Selling Annual Deals At High Velocity to Accelerate ARR.

Read time: 3 minutes.

Welcome to the 30th edition of The Growth Elements Newsletter. Every Monday, I write an essay on growth metrics & experiments and business case studies.

Today’s piece is going to 5100+ founders, operators and leaders from businesses like Shopify, Google, Sage, Hubspot, Servcorp, Zoho, Apollo & more.

Happy Monday!

The journey of a SaaS startup often reaches a crucial inflection point - a moment where the right strategies can catapult ARR to new milestones.

This essay will explore how focusing on closing six-month and annual deals at a high velocity can increase ARR and Net Growth Rate.

This approach isn't just about hitting revenue milestones; it's about crossing a threshold that improves cash flow and customer relationships.

It also reduces churn and solidifies the overall health of the ARR bucket, including - New business, expansion, contraction and churn.

Why Selling Annual Deals At High Velocity?

[1] Quick Revenue Injection

• 6-month and 1-year deals can provide an immediate boost to ARR.

• It can help improve the cash flow situation.

[2] Stable Revenue

• Annual deals ensure a consistent revenue stream.

• They bring predictability and stability, allowing for more strategic planning and resource allocation.

[3] Stable Customer Base

• Monthly models can lead to a rollercoaster of customer sign-ups and drop-offs.

• In contrast, six-month and annual deals provide a more predictable customer base.

[4] Decision Frequency

• Annual contracts reduce the frequency of decision points for the customer to consider discontinuing the service.

[5] Efficiency in Operations

• Switching from monthly to six-month or annual billing cycles cuts down on admin tasks.

• Creating a smoother and more cost-effective operation.

[6] Customer Segmentation and Churn

• Annual deals help distinguish the most loyal customer segments.

• Understanding these long-term users enables businesses to tailor their services more effectively and reduce churn.

[7] CX, Insights and High NPS

• With a year in hand, there's ample time to nurture a robust customer relationship.

• This period allows businesses to generate insights from product usage, improve features using a feedback loop and increase NPS.

Takeaways

1. Incorporating annual contracts into your business approach isn’t just about changing how you bill your customers - it’s about forging a longer, more meaningful journey with them.

2. Selling annual deals is a strategy that underpins financial stability and cements lasting customer relationships.

3. Annual contracts stabilise revenue, guiding businesses towards sustained growth and reduced churn.

That's it for today's article! I hope you found this essay insightful.

Wishing you a productive week ahead!

I always appreciate you reading.

Thanks,
Chintan Maisuria