What a good outcome looks like before anybody quotes a discount. Three knowledge checks along the way, and 4 clips from a senior licensing analyst.
This is a taught session, not a talking head. The instructor works through analyst grade slides, and three times the video stops on a question with four options on screen. Pause, commit to an answer, and the next slide explains which option is right and why each of the others is wrong. 4 times in the session the frame splits and a senior licensing analyst gives the view from inside real SAP negotiations, and the instructor picks the clip apart when the slides return.
The full narration of this session, section by section, for reading and reference. Guest analyst clips are marked.
Welcome back. Session twenty seven, benchmarking and the term sheet. Last session was about when to negotiate. This one is about deciding what you want before anybody tells you what is available, because the first number that arrives sets the frame for everything after it, and a position written in response to a proposal is not really your position. So today: why the discount percentage is the least useful figure in the conversation, what a benchmark is actually worth and which kind travels between organisations, the one page term sheet written before the first quote, ranking what you want, and defining a walk away that is real. Three knowledge checks. Let's begin.
Five objectives. First, see past the discount percentage, because a discount is measured against a list price the vendor sets, which makes it a poor target. Second, use a benchmark correctly, meaning comparable unit economics rather than a headline percentage from an organisation unlike yours. Third, write a term sheet first, setting out what a good outcome contains before the first number arrives. Fourth, rank what you want, because you will not get everything and the ranking decides what you trade. And fifth, define the walk away, which is not a threat to leave but the point at which you would rather do nothing.
So, the discount illusion, a percentage off a number they chose. Their baseline: list price is a vendor decision, so a discount is a percentage of something they control entirely. Wrong quantity: a large discount on more licences than you need is not a good outcome, it is an efficient way to overbuy. Silent on terms, because the uplift cap, the reduction right and the definitions do not appear in the percentage at all. And easy to celebrate, which is exactly why it becomes the internal measure of success. Let me explain why that last point is the dangerous one.
Guest analyst clip.
So the useful question is not what discount did we get. It is what will this cost over the term, on the quantity we actually need, with which protections attached. Three parts, and the percentage answers none of them.
Right, what a benchmark is worth, and there are three kinds. A headline discount tells you what percentage another customer reportedly achieved, and you should trust it very little, because the scope, quantity, term and baseline are all different. Unit economics tell you the effective cost per user per month, per licence type, at your scale, and you can trust that considerably, provided the scope is described properly. And terms achieved tell you which protections other buyers of your size obtained, which is highly useful and the least discussed of the three. So ask for the second and the third. A benchmark expressed only as a discount percentage is a conversation starter rather than evidence, and it will be dismissed as one, quite reasonably, by somebody who knows more about the comparison than you do.
First knowledge check. Which benchmark is most useful in a negotiation? A, the discount percentage a similar company achieved. B, effective cost per user per month by licence type at comparable scale. C, the list price of each product. D, what you paid at the last renewal. Pause here and pick an answer before you continue.
B. Unit economics survive the differences between two organisations in a way a discount percentage cannot, because they express what is actually paid for a defined thing rather than a ratio against a baseline that varies. A is the number everybody quotes and the first thing an account team will take apart, quite fairly. C is the denominator of the illusion. And D is genuinely useful as a trend, and it is your own history rather than a market position, so it tells you the direction and not the destination.
So, making your own numbers comparable. Effective cost per user per month: total for the line divided by users divided by months, which is simple and surprisingly revealing. By licence type rather than blended, because a blended average hides the mix and the mix is where most of the variance lives. Include everything attached, so support, add ons and the percentage based lines, otherwise you are comparing halves of two different things. State the scope: term, quantity, edition and what is bundled, because a number without scope is not comparable and will not be treated as such. And track your own over time, because your own trend across three renewals is a benchmark nobody can dispute. Now, the term sheet.
Guest analyst clip.
One page, before the first quote. Quantities by line, taken from the measurement work rather than from last year's order form. Target unit economics, cost per user per month by type, with a number you would accept. And the structural terms: uplift cap, reduction band, co-termination, and the definitions written on the order form.
Then the timing, meaning the window you intend to close in and the notice date behind it. And the walk away: what you do if none of it is agreed, and it must be something you would genuinely do, which we will come back to.
Second knowledge check. When should the term sheet be written? A, after the first proposal, so it can respond to what is offered. B, before any number arrives, so the proposal is judged against it. C, during the final negotiation, when priorities are clear. D, it is not needed if the benchmark is strong. Pause here before you continue.
B. The first proposal sets the frame, and a term sheet written afterwards inevitably becomes a reaction to their structure rather than a statement of yours, which is a subtle difference and an expensive one. A feels efficient and quietly concedes the shape of the deal. C is far too late, because by the final stage you are trading inside a structure that is already established. And D confuses evidence with a position, since a benchmark tells you what is achievable while the term sheet says what you intend to achieve.
So, ranking what you want, in three tiers, decided internally. Must have: you would not sign without it, and keep this list genuinely short or it means nothing. Want: real value and tradeable, and this is where most of the negotiation actually happens. Nice: ask for them, expect to concede them, and let them buy something from the tier above. Rank before you meet, because ranking under pressure produces the order that suits whoever is talking loudest in the room. And share it with nobody outside, because the ranking is your internal map rather than a negotiating document. Let me say why the discipline of a short must have list matters so much.
Guest analyst clip.
A list of twelve non negotiables is the same as having none, and everybody on the other side of the table knows it within about ten minutes.
Now the walk away, which is not a threat but a decision made in advance. It is rarely leaving, because for most estates a genuine exit is not credible and pretending otherwise costs you standing in the room. It is usually doing less: renewing a reduced scope, deferring a purchase, or extending on current terms. It must be real, meaning something your organisation would actually accept, agreed with the sponsor beforehand rather than asserted by you. Write it down, because an unwritten walk away drifts under pressure, which is precisely the moment you need it fixed. And you may never use it, since its value is that you know it exists, and that quietly changes how you sound.
Five failures. The discount becomes the goal, reported internally as a success with the uplift and the quantity unexamined. A benchmark with no scope, a percentage from an unnamed company, dismissed in one sentence and rightly so. No term sheet, so the proposal defines the shape and every subsequent move is a response to it. Everything is a must have, meaning a list of twelve non negotiables, which is the same as having none. And a walk away nobody agreed, invented in the meeting, abandoned in the meeting, and everybody present notices.
Last knowledge check. You achieve a larger discount than last time but no uplift cap. What have you done? A, improved the outcome, since the discount is bigger. B, traded a term that compounds for a saving that applies once. C, broken even, because the two are equivalent. D, improved year one and left the term unchanged. Pause here and pick an answer before you continue.
B. An uncapped uplift applies to every year that follows and compounds against a base that is usually also growing, so trading it away for a one time percentage is the single most common bad exchange in software negotiation, and it gets celebrated internally every time it happens. A measures the visible number and ignores the term. C treats a one off against a compounding series as equivalent, which they never are. And D is nearly right and it understates the position, because leaving the uplift uncapped does not leave the term unchanged, it leaves it exposed. Let me set out the sequence.
Guest analyst clip.
The sequence that keeps the frame yours. Measure first, taking quantities from the estate rather than from the last order form, because everything else rests on that. Benchmark second, on unit economics and terms achieved, with the scope stated, for organisations like yours. Draft the term sheet third, one page, before any conversation about price has taken place. Agree it with the sponsor, including the walk away, so it survives the moment somebody senior decides they want the deal done this week. And then invite the proposal, and read it against your page rather than reading your page against it, which is the whole point of having written it first.
Three sentences. A discount is a percentage against a baseline the vendor sets, so it is the least informative number in the negotiation, and the useful question is what this costs over the term, on the quantity you need, with which protections attached. Benchmark on unit economics and on terms achieved rather than on headline percentages, because cost per user per month by licence type with the scope stated survives comparison between organisations while a discount figure does not. And write the term sheet before the first number arrives, rank what you want, and agree a walk away your organisation would genuinely accept.
Homework before session twenty eight, about two hours. One, calculate your unit economics: cost per user per month by licence type, with everything attached included. Two, write the scope beside each one, meaning term, quantity, edition and what is bundled, because without it the number is not comparable to anything. Three, draft a one page term sheet: quantities, targets, structural terms, timing and the walk away. Four, rank into three tiers and keep the first tier to three items at most. And five, test the walk away by asking your sponsor whether they would actually accept it, and if the answer is no then it is not your walk away and you need a different one.
Five guides, all on redresscompliance dot com. Benchmarking Salesforce discounts covers what a benchmark can and cannot tell you and how to use one. Salesforce discount benchmarks gives the reference figures with the scope that makes them meaningful. The Salesforce negotiation CIO playbook covers building the position before the first proposal arrives. The Salesforce renewal war room checklist walks the preparation item by item. And Salesforce contract terms, ten clauses, covers the terms that belong on the term sheet and why they outlast the discount.
That is session twenty seven. The thing to take away is that whoever writes the first structure controls the negotiation, and there is nothing stopping that being you, because a one page term sheet costs an afternoon and it has to exist before the first number arrives. Next time we run the renewal itself: preparation nine months out, the leverage you actually hold, and the terms worth more than the discount. See you then.