Almost every SaaS tool offers a discount if you pay annually—and some, including Salesforce, require annual contracts. But even with the discounts, paying up front can be prohibitively expensive as you typically have to pay for the whole year up front.
So which do you prefer: Would you rather pay a bit more overall but be billed monthly, or would you prefer to pay once a year? Or would you like annual contracts and discounts, but with the annual bill paid in 12ths each month?
Of course, there are a ton of factors that contribute to our decision making when onboarding a new platform, but if we're familiar with the tool and believe it will become an integral part of our stack, we follow the 18% rule:
If the discount is greater than 18% when paid annually, we pay annually; any discount below 18% - we remain on a monthly payment plan.
One approach to take: 1) Off the bat, you definitely want to exercise any free trial period with the software to test it out. 2) If you're unable to commit long-term after the trial and can't extend it, ask if your team can sign-up for a month-to-month plan and if within the first 1-2 months you can commit to the full year, have the remaining balance prorated at the annually discounted rate.
Depending on the time of year and size of the contract, you'd be surprised how often sales teams will honor this type of plan to appeal to new (and potentially long-term) customers.
I always prefer to start monthly for tools I haven't used before. If it's a tool we feel like we can't live without after vetting it and integrating it into our workflows, we sign up annually for the discounts.
We're offering a 50% annual discount at launch of our new product and we're super-interested to see how many go for the discount vs. staying on monthly. Will report back!
My suspicion has always been that Enterprises and larger orgs prefer to pay annually because it coincides with budgets and it's easier to approve single purchases vs ongoing monthly fees. We are working on the paid plans for Yac right now so I'm interested to see what others from the community answer here.
The not so secret secret is most SaaS providers don't have a good refund policy in place. If you hate the service 2-3 months down the line or the quality/uptime metrics degrade as you start using them it becomes a terrible thing to get out of. Unless i know what i am getting into (w.r.t annual subscriptions) and there is a proper (& pro-rated) refund policy in place i end up paying monthly over annually.
Overwhelmingly, I prefer yearly. Every $ counts in our budget, and at our size (about 300 employees), cancelling or changing software requires tons of planning, so a yearlong commitment isn't too much to ask.
At the risk of stating the obvious, I’ve always made use of free trials to determine whether a SaaS product meets the needs of my company. I’ve found that free trials, even if not listed, can be acquired from most companies by simply contacting support and expressing interest. From there, it’s usually a month long process to familiarize myself with the offering and determine whether it’s actually needed/if there’s a better alternative. Once I’ve decided it’s business critical, I then subscribe to an annual payment plan for the savings.
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