If you’re running an online store, you’re likely well versed in the world of Software as a Service (SaaS). These tools are the backbone of your business, powering everything from your storefront to the apps that add additional features, enhance search functionality, or streamline your backend operations. But a wise philosopher (maybe) once said, “with great tools come great responsibilities” mainly, understanding the contracts that are behind them. Let’s dive into what SaaS services are, how their contracts work, the pitfalls of auto-renewals, and how to stay ahead of the game when it comes time to renew or cancel.
What the Heck is SaaS?
SaaS, or Software as a Service, refers to cloud-based software delivered over the internet, typically on a subscription basis. For eCommerce businesses, SaaS is everywhere. The platform your store runs on—think Shopify, BigCommerce, WooCommerce, or Magento—is a SaaS product. Beyond that, there are countless third-party apps that enhance your store’s functionality. These might include:
- Email marketing tools like Mailchimp or Klaviyo, helping you connect with your customers.
- Analytic tools like Google Analytics that give you insights into your shopper’s behavior.
- Inventory management apps to keep your stock levels up to date.
- Customer support tools like Zendesk or Gorgias.
These services come in various flavors: some you pay for monthly or annually, others operate on a freemium model (free with premium upgrades), and some are entirely free.
The Role of Contracts in SaaS
When you sign up for a SaaS platform or app, you’re not just agreeing to a price—you’re often entering into a binding contract. These contracts outline the terms of service, including how long you’re committed, how much you’ll pay, and what happens when the term ends. For major eCommerce platforms like Shopify or BigCommerce, the contract includes a monthly, quarterly, or annual cost to keep your store live. Depending on your plan, this could range from a low entry-level fee for basic tiers to a much higher rate for enterprise-level features.
Contracts vary a lot! Some lock you into an initial term—say, one, two, or even three years—especially for enterprise or custom plans. Once that term ends, many contracts include an auto-renewal clause. Unlike a month-to-month subscription, these renewals might lock you into another long-term period, sometimes matching the initial term or moving you to a shorter one, like a 12-month renewal. But there’s a catch! Auto-renewals often happen without warning. Many SaaS providers don’t send reminders, leaving it up to you to track contract start dates, term lengths, and renewal deadlines.
The Hidden Dangers of Auto-Renewals
If an unplanned auto-renewal happens, it can feel like a trapdoor just opened underneath your feet. If it happened and you weren’t aware, you could be on the hook for some of these things that can cause major headaches:
- You’re Stuck in a Losing Relationship – Maybe you’re planning to switch platforms. An auto-renewal could lock you into a multi-year contract with a provider you planned on moving away from. For example, if you signed a two-year contract with BigCommerce but now want to move to Shopify for better app integrations, an auto-renewal could keep you married to the original platform for another two years.
- Unexpected Rate Increases – Renewals don’t always come at the same price. Some SaaS providers raise rates upon renewal, citing “updated pricing” or “enhanced features.” If you’re not paying attention, you could find yourself paying significantly more than you budgeted for, putting a squeeze on your margins.
- Payment Term Shifts – Cash flow is the lifeblood of any eCommerce business, and auto-renewals can disrupt it. Right now you may be used to paying your platform fee on a monthly basis. Upon renewal, the contract might switch to a prepaid quarterly or annual fee, forcing you to fork over a lump sum upfront. For small businesses or those with tight cash flow, this can be a major blow.
- Costly Exits – Once a contract auto-renews, getting out is NOT simple. Many SaaS agreements include strict termination clauses, meaning you’re stuck until the term ends. Hiring a lawyer to review the contract and search for loopholes could cost thousands in legal fees—often more than just riding out the term. Even if you find a way out, early termination fees can sting.
A Real-World Example
Let me paint you a picture: You signed up for a SaaS inventory management tool two years ago when your store was smaller. The initial two-year contract was affordable, but now it auto-renewed for another two years at a 25% higher rate, and you’re required to pay quarterly, in advance, instead of monthly. Your business has grown to multiple fulfillment locations and the tool doesn’t support that, and you need to switch to one that does, but the contract has no easy exit. Now you’re stuck paying for a service you don’t need, draining cash that could be used for marketing or new products.
This scenario isn’t uncommon. Auto-renewals can quietly wreak havoc on your budget and strategy, especially if you’re juggling multiple SaaS tools. The lack of renewal notices only makes the problem worse, as it’s easy to lose track of contract dates when you’re tied up running your online store.
How to Keep Contracts in Check
Don’t let SaaS contracts catch you off guard. Here are some tips on how to proactively manage them:
- Review Your Contracts: Dig into your agreements with your eCommerce platform and third-party apps. Note the initial contract date, term length, and renewal terms (length, cost, and payment structure). Set a calendar reminder for renewal dates.
- Understand Cancellation Policies: If you’re considering switching providers—say, moving from BigCommerce to Shopify—check the notice period for cancellation. Many contracts require three to six months’ notice, so plan well in advance to avoid paying for two platforms at the same time.
- Negotiate When Possible: For enterprise plans or high-value contracts, reach out to the provider before renewal. You might negotiate better terms, a shorter renewal period, or even a discount if you plan on continuing to use the service.
- Centralize Your SaaS Tracking: Use a spreadsheet or tool to track all your SaaS subscriptions, including contract start dates, terms, and renewal details. This keeps everything in one place and helps you avoid surprises.
At Your Store Wizards, we know how flexibility is key for any eCommerce businesses. That’s why we’ve designed our SaaS services to be as straightforward as possible. Our Your Store Tools plans, along with apps like Search Magic, Custom Field Populator, and others, are all month-to-month. No long-term commitments, no auto-renewal traps—just tools that work for you when you need them. If your business needs change, you can cancel anytime without penalties. We’re here to help grow your store, not tie you down.
When it comes time to choose a SaaS provider, choose one that prioritize transparency and flexibility, like we do, and you’ll have one less thing to worry about as you grow your online business.
Scott Sanfilippo began his eCommerce journey in 1994 by co-founding one of the Internet’s first online retailers, TheFerretStore.com, which was acquired by PetCo in 2006. In 2001, he co-founded the eCommerce design and marketing firm Solid Cactus, which was acquired by web.com in 2009. Today, Scott is the General Manager of Your Store Wizards and lives in Delray Beach, FL. Scott can be contacted at scott@yourstorewizards.com.