October 12, 2022
Contract Lifecycle Management Software: Benefits for Your Tech Company
Sales teams at growth stage tech companies are often small, but mighty. They tend to be a huge part of the revenue-generating teams that ensure the company meets its revenue targets by directly interfacing with prospects and guiding them through a deal. High-growth tech companies have ambitious revenue goals, so sales reps need to be on top of their game.
Which means your contracts have to be on top of their game too.
At the end of a deal, where does your team get their contracts from? Do you know if the correct versions are going out? Are they landing in front of potential clients on time? If you don’t have good answers for these questions, it might be time for your sales organization to look into contract lifecycle management software.
Without proper contract management, your deals could be delayed, quarterly targets missed, and your reputation damaged from the poor customer experience of disorganized contracting.
Still not sold on the value of CLM software? Allow us to convince you.
What Is Contract Lifecycle Management?
Contract Lifecycle Management is the process of organizing, managing, and tracking your company’s contracts in a systematic way in order to smoothly and seamlessly execute business contracts.
For sales teams, this means easily locating contract templates, routing approvals quickly and accurately, and getting the contract in the hands of the signer with little to no delay. Ultimately, this helps you close more deals faster and shortens your sales cycle.
Steps in the contract lifecycle
There are three major steps in contract lifecycle management: pre-signature, signature, and post-signature.
This stage is about contract creation and collaboration. It includes generating the contract with the proper terms and collaborating on the contract terms with the customer or vendor.
In this stage, the contract is finalized and signed. After the contract terms have been agreed to by all parties, each signs it using esignature or wet ink.
This stage includes organizing, storing, and managing executed contracts. After the contract has been executed, you need to be able to store it in a centrally accessible location so you can automate the things that come after the signature, as well as keep track of obligations, renewals, and opportunities for upsell. After the contract is executed, it’s crucial that there is a seamless hand-off to other teams — e.g. CS, Finance — and proper communication so those teams know what terms your business has agreed to.
It’s best to use CLM software to do this, as manual contract management leave too much room for error.
What Is Contract Lifecycle Management Software
Contract lifecycle management software is technology or tools that can help streamline the process of all stages of the contract management process. Even if you manage your contracts manually, while it’s better than nothing, you don’t get the full benefit of efficiency until you use software.
Without it, companies tend to store their contracts in their inbox and play guessing games about what contracts are live, what terms are included in which contract, and when renewals are.
What to look for in contract lifecycle management software?
The criteria for evaluating which CLM software is right for you depends on your business goals and needs. Depending on your team’s internal processes, tech stack, and quarterly targets, here are some things you might want to consider:
- Can it integrate with your existing tech stack? There are some tools that every company needs to carry out business efficiently — for example, invoicing software, communication tools, and CRMs. Your CLM software should be able to integrate well with those. Otherwise, you might experience hiccups in the contract management process, which reduces some of your efficiency gains.
- What kinds of storage does it have? Does this software centralize contract storage, or does it leave you to figure that out on your own? Also, does it maintain dynamic copies of your contract, or is it all PDF-based? FYI, we believe PDFs are a terrible way to store contracts because it’s a static format that makes data extraction difficult.
- Does it manage all three stages of the lifecycle? Some CLM software leaves you hanging after the contract has been signed, which means there’s no way to collect or aggregate data, keep track of obligations, or store your agreements properly. It’s important that the software you choose handles each stage of the process so you can fully streamline your agreements.
4 Ways Tech Companies Can Benefit from CLM
Good CLM helps streamline a lot of the more tedious and time-consuming tasks around your contracts. Here are four ways your tech company (and sales team) can benefit from CLM software:
It helps make the contract creation process go more smoothly
Rogue contracting can be a huge problem, especially in growth stage startups. Sales wants to get the contract done, but Legal and/or Finance, understandably, want to make sure that the right terms are being sent to the right person to protect the company from risk. But if this takes too long, the tension between teams will come to a head, and lead sales to act based on their priority, which is to get the deal done.
Suddenly, you have lots of contracts out in the wild that contain terms that are not beneficial to your business.
But using CLM, you can give sales reps the power to generate contracts using pre-approved templates. For smaller deals, this can be a godsend because you can automate a lot of the more tedious aspects that would often take more hours than they’re worth.
Shorten the sales cycle
Deals tend to get delayed at the negotiation and signing stages. Negotiation can take a long time because each party wants to ensure that their needs are accurately represented in the contract. Signing can delay the deal because it’s notoriously tedious to review and sign a PDF.
But using CLM, you can send out contracts for quick and easy esignature, reducing the time to sign by hours or sometimes weeks. After the contract is signed, you can easily automate post-signature workflows.
A shorter sales cycle increases the likelihood of sales team members hitting their quota, and of your business hitting its revenue targets.
Keep track of contracts after they’ve been signed
Too often, people sign contracts and don’t look back. As a result, they usually don’t remember the terms of their agreement or what the renewal terms are. From a strategic standpoint, they struggle to identify opportunities for expansion because of this lack of visibility into their agreements.
Contract storage is integral to CLM software. It allows you to centrally store all your agreements and search them for upcoming deadlines and specific clauses.
Better cross-functional collaboration
The best CLM software is easy for all teams to use. It is a central location where all your contract data is stored, which means it allows other teams to have insight into deals before and after they’ve been completed. This preemptively gets rid of silos between revenue and non-revenue teams.
Even more, it helps create a better customer experience, as it gives customer success insight into the deal and allows them to answer questions that customers posed during the sales deal. Ultimately, this helps reduce churn, as it makes the customer feel as if the entire team cares about them and doesn’t just see them as a deal.
While these are good anecdotal examples of how your SaaS company can benefit from CLM, you might need hard numbers to prove ROI of the tool to get buy-in from stakeholders. Here’s how you do that.
How to Prove the ROI of CLM
Proving and understanding the ROI of your CLM tool can be challenging, but is a necessary evil for keeping it.
Start by benchmarking how much time and money your previous contracting process costs, so that when you implement the new tool, you can easily compare the data to determine savings. Here are some things to consider to prove ROI.
How much did contracting cost your business before?
Determine how much of your spend had previously been dedicated to contracting before your implemented CLM software. Include your spend on outside counsel, alternative legal service providers (ALSPs), and legal department headcount. Was this more or less than the cumulative dollar value of your executed agreements?
Prove the amount of time saved
From contract generation to signing, how long did it take for the contracts to get from your desk to the signer’s? The more quickly a contract is signed, the more quickly your company can recognize the revenue. Compare those costs both before and after you implemented CLM software.
The number of deals closed
Without a CLM tool, how long did it take you to close a deal? Even better, how long did it take to get through each stage of the contract management process? Compare the number of contracts executed and deals closed in the first year of having the tool vs the year prior when you didn’t.
You can also measure the return on investment in your CLM software by employee happiness. Those who had to deal with the tedious manual contract process before were probably stressed, but with the lift provided by contract automation, they can get more done and feel good about their jobs. Measure employee satisfaction and changes in their attitude using an internal survey.
Compare all these figures with the annual cost of the tool. How much are you saving by using the CLM software? Further, how are you able to make more strategic business decisions based on the data in your CLM?
CLM software can make your business more competitive. And in a crowded space like SaaS and tech, you want to grab the opportunities that will help make you more competitive. Using this tool, your sales team can close deals faster, and your overall business can increase money in and decrease money out.
See for yourself: Calculate the ROI of CLM.
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