7 Things To Look For In CPQ for SaaS

When your SaaS business outgrows its manual order forms, it's critical to switch to a CPQ. As a fast-growing SaaS business, you're creating new offerings, launching new pricing tiers, and iterating on your GTM motion rapidly. You need a system that'll allow you to make these changes quickly, eliminate the manual copying of data, and give your sales reps more time for selling, not quoting.

That's where a flexible CPQ solution designed specifically for SaaS companies comes in. But how do you make an informed decision on such a significant investment? Picking the wrong solution could cripple your revenue operations.

In this guide, we'll look at the features you need in a CPQ solution for SaaS businesses.

What Is a CPQ?

CPQ stands for "Configure, Price, Quote." CPQ is a software that automates customer quote generation and frees you from time-consuming, error-prone manual quoting processes.

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What Is a SaaS CPQ?

Unlike traditional CPQs that were designed for one-and-done deals, a SaaS CPQ is designed ground-up to handle workflows of a SaaS business, e.g. —

1. Amendments and Renewals
2. Frequent pricing and packaging changes
3. Multiple sales channels

When Do You Need a CPQ?

It's time to add a CPQ when you see:

• Slow turnaround times when generating quotes
• Lost sales-rep time if you have more than a handful of packages/pricing tiers with plans to introduce more
• Reps struggling to create quotes for complex package options
• A lack of visibility into what reps are quoting, and you want to standardize your quoting logic
• Quotes that look sloppy and unprofessional

What Problems Does a "Good" CPQ Fix?

1. Customers hear back faster — Time kills deals. While your rep is calculating quotes, emailing other teams, and waiting for responses, your prospect is shopping around. Speed closes deals
2. Efficiency — Automation of sales processes: Sales reps can spend more time selling instead of wasting time on administrative tasks like calculating quotes. When your reps aren't selling, you're losing revenue
3. Accurate quotes — How many reps are making mistakes with data entry or other human errors? Standardize your quoting process, even for complex enterprise deals
4. Collaboration — Get finance, legal, CS, and leadership to see what's being quoted. Stop rogue reps from sending an unprofitable quote or something you can't deliver. Have a centralized, up-to-date view of what every customer is buying instead of relying on out-of-date spreadsheets
5. Standardization — A CPQ generates standardized quotes that look professional

What Should You Look for in a CPQ for SaaS?

Before we go into the specific details, it's important to note that you shouldn't buy a CPQ based on your current needs alone. Replacing a CPQ is a massive undertaking and is disruptive to your team and business. While deciding on a CPQ for your business, look ahead and jot down the potential GTM requirements.

For example, you may add other sales channels, experiment with new pricing models — including usage-based pricing — or sell in different currencies.

Most RevOps teams are overburdened due to a lack of planning, and implementing any changes requires weeks, months, or quarters. Don't be that team.

Now, let's go over what you should look for in a CPQ for SaaS (in order of priority)

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1. Fully Automates Amendments & Renewals 

In SaaS, it's common for customers to amend their initial purchase (often several times) by upgrading or downgrading an offering or buying another offering (cross-sell) during the contract period.

Amendments and renewals are fundamental to the SaaS land-and-expand business model. If done manually (which is the unfortunate reality of almost all SaaS businesses today), you'll create enormous (and unnecessary) friction in your sales process, resulting in poor customer experience, and even your reps will feel the pain.

That's why a CPQ for SaaS should enable 100% automation of both amendments and renewals.

For example, let's say you have a tiered user plan that looks like this: 

• 1-10 users @ $72/year
• 10+ users @ $60/year

Upgrade Example

Your customer paid for a 1-year plan for 10 users ($720 total), but 2 months in, they want to add 5 more users. 

Your CPQ should calculate pricing as: 

• (5 x 60 x 10/12)

The above price includes proration (i.e., pay only for the remaining 10 months) and choosing the right pricing tier. 

Downgrade Example

After a month, the customer calls again and wants to remove 2 users, so the CPQ should automatically calculate the amount, which is usually offered as a credit against future invoices instead of a plain refund.

• – (2 x 60 x 9/12)

Renewal Example

When it's time to renew, the CPQ should remember the total count as 10+5–2 and makes the prorated adjustment automatically.

Traditional CPQs treat amendments and renewals as separate deals forcing the RevOps teams to do manual reconciliation — this is a massive time sink and error-prone. Your CPQ should fully automate these workflows.

2. Supports Multiple Sales Channels 

As the name suggests, a sales channel is the route through which your customer buys your product. For example:

• Sales-led —  Your customer talks to the sales rep and gets a quote
• Self-serve — Your customer goes to your webpage and does a free trial or buys your product and starts using it on their own
• Resellers — Your customer talks to a reseller and buys your product through them. (For example, Accenture selling Google Cloud to Boeing)

SaaS business can be divided into two distinct categories:

1. Product-led Growth (PLG) — The primary sales channel for such businesses is the web, e.g., Atlassian, Monday.com, etc.
2. Sales-led Businesses —The primary sales channel for these businesses is talking to a sales rep, e.g., Databricks, Workato, etc.

A PLG business almost always adds a sales-led channel to close enterprise deals. Similarly, most sales-led businesses add a self-serve channel, although it's not straightforward as it requires significant product changes. However, all sales-led businesses should offer upgrades through self-serve — your customers expect upgrades to happen in seconds, not days. Also, your reps don't get a healthy commission on upgrades.

Reseller Channel  

SaaS businesses often add partners to expand their reach. Large enterprises and governments might only buy from trusted vendors, so you'll have to sell through them. Or maybe your product complements a larger established business's product, and you get free distribution through them.

• The current practice is for the resellers to email the point of contact on your side to register a deal with internal sales. This is a slow and complex manual process
• A CPQ for SaaS should let partners quote directly from your system at a partner-specific rate

As such, the CPQ needs to handle all three channels — even if you don't have all of them right now.

Also, to support the self-serve channel, your engineering and product teams will need to experiment with the product catalog and APIs. For that, they will require access to their copy of the sandbox. The CPQ vendor should allow you to create these sandboxes easily and not make you go through a long support process or charge hefty license fees.

3. Supports Multiple Pricing Models

You're a SaaS company, so you bill your customers on a recurring basis with subscriptions. But your pricing doesn't end with subscriptions. Most SaaS companies add more pricing models eventually, so you'll have:

• Subscriptions
• Setup/Implementation fees
• Usage-based fees

Subscriptions

Subscriptions alone are complex to handle, with billing periods like monthly, quarterly, or annually... and then there are non-standard contract terms like a 15-month contract — these are done typically for two reasons:

1. Trials — including a trial period, e.g., a 3-month trial followed by a 12-month regular subscription
2. Budget — The customer has the budget to spend now, so the idea is to stretch the contract as far as possible to exhaust the budget.

Fixed Fees for Setup/Implementation

You might charge professional service fees to help a company implement your solution. These fees might be for infrastructure consulting, detailed integration work, high-touch troubleshooting, or strategy guidance. These aren't recurring charges.

Usage-Based Fees

If your product expands to include usage-based billing, you'll need to calculate charges dynamically at the end of every billing period. Further, while subscriptions might be billed at the beginning of each month, usage-based fees might not be calculated until the end of the month — after a customer has used your product.

It gets complicated fast, and your CPQ needs to support all these individually and in combination — like a one-off implementation fee + monthly or quarterly recurring billing + monthly usage.

4. Supports Billing

CPQ and Billing systems have been, and often still are, separate. That was okay for the linear sales model of non-SaaS companies, where a customer might buy hardware (for example), which is a one-time fee — i.e., a terminal transaction, not a subscription — and flows in one direction from the CPQ (which generates a quote) to Billing (which generates an invoice).

A SaaS CPQ must support the non-linear SaaS business model, where a customer has a subscription. The sale is no longer terminal since it can be amended. CPQ and Billing have to "remember" how many units were sold — and at what pricing — so they can generate the correct quote and invoice.

CPQ and Billing systems should share the same product catalog, unified in a single platform. Otherwise, situations can develop where the billing system doesn't allow product bundles, but the CPQ does.

When that happens, you have to write a lot of custom code on top of your billing system to simulate a bundle — e.g., you'll have to create SKUs specific to that bundle, which leads to SKU proliferation and unnecessarily complicates your GTM.

Further, revenue operations can't be fully-automated if the CPQ and Billing aren't working together because they need a "translator" to understand each other. This translation usually happens through the upstream CRM and is a manual process in most SaaS businesses.

5. Supports Agility in Operations and Implementation

SaaS businesses are characterized by:

• Frequent offering launches — Launching new offerings, e.g., Figma launched FigJam
• Frequent pricing changes — You want to increase or decrease prices for a new or existing customer segment, e.g., decrease pricing for a new geo
• Frequent updates to existing offerings — You add a free tier or a limited-time trial for a paid plan or add a new entitlement to specific offerings

To support your rapid iteration and experimentation, your CPQ should let you make pricing, packaging, or launch changes in minutes, not hours — and certainly not days or weeks.

Lengthy CPQ implementation is a red flag.

An implementation time longer than 2 to 4 weeks usually means that you'll have to do a lot of customization, and every GTM strategy iteration you make in the future will cost more money and time. It's a downward spiral.

In short, your CPQ shouldn't require implementation partners.

6. Supports Complex Enterprise Deals

A CPQ should support quoting even for complex enterprise deals without needing an implementation partner. 

Such Deals Include Ramps, Account-Based Pricing, and Complex Usage Quotes

Ramps — Ramps allow your reps to "ramp" either quantity, prices, or discounts over the period of the contract.

For example:

• After one quarter, add 10 more users.
• Then, after one year, increase the pricing of an offering by 10%

Account-based pricing — Reps can edit the pricing for any product or service for an individual account during quoting in real-time without asking RevOps team to create it.

For example:

• Your rep is talking to a large enterprise customer and would like to:
• Charge a higher price for implementation
• Change the tiers of a usage product and even the pricing associated with each tier
• Create a special discount

Complex Usage Quoting Scenarios — A CPQ for SaaS should allow quoting for usage and consumption-based products. Most complexity in quoting usage products comes from minimum commitments. Specifically —

1. Allow one minimum commitment across several usage products. Even though this is a very customer-friendly pricing model, most enterprises cannot offer this due to the complexity of automating this.
2. Ramps on minimum commitment — In certain scenarios, you want the minimum commitment to ramp up on a monthly, quarterly, or annual basis.

For example:

Your business sells 5 usage products, and you create a minimum commitment of $1000 per month across all these usage products. Furthermore, for the first 3 months, the customer must spend at least $1000/month and then spend at least $2000/month for the rest of the year.

A CPQ built for SaaS must support Ramps, Account-Based Pricing, and Complex Usage Quoting Scenarios.

7. Fast and Intuitive UI

Sure, every product you use should be fast and easy to use. But sometimes, it matters more than others, and CPQ is one of those times.

Why?

Because every minute spent away from selling is lost revenue. You want a CPQ UI that:

1. New reps can pick up with minimal training
2. Lets reps generate quotes FAST — in seconds, not minutes

And you definitely don't want to adopt software that's slower than the manual processes it replaces.

Trust a Vendor that Moves at the Speed of Your Business

You're a fast-moving SaaS company.

You should buy tools from vendors that are, like you, moving fast and constantly adding new features that add even more value.

These companies "get you," and you can count on them to anticipate your growing needs and build solutions for them. You don't want to be stuck with a product that takes 2 months to fix a critical bug and 3 quarters to launch a new feature.

The Right CPQ for SaaS Is One that's Built for SaaS

Many RevOps leaders get a terrible feeling when CPQ is mentioned because of their prior (painful) experience in trying to retrofit a traditional CPQ for SaaS businesses.

The world has moved from Non-SaaS to SaaS, and it's high time the tooling should too.

Use the above evaluation criteria and pick the right CPQ. Not just your boss but even your CEO and your Board will consider you a Hero.