Before joining Metronome, I spent years working to map dollars and cents to the work of product teams across the spectrum of SaaS. If there’s one sentiment that was shared across go-to-market, R&D, and G&A teams, it’s this — nobody wants complexity in their contracts. It’s a pain for finance, deal desk, customer success, product, support, and yes, even sales teams after a while. Yet leaders across industries inevitably end up with the kind of contracts that lead to costly errors and significant dependencies on manual processes to execute a standard bill run.
As we’ll discuss below, even the most disciplined pricing and packaging schemes near-universally fall victim to enterprise negotiations. But startups can still avoid long-term operational overhead while empowering their teams to move up-market and bring on larger customers with nuanced contract needs.
This blog is designed to help executives, business teams, legal teams, and finance professionals at growing software companies that utilize usage-based pricing models anticipate — and navigate — scaling contract complexities.
Contracting complexity is both a blessing and a curse
You can bucket contractual complexity in the category of “growing pains.” If you encounter this issue, then congratulations on your business growth. Although nobody wants a growing number of complex contracts, I’ve found even fewer people want to give up a 7-figure deal just because it’s non-standard.
As your company and negotiating power grow, you’ll continue to acquire the market position, tooling, and enablement to keep the vast majority of your contracts on the standard path. For the rest, my feedback is always to ensure that both your risk tolerance and exceptions process is stage-appropriate. Ultimately, contract complexity is a balance between your short-term growth and long-term agility. The good news is that you can have both.
How enterprise contracts grow in complexity
As companies that utilize usage-based pricing models grow, their contracts become increasingly complex. This complexity is driven by the need to:
- Accommodate larger and more diverse customer bases
- Address specific business requirements
- Provide competitive pricing and service agreements
With the risk of over-generalizing, here is an attempt to categorize the evolution of contract complexity at different company stages, updated from my evolving mental model to include the kinds of hyper-scalers we see in the usage billing space.
Systems to manage contract complexity
Using systems to manage contract complexity is crucial for companies with usage-based pricing models, especially as they scale. Here’s how you can leverage different systems to handle and mitigate the complexity of enterprise contracts effectively.
1. Modular billing systems
Example: Metronome
Implement a scalable billing platform that can handle complex pricing models, contracting structures, and enterprise deals, ensuring you're prepared for future growth, increasing complexity, and changes to both your product lifecycle and customer lifecycle over time. As ACV grows, ensure that you have the flexibility to utilize the payment system that best maps to a segment’s needs (I love Stripe for self-serve and something like Netsuite for high-ACV contracts paid up-front or in limited installments).
2. Contract management systems
Example: DocuSign, Ironclad, Concord
Utilize contract management software to handle the entire lifecycle of your contracts. These systems can automate the creation, negotiation, approval, and storage of contracts, ensuring consistency and compliance, striking a balance between teams looking to execute at all costs and teams charged with overall risk management.
3. Customer relationship management (CRM) systems
Example: Salesforce, HubSpot
Integrate your CRM system with your billing and contract management systems. Use it to track customer interactions, monitor usage data, and federate data to down-funnel systems where customer teams can take action on early commit drawdowns or product expansion opportunities. While most companies still utilize CRMs predominantly for their enterprise prospects and customers, we’re seeing more RevOps teams using Salesforce as the system of record for all customers, in companies where a product-qualified lead motion can move a customer from self-serve to an enterprise agreement.
4. Analytics and reporting tools
Example: Tableau, Google Analytics, Looker
Implement analytics tools to monitor customer usage patterns, predict trends, and generate reports on contract performance. These tools should integrate with your billing and CRM systems to provide real-time data. While I love a purpose-built system for data visualization, there’s really no replacement at data-driven companies for a common data visualization framework shared across teams (bonus points if someone in your org can herd enough cats to get everyone using a common LookML approach across organizations before there’s a unified BI team ruling the roost!)
5. Workflow automation
Example: Zapier, Workato, Microsoft Power Automate
Use workflow automation tools to streamline processes such as contract approvals, notifications for renewals, and compliance checks. These tools can integrate with your existing systems to ensure a smooth flow of information and tasks.
Other tactics to consider
- Standardized contract templates with customizable clauses: Develop a library of contract templates with customizable clauses to streamline the contract creation process while allowing for necessary adjustments. Keeping track of standard vs. exception-based language will help everyone on your team have a voice and find common ground.
- Flexible/modular pricing models: Design modular pricing models that can be easily adjusted to accommodate different customer needs and market conditions (e.g., AWS services). Check out the recent write up on dynamic pricing to get deep in the weeds here.
- Dedicated legal, financial, and deal desk teams: Establishing dedicated teams to oversee the processes of contract negotiations, compliance, and financial reporting. Align team goals and incentives to avoid creating unnecessary processes and keep everyone focused on mindful growth.
Conclusion
As usage-based pricing companies scale, their contracts naturally become more complex. By leveraging strategies of good system design to manage this complexity, your GTM can remain agile and competitive in the market while bringing in those large enterprise deals. Nobody ever says, “Sorry about your growth,” so congrats on the growth! If you’re looking to smooth out the resulting complexity, shoot us a note here and let’s talk about bringing your billing system in line with your needs.
