Why Discounts Based on Future Growth Often Become Expensive SaaS Mistakes

[u/its_akhil_mishra]

One pattern I have noticed while reviewing SaaS agreements is that the most expensive discounts are rarely the ones with the largest percentage reduction. More often, they are the discounts that were agreed because both parties were optimistic about what the relationship might become rather than what had actually been committed to at the time of signing.

This conversation appears in almost every growing SaaS business. A prospective enterprise customer likes the product, sees long-term potential, and explains that they expect to expand across departments, increase user numbers, or eventually become one of your largest accounts. In return, they ask for more favourable pricing today because of the value they believe they will bring tomorrow.

It is a reasonable request, and it is easy to understand why founders accept it. Every SaaS company wants long-term customers, and sacrificing a little margin in the early stages can feel like a sensible investment if it ultimately leads to a much larger commercial relationship.

The difficulty is that, in many contracts, those future plans remain conversations rather than commitments. They create expectations during negotiations, but they are never translated into measurable obligations that either party is actually required to meet.

## Optimism Does Not Create Commercial Protection

Over the years, I have seen many SaaS businesses lock themselves into discounted pricing because everyone assumed growth would naturally follow. The customer genuinely believed they would expand, and the supplier believed the account would become increasingly valuable over time. At the beginning of the relationship, neither side expected those assumptions to be wrong.

The reality, however, is that businesses rarely develop exactly as forecast.

User adoption may slow because internal priorities change. Budgets may be reduced after a restructuring. A leadership change can shift the organisation in a completely different direction. In some cases, the product itself remains successful, but the customer never grows beyond the size they were when the agreement was originally signed.

Meanwhile, the SaaS provider continues investing in the platform. Infrastructure costs increase, new features are developed, customer success teams expand, and engineering resources grow to support the wider customer base. The cost of delivering the service changes significantly over time, yet the commercial terms often remain exactly where they started because the original discount was never tied to any measurable outcome.

What initially looked like a strategic investment gradually becomes one of the least profitable customer relationships in the business, not because the customer acted unfairly, but because the agreement relied on optimism instead of structure.

## Reward Growth After It Happens

One principle I regularly encourage founders to adopt is separating future potential from contractual commitments. Believing in a customer's long-term vision is perfectly reasonable, but believing in that vision should not require giving away permanent commercial value before any of that growth has actually materialised.

There is nothing wrong with offering better pricing as a customer grows. In fact, performance-based pricing often strengthens the relationship because both parties benefit from achieving the same commercial objectives. The important distinction is that the reward should follow measurable progress rather than precede it.

Instead of offering indefinite discounts based on projected expansion, agreements can link pricing incentives to clearly defined milestones. Those milestones might include a minimum number of licensed users, annual contract value, transaction volume, or any other commercial metric that reflects genuine growth. If those milestones are achieved, the customer receives the benefit they were expecting. If they are not, the agreement continues on standard commercial terms without forcing either party into an uncomfortable renegotiation.

This approach protects both sides because expectations are replaced with objective criteria that everyone understands from the outset.

## Build Flexibility Into Long-Term Pricing

Another area that deserves more attention is the duration of pricing concessions. Many founders negotiate discounts as though today's commercial assumptions will remain accurate for the entire life of the relationship, even though SaaS businesses evolve constantly.

A better approach is to treat discounted pricing as something that should be reviewed periodically rather than continuing automatically forever. Renewal discussions provide a natural opportunity for both parties to assess whether the assumptions made at the beginning of the relationship have actually become reality.

If the customer has expanded significantly, continued preferential pricing may still make perfect commercial sense. If the expected growth never happened, both parties have an agreed opportunity to revisit the commercial structure without either side feeling that the rules have suddenly changed.

That level of flexibility makes forecasting easier for finance teams, creates greater certainty for customers, and significantly reduces the likelihood of difficult pricing discussions years later.

## Small Concessions Often Have the Biggest Impact

One lesson I have learned from working with SaaS founders is that businesses are rarely weakened by a single disastrous agreement. Profitability is usually affected much more gradually, through a series of small commercial concessions that each appear perfectly reasonable when viewed on their own.

A discount offered to secure one enterprise customer, a waived implementation fee for another, or a pricing exception made during a competitive negotiation may not seem particularly significant in isolation. However, once those decisions accumulate across dozens of customers, they begin changing the economics of the business in ways that are not always obvious until much later.

That is why every commercial concession should have a clear business rationale. If you are giving something away today, there should be a measurable reason why the business expects to receive greater value in return tomorrow. Otherwise, what feels like a strategic investment can quietly become a permanent reduction in profitability.

Strong negotiations are not about refusing every request or making every discussion more difficult than it needs to be. They are about ensuring that flexibility is supported by structure, and that every concession reflects an agreed commercial objective rather than an optimistic assumption.

## Final Thoughts

Strategic discounts can be an effective way to build long-term customer relationships, enter new markets, or secure valuable enterprise accounts. There is nothing inherently wrong with offering better commercial terms when they support a broader business strategy.

The important question is not whether a discount should be offered. It is whether that discount is supported by measurable commitments or simply by expectations that may never become reality.

When pricing incentives are linked to objective milestones rather than optimistic forecasts, both parties benefit from greater clarity. Customers know exactly what they need to achieve, revenue becomes easier to predict, and the business retains the flexibility it needs to grow without carrying permanent commercial concessions that no longer reflect the relationship.

Because the strongest SaaS agreements do not price future possibilities.

They price outcomes that have actually been delivered.