The Importance Of Short-Term Contracts To Businesses

The Importance Of Short-Term Contracts To Businesses

Businesses especially service-based businesses are increasingly realizing that short-term contracts have certain benefits over the long-term contracts. The importance of short-term contracts is understood by Netflix and Spotify.

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This is more like a fundamental paradigm shift. It was fashionable to have a long-term contract. It was the ultimate goal of many software providers. It is still fashionable but it no longer has the importance ascribed to it before.

The short-term contracts are becoming very typical for B2B companies. An instance is the case of Codeweavers. This company that provides financial software had a 48% rise in sales after they introduced a 30-day option.

The above shows that customers want technology that reflects their own fast, agile business approach.

The Beauty Of Short-Term Contracts

Innovation and inventions have made it difficult for long-term contracts to hold up in our modern world. Innovations have the capacity to make a hitherto in-demand product or service obsolete within a few months.

Netflix and Spotify have made customers become accustomed to month-to-month subscription. This model is spilling over to the business world. This is more manifest in the software category where the “software as a service” (SaaS) subscription model is becoming more and more accessible.

The fact that short-term contract gives the customers the possibility to test-run the product or service is an argument in favor of the model. This gives the user the ability to make a more educated decision on whether to make a more financial commitment or not. This will help you appreciate the importance of short-term contracts to businesses.

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You will also have to factor in the financial commitment the long-term contracts for you to appreciate the importance of short-term contracts. There are cases of companies wanting to sign up for long-term contracts but lack the financial muscle to pull it through even if it has needs for the long-term contract.

Importance Of Short-Term Contracts To Businesses

importance of short-term contracts

  1. It offers something for everyone

The biggest advantage of having short-term contracts is that you will have a wider reach. In fact, it is best you offer both short and long-term contracts. The rationale for this is very simple; some people will prefer to go with just the short-term either because they cannot afford the long-term contract or because they don’t have the confidence needed in what you are offering while the people who want stability will opt for the long-term contract.

The importance of short-term contracts is that Tom, Dick, and Harry are catered for. The people will now make their choice. It just offers a viable alternative for businesses.

  1. It hangs on to customers longer than the long-term contracts

The short-term contracts do not guarantee immediate revenue the way long-term contracts do. However, one of the importance of short-term contracts is that the guarantee you more customers and clients.

More so, these customers will hang on longer than those who go with long-term contracts in of cases. You will just need to work on the impact on their bottom line before going all-in with short-term contracts.

  1. They build your confidence in the customer’s eyes

One of the importance of short-term contracts is that it builds the confidence of the company. It is a serious vote of confidence. This is because when you offer short-term contracts, you send a message that your company sure enough of its product’s value that it doesn’t need to lock customers into a long-term contract.

It seems pretty cool, right? Look at what Neil Patel thinks about confidence in business. He said, “This level of brand confidence perpetuates itself, you become a ‘best brand’ in the mind of the customer. You become the SaaS they ‘love and need.’ This type of customer loyalty, in turn, builds the brand confidence even more.”

When your brand has confidence, it inspires confidence in its customers. Resultantly, they respect it and stick with it.

The choice is yours as the business is yours. Our stand is that you need to have both short-term contracts and long-term contracts. You don’t need to shy away from the former as was the case before now as it has its uses which you have seen from our discourses on the importance of short-term contracts.