What You Don't See
In our last posting, "Don't Do Me Any Favors - Part I", we discussed the economic reality of having floating customer contracts and how these act as put options for the installed base. These seemingly benign agreements have, in our analysis, led to a significant dilution of shareholder value —exceeding 30%. A phenomenon many software vendors might dismiss as mere market capture, but at what cost? Good luck.
The Epiphany: When We Knew We Were On To Something
If your solution is thought (by the prospect) as something difficult to replace AND is persistently mission critical, your prospect is going to INSIST on a long-term contract. At LiquidFrameworks, customers routinely went to five-year deals. Their call, not ours. Why?
The reason lies in the customers' perception of our solution's irreplaceability and their anticipation of a potential renegotiation upon renewal, prompting their preference for five-year agreements. If your prospects aren't going for long term, you haven't convinced them of something.
The Exit Challenge: Navigating Short-term Contracts in Energy Sector SaaS
You are going to feel the effects of having very short-term contracts when you try to sell. You are going to feel this especially if you sell into the Energy sector and you are a field application (the energy market downtown always starts at the well and works its way back to corporate). Your return on sales and marketing expense will be deemed to be inadequate given the attendant risk of the floating contracts. We speak from experience, and anyone to whom you endeavor to market your company is likely going to know this or figure this out.
Revolutionizing Sales Processes for Strategic Exits
The predicament posed by short-term contracts is not insurmountable. Our Sales Engine and Exit Engine, coupled with the Long-Term Auction Model, are meticulously designed to transform this scenario. By redefining sales processes and laying down a strategic groundwork for exit planning, we empower SaaS companies to not just anticipate but actively shape their exit outcomes.
In the realm of energy SaaS, the journey towards a lucrative exit begins with a strategic pivot—moving from passive market participation to active market creation. If the prospect of enhancing your exit valuation resonates with you, let's initiate a dialogue on how MOIC Partners can catalyze this transformation.
If your customers are not demanding long-term contracts, please email us at Maximize@MOICPartners.com for an exploratory conversation on propelling your company ahead of the curve.
