Article · 6 min read

Dear SaaStr: What's a Reasonable Discount for an Annual Contract? How About a 3 Year Contract?

Jason Lemkin · SaaStr Free Beginner

Puts real numbers on what you should trade a discount for: roughly 15 to 20 percent for an annual commit from a smaller buyer, and multiple rounds of give budgeted into enterprise pricing from the start.

  • Raise monthly pricing about 25 percent so you can price in a 20 percent discount for going annual.
  • For SMBs a 15 to 20 percent annual discount is the understood incentive, though most small SMBs still will not take it.
  • Steep multi year prepay discounts (40 percent off year 3) trade tomorrow's ARR for today's cash, only worth it if churn is high.
  • Pay reps full commission up front on years 2 and 3 of prepaid deals if you want them closed.
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The question it answers

  1. Procurement has entered the conversation and wants thirty percent off. How do I negotiate without gutting the deal?

Read with it

  1. The pragmatic case for pricing so discounts are survivable instead of pretending you will hold the line: mark up by around 20... SaaStr Article · short read The Confounding Logic of Discounting Jason Lemkin
  2. Podcast · Full episode 7 Myths About Selling B2B SaaS In India ft Unicommerce Founder Kapil Makhija Siddhartha Ahluwalia with Kapil Makhija
  3. Video · 33 min Negotiation Masterclass: 32 Minutes of Proven Negotiation Tactics (B2B Sales) Armand Farrokh and Nick Cegelski
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