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5 Online contract management mistakes SaaS startups make

Nov 24, 2015 3:11:24 PM

So you have a startup, or are thinking about starting one. Congrats! We’re proud of you. Finding that million dollar idea takes passion and perseverance—something not everyone has! Now let me ask you...have you reached that “Oh shit” moment yet? The moment where you say, “Oh shit! This is really happening. How do I make sure my agreements with clients are secure?!”

You probably haven’t. That’s because most people don’t reach that moment until something goes really wrong. Not, “missed the electric bill” wrong—more like, “oh shit, we’re getting sued for millions of dollars” type of wrong.

Online contract management mistakes startups make

Such as getting sued for lofty terms and conditions.

Your company name is trademarked, your solution is patent-pending, you’ve done decent legal background work, you’re keeping track of your customers, but all of that evidence is scattered around. I’m sure it’s in a Dropbox file or accordion file folder somewhere...organized chaos, right? Wrong. That’s just one of the lies startups tell themselves.

If legal documents aren’t in line, your entire product can and will turn to crap. Fast. Lucky for startups, numerous tools are out there to help with that.

However, it’s more than making sure no one can steal your company’s name or trade secrets—who are you serving? Customers. Who do you want to make happy? Customers! So why aren’t you keeping track of the criteria your customers have agreed to on your website indicating that they approve your plan to make them happy?

Oh...you haven’t asked them to approve your plan...terms and conditions...anything...

The only measure of contractual legal protection a SaaS business has are its digital legal agreements. If those agreements aren’t implemented and managed properly, a SaaS business puts itself at unnecessary risk. SaaS agreements are also a major asset and typically the subject of due diligence inquiries for various types of transactions (financing, acquisitions…etc).

If any of the following problems sound like something you’ve faced, you should consider revisiting your current contract management system:

Contracts, versions, and redlines in too many places

In order to present customers with an agreement in the first place, it has to be created and approved. Often times, contract creation has too many point persons. Businesses take a shot at constructing a contract, then, have a lawyer look at it, and have advisors look at it to the point where too many versions of the contract exist.

You need a repository for your your legal content. One place where each version of your agreement can be created, edited, redlined, shared, and ultimately executed. Eliminate the back and forth: simplifying the contract creation system is a great place to start! Failing to simplify only prolongs the lack of communication and extends the annoying back and forth for all parties involved. There’s no need to become overly annoyed with each other before the agreement isn’t even official.

Slowing down publishing rate

Not only does building your contract in multiple places leave you unorganized and frustrated, but it also significantly slows down your contract’s publishing rate. If you can never lock down the contents of your agreement, how long do you think it will take to have ready for your customers to accept?

Too long.

If your customer is waiting to sign off on this contract and their patience becomes thin, they can easily back out. Quickly presenting them with thorough agreements catches them in the heat of the moment while they are happy and excited to be doing business with you.

You’re building a relationship—no one wants a fickle partner.

Difficult online acceptance

You’ve finally managed to create and publish an agreement you feel comfortable with your customers accepting. How do they accept it? If your idea of contract enforceability is hyperlinking to your terms at the bottom of your website...that is a poor practice. It’s called a browsewrap agreement, and without conspicuous notice to customers that these agreements must be accepted, the link at the bottom of the page is not enough.

Not having sufficient notice includes a lot of negative dollar signs for your company.

Lack of tracking

Just like everything, contracts eventually change.

Even businesses who are doing the publishing and notifying of online agreements correctly usually get this part wrong: the tracking. You need to know who has agreed to which versions of your agreements and when. Any time there is a new agreement that a customer says “yes” to, there needs to be a record. Most people overlook this detail and find themselves unorganized and unprotected.

Waiting for the aforementioned “oh shit” moment on the day you are sued is not a sufficient practice.

Lack of modification notice

At some point, your agreements will have provisions. In order for those online contracts to stay enforceable, you will also need to notify customers who have already accepted the agreement that there are changes.

You want your communication with customers to remain honest and open. Your relationship with customers hold value! Value decreases when customers are uninformed, which sadly is the case for the majority of B2B relationships right now. Nurturing your product development is important—don’t let all of that hard work go to waste by neglecting the legal component.

If your startup fails to acknowledge and improve these contract management mistakes, you will have to find someone to help dig you out of your hole.

My advice? Help yourself and start remedying these easy mistakes now.

Request a demo of PactSafe.

Amber Ferrari

Written by Amber Ferrari

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