How to Avoid Unplanned Renewal Costs in Salesforce
- Review Contracts Early: Identify potential cost escalators or hidden fees.
- Monitor Usage: Track feature utilization to avoid overpaying for unused services.
- Set Budget Limits: Plan and allocate funds for anticipated increases.
- Negotiate Caps: Request limits on rate hikes during renewal discussions.
- Audit Invoices: Check for discrepancies in past billing to avoid recurring issues
How to Avoid Unplanned Renewal Costs in Salesforce
1. Your Salesforce Contract Inside Out
One of companies’ biggest mistakes is not fully understanding their Salesforce contract. Salesforce licensing is not simple, and the fine print often hides crucial details that can lead to unplanned costs.
Here’s how to avoid this:
- Start Early: Begin reviewing your contract at least six months before renewal. This gives you plenty of time to identify potential pitfalls.
- Identify Key Terms: Look for “auto-renewal,” “price escalation clauses,” and minimum commitment requirements.
- Take Note of Usage Limits: Salesforce often caps usage metrics. Understand what you are paying for and ensure you do not exceed these limits.
Example: If your contract includes a price escalation clause of 7% each year, you must budget for this accordingly, or better yet, negotiate for a cap.
2. Assess Your Usage Regularly
A frequent cause of unplanned renewal costs is overestimating the licenses or services needed. To avoid this, regularly assess your Salesforce usage:
- Audit Your Licenses: Conduct a quarterly audit to ensure the licenses match your team’s needs.
- Identify Idle Licenses: Salesforce licenses can be pricey. Look for employees no longer using their licenses or redundant accounts.
- Match Features with Needs: Not every feature Salesforce provides is necessary for your organization. If you have multiple premium features that go unused, consider removing them.
- Monitor App Usage: Frequently check which apps and features your team uses and assess whether they are worth keeping. Removing barely used apps can lead to cost savings.
Example: You might have Marketing Cloud licenses that are used only occasionally. Consider switching to a different subscription model that fits your actual usage.
3. Don’t Wait for Salesforce to Contact You
Most organizations wait for Salesforce to initiate the renewal conversation. This approach can leave you with limited options. Instead:
- Initiate the Process: Contact Salesforce yourself, preferably eight to ten months before renewal. This gives you control over the timeline.
- Gather Data for Negotiation: Use the months ahead to gather usage data, identifying areas where you’re overspending or features you don’t need.
- Stay Informed of Upcoming Changes: Salesforce often rolls out product changes that may impact your costs. Ensure you’re well aware of these changes to assess how they impact your upcoming renewal.
Example: If Salesforce plans to discontinue or merge some features into another product, you might pay for overlapping services. Proactively managing this can prevent hidden costs.
4. Leverage Benchmarking and Industry Data
Salesforce pricing varies by customer, often depending on your negotiation skills and peers’ pay. To avoid getting a bad deal:
- Collect Industry Insights: Gather pricing data from industry sources or analysts. This will help you understand the price ranges others are getting.
- Set Price Expectations: You can set realistic price targets with solid benchmarking.
- Identify Common Discounts: Salesforce often discounts volume purchases or multi-year deals. Use benchmarking to identify typical discounts.
- Collaborate with Industry Peers: Connect with other businesses using Salesforce. They might be willing to share insights on what they negotiated in their contracts.
Example: If most companies like yours get a 20% discount, you’ll have a clear benchmark to argue for during negotiations.
Learn what are Salesforce sales reps incentives in a renewal.
5. Plan for Long-Term Commitment Carefully
Salesforce often pushes for long-term commitments, usually in multi-year contracts. While these may offer cost savings, they also come with risks.
- Avoid Being Locked In: Understand the implications of being locked into a long-term contract. If your needs change, you may be stuck with a deal that doesn’t fit.
- Calculate True ROI: Make sure the multi-year commitment makes sense based on expected ROI rather than short-term discounts.
- Negotiate Flexibility: If your user numbers change, add provisions that allow flexibility in scaling down licenses.
- Plan for Business Changes: Assess how your business’s growth or downsizing might affect using Salesforce over the contract term.
Example: If Salesforce offers a discount for a three-year deal, ask for a clause that allows you to reduce license count by up to 10% each year without a penalty.
6. Negotiate with a Strategy
Effective negotiation is critical to avoiding unplanned renewal costs.
- Assign a Dedicated Negotiator: Appoint someone with experience in dealing with software renewals, ideally someone who knows Salesforce’s pricing tactics.
- Set Priorities: Identify your must-haves and deal-breakers. For example, flexibility in scaling licenses might be more important than a small discount.
- Use Competing Solutions as Leverage: If a competitor can provide some features or services, use this as leverage.
- Maintain Relationship but Stand Firm: While having a good relationship with Salesforce is essential, don’t be afraid to push back on pricing.
- Document Negotiations: Record all offers and commitments made during negotiations. This can help if Salesforce tries to alter terms during the renewal phase.
Example: If Salesforce is unwilling to negotiate fairly, you could mention credible alternatives like Microsoft Dynamics. Having credible alternatives can push Salesforce to reconsider its stance.
7. Manage User Adoption and Optimize Usage
Salesforce charges by user license, so ensuring you get value from every license you purchase is crucial.
- User Training: Invest in training your team so they can get the most out of Salesforce features. Under-utilized features are wasted money.
- Remove Inactive Users: Make it a routine to deactivate or reassign licenses from users who are no longer using the platform.
- Right-size your License Types: Salesforce offers multiple license types with different access levels. Ensure users have only the licenses they need.
- Assess Feature Adoption: Track which Salesforce features are being used and which are not. If certain functionalities aren’t being leveraged, look into discontinuing them.
- Incentivize Adoption: Offer incentives for employees who fully utilize key features of Salesforce that lead to productivity improvements.
Example: A part-time team member doesn’t need the full Enterprise license. Downgrading them to a more basic permit could result in significant savings.
8. Collaborate with Your Account Executive
Building a productive relationship with your Salesforce Account Executive (AE) can make a huge difference.
- Be Honest About Your Needs: Be clear with your AE about your budget and actual needs. They can help you identify packages that better suit your requirements.
- Ask for Cost Reduction Options: AEs have a quota, and meeting their sales target may give them the flexibility to provide a discount or a better offer.
- Timing Matters: Salesforce’s fiscal year ends in January. AEs are often more willing to offer discounts or concessions as they try to close deals towards the end of their fiscal year.
- Keep Communication Regular: Stay in regular contact with your AE throughout the year, not just during renewal time. This keeps you on their radar and could make them more willing to negotiate.
- Know Their Incentives: Understand your AE’s sales incentives. They are more likely to negotiate favorably if it helps them meet specific sales targets.
Example: You might be able to negotiate a better deal by timing discussions during Salesforce’s end-of-quarter rush when AEs need to hit their sales quotas.
9. Take Advantage of Bundling and Promotions
Salesforce often runs promotions or offers bundling options that can reduce costs if appropriately planned.
- Evaluate Bundles: Review if bundling multiple products or features could reduce overall costs, but only opt for bundles you genuinely need.
- Use Credits Wisely: Salesforce sometimes provides credits for new features. Use these to experiment without committing financially.
- Avoid Impulsive Purchases: Bundles and add-ons can seem like good deals, but they could become a cost sink if not fully utilized.
- Trial Before Commit: Where possible, trial new bundles or services before committing to long-term contracts.
For example, Salesforce might offer to bundle Marketing Cloud with Sales Cloud at a discount. Make sure this aligns with your needs before opting in.
10. Monitor Price Escalations Closely
Salesforce contracts often include clauses that allow them to increase prices over time. To avoid being blindsided:
- Understand the Escalation Cap: Look for clauses detailing the maximum percentage at which Salesforce can raise prices during renewals.
- Negotiate Escalation Caps: Limit the price escalation. Some organizations successfully negotiate to keep escalation rates between 2% and 3% per year.
- Prepare a Contingency Plan: If Salesforce increases the cost beyond what you can afford, have a strategy for which licenses or services to cut.
- Track Changes During the Contract: Keep a log of any changes Salesforce makes during your contract term that might impact pricing. Use this information during negotiations.
Example: If your renewal has a 5% annual price escalation, negotiate this down or set strict caps on the price that could be charged in the following year.
11. Assess Whether Salesforce Is Still the Right Fit
Lastly, the most strategic way to manage renewal costs is to ask if Salesforce is still the right platform for your needs.
- Evaluate New Requirements: Your business might have evolved since you signed up with Salesforce. Check if your current needs match what Salesforce provides.
- Look at Competitors: Evaluate what other solutions the market offers. If Salesforce costs are too high, alternatives like HubSpot or Zoho might be better.
- Keep the Migration Option Open: Though migrating away from Salesforce can be costly and time-consuming, in the long term, it might save you more if Salesforce pricing keeps escalating.
- Assess Customization Costs: Customization can add significant value, but it can also add substantial costs. Re-evaluate if these customizations are still necessary.
- Conduct a Gap Analysis: Determine any gaps between Salesforce’s offerings and your requirements. If there are persistent mismatches, this can help justify a change.
Example: If your business is focused on SMBs, and Salesforce has become too feature-heavy and costly, it could be time to move to a more straightforward CRM solution.
Summary Checklist
To wrap things up, here’s a quick checklist to avoid unplanned renewal costs:
- Understand contract details and fine print.
- Audit Salesforce licenses regularly.
- Initiate renewal discussions proactively.
- Use benchmarking data for negotiation.
- Weigh long-term commitments carefully.
- Assign a dedicated negotiator.
- Optimize user adoption and licenses.
- Collaborate closely with your Account Executive.
- Take advantage of bundling cautiously.
- Monitor price escalations and cap them.
- Evaluate alternatives and stay open to change.
By following these strategies, you can take control of your Salesforce renewals and prevent unexpected costs from derailing your budget. It’s all about planning, understanding the details, and negotiating with the data in hand.
FAQ: How to Avoid Unplanned Renewal Costs in Salesforce
What are unplanned renewal costs in Salesforce?
Unplanned renewal costs are unexpected charges incurred during Salesforce license renewal. They often occur due to auto-renewals, unused licenses, or lack of preparation before renewal.
How can I identify unused Salesforce licenses?
Regularly audit your user list and system usage reports. Look for inactive accounts, underutilized features, or licenses assigned to users without access. This data can guide decisions about which licenses to deactivate.
Can Salesforce auto-renewals be avoided?
Yes, but you must review your contract for auto-renewal clauses and provide written notice to Salesforce before the renewal window closes. Most contracts require this notice 30 to 60 days before the renewal date.
What steps should I take before renewing my Salesforce contract?
Evaluate your current usage, review contract terms, and compare available Salesforce offerings. Speak with your Salesforce account manager to discuss adjustments, downgrades, or potential discounts.
Is it possible to negotiate better pricing during renewal?
Yes, Salesforce often allows negotiations, significantly if your business needs have changed. Use data about your usage and planned growth to justify requests for lower pricing or a more tailored package.
How do I handle license needs for a growing team?
Review whether your current license type supports your growth. Consider upgrading only for those who need additional features and reassigning unused licenses to new users where possible.
What tools can help manage Salesforce licensing costs?
Tools like BetterCloud or Zylo can monitor license usage and provide insights. These tools help you identify unused licenses, underutilized features, and potential cost-saving opportunities.
How can I prepare for a Salesforce renewal negotiation?
Gather data on your usage patterns, total licenses, and any issues you’ve faced. Outline your business needs and desired changes to the contract. Engage Salesforce early to allow time for meaningful discussions.
What should I look for in my Salesforce contract before renewing?
Focus on pricing tiers, auto-renewal clauses, termination terms, and potential downsizing penalties. Ensure the terms align with your actual usage and plans.
Can I cancel unused licenses before renewal?
Yes, licenses can often be adjusted or canceled during the renewal period. Notify Salesforce of the changes within the required notice period specified in your contract.
What happens if I miss the renewal notice window?
If you miss the window, your contract may auto-renew at a higher cost or under unfavorable terms. Always set reminders to review and act on your contract well in advance.
Are there discounts available for Salesforce renewals?
Discounts are possible, especially for long-term commitments or bundled licenses. Highlight your loyalty or willingness to increase your usage to negotiate better terms.
How can I optimize Salesforce licenses for remote teams?
Assess which licenses offer the most value for remote workers. Some users may only need basic access, while others require advanced features. Adjust license assignments accordingly.
What are the risks of over-purchasing Salesforce licenses?
Over-purchasing leads to a wasted budget, as unused licenses inflate your renewal costs. It can also result in poor resource allocation, diverting funds from other critical business needs.
Why is it important to involve your team in the renewal process?
Your team can provide insights into their actual usage, highlight features they need, and identify areas of improvement. Their input ensures that the renewal aligns with your organization’s practical requirements.
