What should I ask about a small SaaS product’s biggest customer’s contract terms?

Get the signed agreement and every amendment, order form and side email that changes it. Check the term and the renewal mechanism. Does it renew by itself, or does the customer have to opt in? Look at the notice needed to cancel and whether the customer can leave early without penalty.

Then look for promises outside the standard product. These may include custom features, special pricing, service-level commitments, or exclusive use. Ask whether the product delivers on each one today. Read any clause about assignment or change of control, since a sale may need the customer’s consent. Have your lawyer review it.

Ask the commercial questions the paper does not answer. Who at the customer uses the product and who decides renewals? Have they complained or asked about alternatives? Has the price been negotiated down before? Consider talking to the customer yourself, with the seller’s permission, before closing. Last, ask how much of the business depends on this one account, and what the plan would be if it left. Ask also about invoicing and payment history with this customer. A large account that pays late, disputes invoices or asks for credits tells you about the relationship in ways the written terms never do.

Key takeaways

• Read the full contract with every amendment and side agreement.
• Check for change-of-control clauses and ask your lawyer about them.
• Ask how much of the business rests on this one customer.