The SaaS buying process: Four steps to get started

SaaS spending isn’t slowing down anytime soon — in fact, Gartner predicts it will grow 9.5% YoY. With the industry growing rapidly, finance leadership is under more pressure than ever to make conscious software buying decisions.

Visibility and leverage are powerful tools for managing software spend and creating an efficient buying process. Today, it takes almost 90 days to make a B2B purchase.

This post outlines the four steps in establishing a SaaS buying process early on, so your team can start using software sooner.

Step 1: Establish the four “yes’s”

Creating a buying process from scratch? The best place to start is to establish the four “yes’s” for every department. That way, a stakeholder requesting a new product or working through a renewal will know exactly who to go to for alignment and approvals. Have these four yes’s all documented in a centralized place or intranet for stakeholders to access any time they want to purchase something.

1. Department head

Identify the department-level approver for every team. We usually see this as head of marketing, head of engineering, head of sales, etc. Stakeholders on each team that want to request new products need to get their department head approval first.

2. Finance

Determine with the finance team who should be the go-to approver on budget prior to purchasing. We’ve seen this being the VP of finance at orgs with up to about 250 employees, FP&A for 250+, and procurement for larger companies. The stakeholder would then know to check with this finance contact to see if there's enough budget to justify the request.

3. Security

Talk with your IT/security/DevOps team to figure out who the security approval should be sent to. Typically this is the Head of information security, or the person in charge of the security questionnaire.

Once they have the budget, stakeholders would kick the purchase request to security next. It’s important to understand what’s required for the OK from security (i.e. SOC 2 compliance, SSO requirements, who fills out the security questionnaire, lead time, etc.).

4. Legal

Lastly, work with the legal team to understand who the approver is for contract reviews and redlining. This may be internal or outsourced general counsel or an outsourced council.

Legal tends to be the biggest bottleneck in the buying process and takes the most time to get through, which is why we suggest waiting until budget and security is approved before a stakeholder approaches legal. It’s also important to understand lead time that Legal requires (i.e. how many weeks of runway do they need).

Avoid too many approvers. A more traditional organization like a bank will have more approvers than a startup tech company, but in general, the four yes’s work across industries. The quicker you can buy, the better price you’ll get and the faster your stakeholders can get the products they need to be successful.

Step 2: Identify timelines and cost implications

An ideal buying process is an organized set of steps for both net new software purchases and renewals. Documenting this process internally and making sure stakeholders are aware will save both sides of the software negotiation lots of time. We suggest:

1. The SaaS management owner should reach out to the tool stakeholder 90-120 days in advance of their purchase, especially in the case of an auto-renewal to gain the most leverage.
2. The SaaS management owner should reach out to the tool stakeholder 90-120 days in advance of their purchase, especially in the case of an auto-renewal to gain the most leverage.

“Evaluating” is the key term here. SaaS companies assume customers will pay more for their product year over year. This term indicates you’re going to take their proposal to market to get competing bids.

Step 3: Stakeholders should evaluate software before asking for a budget

If you’re the head of finance, ask stakeholders what else they evaluated and what each tool costs. Stakeholders should be able to articulate at least three competing products, their major pros and cons, how it will help drive revenue, and what effect it will have on expenses, if any.

A standard approach to buying new software is three bids and buy, meaning get at least three suppliers bidding before signing a contract. In general, it’s bad practice to buy anything new without it being competitive.

Regardless of if a company loves Mixpanel, for example, it must be competitive with Heap and Amplitude. Make sure the salesperson you’re working with knows that they’re competing for your business.

Step 4: Identify spend thresholds and bring everyone together

Depending on the spend threshold that you determine, the stakeholder may have to seek approval from additional people. For example, you could have VPs approve anything under $100k and CFOs handle anything above $100k.

We recommend setting a threshold that allows for the people you’ve hired to use good judgment. Similar to the number of approvers, the lower the spend threshold, the harder it is for people to buy products that will help them get their jobs done faster.

Once you’re ready to sign, getting all approvers on a single email or Slack thread is paramount in moving quickly and getting everyone signed off and aligned on the final purchase decision.

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