A New Post from Danny DeMichele Looks into Month-to-Month Contracts

Many digital entrepreneurs today are interested in the “software as a service” business model where an application is effectively leased to clients instead of sold or licensed for a fixed period. The ongoing revenue that such deals enable can make it easier to keep up with maintenance while still building in new features and targeting longer-term goals.

At the same time, some entrepreneurs in this space have trouble with deciding just which kinds of contracts to offer to their clients. As Danny DeMichele has pointed out in a new blog post, month-to-month arrangements, while they might sometimes seem less desirable, tend to win out over those that bind clients for years at a time.

Several Reasons Why Month to Month Wins Out

Compared to the fixed-period deals that many entrepreneurs naturally gravitate toward, month-to-month contracts have several distinct advantages. While each of these features can also be seen as a drawback from a certain perspective, the overall balance tends to tilt notably toward the provider.

  • Easier to Sell. Most obviously of all, it is almost always easier to sell clients on month-to-month service provision than asking them to commit to a year or more at a time. While this will occasionally backfire by making the provider seem desperate in the eyes of its audience, that tends to be fairly rare.
  • Easier to Modify. Longer-term contracts imply terms that remain fixed for the entire period. With month-to-month arrangements, the terms can normally be adjusted after a certain, relatively short notice is given. Whether to give a discount to a client that seems to be looking elsewhere or to cut down on usage limits when they become too costly, this flexibility can be extremely valuable.
  • Easier to Keep Clients Satisfied. Finally, clients who are not locked into long-term contracts simply tend to be less demanding. That can help directly by improving the perceived quality of the experience, and it can also mean that negative reviews and buzz will be less likely.

Although many entrepreneurs assume they will always be better off getting clients to agree to long-term commitments, that often turns out not to be true at all. In fact, month-to-month contracts can be quite a bit more helpful, in many cases.