
Splitting payments into installments
Modifying timing for payment in arrears vs payment on order
Service Level Agreements (SLAs):
Specifying response and resolution times for issues
Guaranteeing uptime percentages for software or services
Increasing penalties for failing to meet SLA standards
Contract Length and Renewal Options:
Extending or shortening the typical contract duration (e.g., getting an 18 month term instead of 12 or 24)
Removing any auto price increases
Pushing the window for renewal notification out further so you have longer to evaluate success
Customization and Flexibility:
Adding developer or professional services hours for customization of products or services
Flexing package sizes if you buying software to reduce shelf ware (e.g., ability to purchase 20 vs the typically required 25 seats per package)
Including easy options for upgrades and downgrades mid contract
Support and Training:
Including training sessions for staff on new systems or products
Providing access to dedicated support teams or account managers
Adding additional on site support hours
Confidentiality and Data Security:
Setting stricter terms for data protection and confidentiality
Defining responsibilities in case of data breaches
Specifying data ownership and access rights
Cancellation and Termination Clauses:
Broadening the conditions under which the contract can be canceled
Adding grace periods or flexing notice requirements for termination
Removing penalties for cancellation
Dispute Resolution:
Making jurisdiction and applicable law for any legal proceedings on your home state soil
Defining methods for resolving disputes, such as arbitration or mediation
Requiring the other party to pay for your legal fees
If I were to just pick three, I’d hammer on Payment Terms to optimize your cash flow, Support and Training so you get the most value out of the product during the term, and Dispute Resolution to ensure you go to court in your local area (or a buyer friendly arena) in case anything goes wrong. I kind of think of those as safeguarding the beginning, middle, and end of the product lifecycle.
Run the Numbers
Apple | Spotify | YouTube
I spoke to the CFO of Thumbtack, Larry Roseman, and discussed all things scaling marketplaces. We hit on:
Which side of the marketplace Thumbtack monetizes, and how they arrived at that strategy
How going broad, rather than narrow, when starting a marketplace can work
Making the right NPV decision
The lies we tell ourselves about Share Based Compensation
How CFOs should think about Big Bets
Quote I’ve Been Pondering
“Let’s say there’s 10,000 areas that are valuable to the human race today in terms of knowledge to have, and the number one in those 10,000 slots is taken.
Someone else is likely to be the number one in each of those 10,000, unless you happen to be one of the 10,000 most obsessed people in the world that at a given thing.
But when you start combining, well, number 3,728 with top-notch sales skills and really good writing skills and someone who understands accounting and finance really well, when the need for that intersection arrives, you’ve expanded enough from 10,000 through combinatorics to millions or tens of millions. So, it just becomes much less competitive.
Also, there’s diminishing returns. So, it’s much easier to be top 5 percentile at three or four things than it is to be literally the number one at something.”
-Naval Ravikant, on stacking your skills