In the world of SaaS, Opportunities don't cut it! While the initial sale Opportunity is roughly as simple as the pre-SaaS world, complexity balloons at amendment and renewal time: 

• When a customer wants to add additional licenses during the term, it is common to create a new Opportunity with a different term
• This approach creates a nightmare at Renewal time as you attempt to merge multiple Opportunities and determine the appropriate price

In SaaS, Contracts are the source of truth.  Opportunities are the method of keeping Contracts up to date. 

The world was so simple before SaaS

It was so simple to create Quotes and Invoices pre-SaaS.  1 Opportunity Closed Won = 1 Invoice that didn’t depend on anything other than that Opportunity.  

You’re an AE selling 10 perpetual software licenses at $10,000 each.  You went into your CRM, creating an Opportunity for 10 licenses at $10,000 each for $100,000.  You might have created a Quote to make the document more formal and seek approval from your Sales Leader.  Then you set that Opportunity to Closed Won, Finance sends an Invoice, and you collect your commission.  

A few months later, that customer calls you up.  They’ve grown and want another 5 perpetual licenses.  You create a new Opportunity for those additional 5 licenses and create a new Quote to formalize it, set the Opportunity to Closed Won, Finance sends the Invoice, and you collect your commission.  

This process could repeat many times for the same customer and it never gets more complicated. 

The new world of SaaS made everything more complex!

When SaaS emerged in the 2000s, the equation where 1 Opportunity Closed Won = 1 isolated Invoice broke!  You now need to manage the customer relationship long-term, make changes to the Contract, and renew the Contract.  

Let’s say you’re an AE selling 10 SaaS software licenses at $2,000/year, each paid upfront for a 1-year deal from Jan. 1, 2023 to Dec. 31, 2023.  You go into your CRM and create an Opportunity for 10 licenses at $2,000/year per license for $20,000.  You create a Quote to formalize it and seek approval from your Sales Leader.  Then you set that Opportunity to Closed Won, Finance sends an Invoice, and you collect your commission.  Easy!  

On Mar. 1, 2023, that customer calls you up.  They’ve grown and want another 5 licenses.  You go into your CRM to create an Opportunity for 5 licenses at $2,000/year per license…but you face a few questions.  

1. Your customer expects co-termination on Dec. 31, 2023, and it sounds simple, but should you co-terminate it with the initial Opportunity?

• You’d have to know when the prior term ends.  Does that live in a file uploaded to the prior Opportunity?  
• You’d have to calculate the prorated price for the 5 new licenses.  Maybe the customer is also asking for a discount on those additional licenses.  Not straightforward at all!  
• It would net your company less revenue and lower your commission payment.  

2. Why not extend the term on the 10 licenses on the original Contract and co-terminate all 15 licenses on Mar. 14, 2024?  This would be great for your company and your commission, but you lack the guidance on how or the mechanism to change the prior deal, and your customer may not agree to it.  

• There’s no Amend button on the prior Opportunity to start from
• The proration math of adding 2.5 months isn’t straightforward (and you’d have to explain it to the customer)
• You don’t have standard legal language for this superseding case
• You don’t know what value to enter on the Opportunity
• Your commission plan might not contemplate the scenario

So, you take option 3, the path of least resistance.  You create a separate Opportunity for only the incremental licenses for 1 year ending Mar. 14, 2024, and set the Opportunity to Closed Won.  Finance sends an Invoice, and you collect your commission.  

Now, the customer has 2 Contracts with different terms running simultaneously.

You have lost the ability to understand how many licenses customers have at any given time! 

Time to Renew the Contract

Now it’s mid-December 2023.  It’s time to talk to the customer about renewing their Contract, a concept that didn’t exist in the pre-SaaS world.  The customer wants to discuss all 15 licenses they had last year and add 2 more.  But you only want to talk to them about the 10 licenses that are renewing.  Do you go to Legal for special language for this fairly small deal?  Do you speak to Finance about canceling the prior Contract for this new one?  Do you talk to RevOps about how to record this in the CRM?  

You are stuck with no clear answer of how or what to renew and only left with open questions!  

The solution → Opportunities Contracts are your source of truth

The core problem in these examples is a lack of source of truth from which to Invoice, Amend, and Renew.  Opportunities represent changes to a Contract, while Contracts represent the actual state.  

Amendments

Amendments must be treated as amendments - not a hacky new quote workaround approach.  When your customer signs an amendment, it edits the Contract directly, which is written to your CRM.  Deal size metrics (e.g., incremental ACV) are calculated by comparing the old Contract to the new Contract.  

The corresponding Contract is a complete record of the relationship with your customer to the end of the contract period.  

Renewals

Renewals begin from the prior Contract instead of a blank page.  Winning the Renewal Opportunity creates a new Contract representing a complete record of the relationship with your customer for the next contract period. 

If you want to make SaaS Opportunities as simple to manage in your CRM as non-SaaS Opportunities, check out our article on the 7 Things To Look For In CPQ for SaaS. Or, if you have any questions about the above, we'd love to hear from you at questions@monetizenow.io.

Glossary

• Quote: an unsigned statement of a Contract's financial and product terms. Includes service period, billing dates, product prices, product counts
• Contract: a signed Quote
• Invoice / Bill: a statement of the charges due and when they are to be paid
• Renewal: subsequent Contract that takes effect when a prior Contract expires
• Amendment: a change to a Contract during the Contract term
• Opportunity: the process of selling to a prospect or customer. Salesforce CRM calls this an Opportunity. HubSpot CRM calls this a Deal.