Setting Up Co-Terming In Your CRM (HubSpot Version)

Introduction

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Remember that huge customer you signed up a few months ago? Great news - they love your product and are ready to expand! They’re going to buy an additional 25 seat licenses plus they’re going to add that new connector package you’ve been telling them about. They weren’t sure they’d need it when they originally purchased from you but, after the success they’ve had on the main platform, they’d love to add it to the contract.

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Oh yeah, the contract… What do we do about that? How do we add these new licenses and products? Welcome to the world of Co-terming!

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What is Co-terming? 

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Co-terming is a practice in SaaS where a company aligns the renewal dates of multiple contracts with the same customer to the same end date, while accounting for any new contracts or expansions that may occur during the term of the existing contracts.

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For example, suppose a SaaS company has a customer with a contract that ends on December 31, 2023 and plans to expand its usage midway through the contract term by adding another subscription. Rather than having two separate renewal dates for the existing contract and the new subscription, co-terming would align the renewal dates of both contracts to the same end date, December 31st, 2023.

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Why Co-terming? 

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Co-terming helps to simplify the renewal process for both the customer and the SaaS company, while also accounting for any new subscriptions or expansions that may occur during the term of the existing contracts. It allows the SaaS company to capture expansion revenue from existing customers while ensuring that all contracts are aligned to the same renewal date.

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Implementing co-terming into your sales process can be complex as it requires careful management of contract terms, pricing, and usage levels to ensure that all contracts are aligned and any new contracts or expansions are accounted for. However, when set up and used correctly, co-terming has several benefits. It reduces the administrative burden of renewing multiple contracts at different times and leads to increased renewal rates and revenue amongst customers. 

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This Guide: 

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The following guide is intended for SaaS companies who wish to grow their expansion ARR. It references best practices utilized by other SaaS companies that run successful expansion revenue processes within their sales organizations. This guide uses HubSpot CRM in its examples however the same guiding principles apply to other CRMs as well. 

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Furthermore, while RevOps CPQ is not required to co-term, it does make the process much easier for everyone involved. This Guide (and the associated video) includes examples of how RevOps CPQ removes manual processes and error-prone methods from the workflow. To learn more about RevOps, sign-up for a free trial here.

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See It In Action: 

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Before we begin, this video will walk you through what the final, co-terming process looks like.

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To best set up and adopt a co-terming workflow in HubSpot, consider using this recommended HubSpot configuration.  

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Create a new, separate pipeline for expansion deals (opportunities)

Why? 

• The Deal Stages associated with expansions will most likely be different from the stages associated with your New Business pipeline, Renewal pipeline, etc. 
• Easier to report and track these deals
• Easier to create workflows and use automation

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For the Deal Type property, add an option for “Expansion.”

If you have different types of Expansions, consider adding options for each type (i.e. “Cross-Sell,” “Up-Sell,” etc.)

Why?

• Tracking & reporting will be easier because you’ll be able to filter on expansion deals
• You can set up workflows specific to expansion deals

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Create a Property Group called “Contract Information”

• Having all the properties associated with contract info within one group will make it easier to manage your RevOps <> HubSpot mappings

At the minimum, create the following properties within this group: 

• Current Contract ID
• Current Contract’s End Date

Other properties to consider adding: 

• Current Contract’s Signature Date
• Payment Terms
• Billing Frequency
• Internal Customer ID

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Because you’ve already negotiated and agreed to specific terms with the original contract, you don’t need to renegotiate those terms on the expansion contract. Instead, you can simply reference the already agreed to terms - usually by referencing either the original contract’s ID number or the date it was signed. 

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Therefore, it’s generally recommended to have a separate template for expansions using this language referencing the previous contract and only calling out additional terms if necessary.  

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Download our Expansion Order Form Template (DocX) or sign in to RevOps to access our Template Gallery.

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The minimum fields you’ll want to call on the template include:  

• Customer Information (i.e. Name, Address, Contact)
• Contract Term (months)
• Contract Period (Start Date & End Date)
• Previous Agreement’s ID and/or Signature Date

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In some cases, you may use different billing or payment terms from the original contract. For example, due to its high contract value, you may have agreed to quarterly payments with the original contract but, due to the expansion’s smaller amount, agree to upfront payments for the expansion. Those are important fields to call out. Any terms that are different from the original contract should be explicitly called out. Hence, these other recommended fields could include: 

• Billing Frequency
• Payment Terms
• Payment Method
• Internal Customer ID 

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If you’re using RevOps.io and you haven’t already set up mappings to sync key data from the New Business Contract to the HubSpot Deal, watch this How-To Video. You’ll want this data in HubSpot to use for expansion deals. 

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Now, to make the co-terming process as simple and mistake-free as possible for your sales team, you’ll want to automatically copy information from the new business contract to the company object when the new business deal is closed/won. Then, any time you go to create an expansion Order Form for that company, you’ll be able to automatically pull in that information. 

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The following video demonstrates how to set up this HubSpot Workflow. How-To: Copying Data from the Deal to the Company Object for Coterming:

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Almost done! To finish the magic act, you’ll now want to set up RevOps variables. Variables allow you to pull data stored in HubSpot into the RevOps contract. 

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To set up variables for co-terming and add them to your template, please watch this video. How-To: Setting Up HubSpot > RevOps Variables 

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Once your template is created, you can start using it for any and all expansion deals. 

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Using this template, start to fill out the required information. If you’re using RevOps.io, you can automate this process and prevent errors. 

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Typically, the hardest part of co-terming is getting the pro-ration and dates right. Most often, you’re taking a price that is based on a monthly or annual term and calculating that price across a non-standard term length. 

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Here’s an example to help explain: 

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You sign a new business agreement with your customer which is a 12-month subscription for 100 seat licenses. The subscription starts on 1/1/2023 and ends on 12/31/2023. The unit price of the seat licenses is $50/seat/month. 

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Four months into the subscription, things are going well and the customer wants to purchase an additional 25 seat licenses. In order to add those 25 seat licenses to the existing contract, you need to complete an expansion agreement where the price of the 25 seat licenses is prorated across the remaining 8 months of the contract. The basic formula to calculate pro-ration: 
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Time Remaining in Contract x Unit Price x Number of Additional Units being purchased.

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In this case, the price would be calculated as follows: 

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8 months x $50/user/month x 25 = $10,000

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This is a simple example. The proration is more complicated when your products are priced annually and/or if the time period is not a flat number. See my video example above for a more complicated example. RevOps works very well for complicated pro-rations because we calculate the pro-ration for you.

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Once the dates, pricing, customer info, and terms are all entered correctly, your co-termed agreement is ready to be sent to your customer. 

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Different customers will have different requirements and preferences regarding whether co-terms need to be signed or not. If the expansion revenue is low, many times the customer may not need to sign the co-term (or can provide verbal/email confirmation of acceptance). Other times, especially if the expansion revenue is significant, the customer will ask to sign the co-term. It’s important to confirm this information with the customer. 

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Additional Resources

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Co-Term