What Is a Ramp Deal?
A ramp deal is a SaaS contract with scheduled pricing increases over time. It allows a customer to start small and grow into a larger contract—usually aligned with expected usage or adoption. Ramp deals are sometimes also referred to as step-up pricing or declining discount contracts.
Example
Year 1: $2,000/month Year 2: $4,000/month Year 3: $6,000/month The contract is signed upfront but ramps over time.
Why This Matters (To SaaS & Finance Teams)
Ramp deals are great for new customer acquisition—but painful to manage manually. Without automation, you’ll misbill customers, miss revenue, or break your revenue recognition. Ordway handles ramp deals natively—automating future price changes, adjusting deferred revenue schedules, SaaS metrics (ARR/MRR), and syncing everything to the GL so Finance doesn’t chase spreadsheets.
How It Works (Break It Down Simply)
- Contract signed with scheduled pricing increases
- Revenue schedule created for year one pricing
- First year invoice sent and payment collected.
- ARR/MRR and SaaS metrics updated to include year one monthly recurring revenue
- Pricing adjusted for year two
- Revenue schedules and ARR/MRR SaaS metrics updated to reflect year two pricing
- Second year invoice sent and payment collected
- Pricing adjusted for year three
- Revenue schedules and ARR/MRR SaaS metrics updated to reflect year three pricing
- Third year invoice sent and payment collected
- Forgetting to adjust revenue schedules
- Hardcoding future rates in spreadsheets
- Errors in rev rec if revenue isn’t spread correctly
- Sales, Finance, and CS all tracking different amounts
- Forecasts overstated if ramps aren’t modeled accurately
Best Practices
- Automate ramp schedules in your billing platform
- Sync ramp logic with CPQ and CRM
- Validate revenue recognition policies aligns with ASC 606
- Forecast ARR by ramp stage, not just full contract value
- Communicate ramp milestones to Customer Success for account planning
When to Use Ramp Deals
- New customer acquisition large customers with phased rollout plans
- Aligning pricing with forecasted adoption
- Supporting startup/scaleup whose budgets are forecasted to grow
- Strategic accounts where longterm value > initial ACV
- High ACV deals requiring lower entry point to close
KPI Impact / What It Affects
- Impacts ARR and MRR timing
- Affects average deal size metrics
- Influences revenue forecasts and renewal base
- Changes ACV/TCV reporting
- Ties into sales comp plans and quota timing
Real SaaS Takeaway
Ramp deals win deals—but without automation, they’re a mess. Ordway tracks ramp terms, triggers future billing changes, and ensures accurate revenue and metrics—no manual intervention needed.
FAQ Section (Quick Answers to Real Questions)
How can you automate billing for ramp deals?
Automating billing for ramp deals requires a sophisticated subscription billing platform capable of handling dynamic pricing schedules. This system should automatically adjust invoice amounts as ramp stages progress, ensuring accuracy and timely collections without manual intervention. It integrates contract terms and billing logic to streamline the entire invoicing process, reducing operational overhead.
What are the revenue recognition challenges for ramp deals under ASC 606 compliance?
Ramp deals introduce significant complexity for ASC 606 compliance due to varying pricing over the contract term. Companies must accurately allocate transaction prices to performance obligations and recognize revenue consistently over the service period. Specialized revenue automation software is essential to ensure compliance and avoid audit risks by accurately tracking and amortizing deferred revenue.
What kind of subscription management system is best for ramp contracts?
An effective subscription management system for ramp contracts must offer advanced configurability to define multi-stage pricing, usage-based tiers, and contract amendments. It should automate the entire lifecycle, from initial quoting to renewals, and integrate seamlessly with billing and revenue recognition engines. This ensures accurate tracking of contract changes and customer entitlements throughout the ramp period.
How are ARR and MRR calculated for ramp deals?
Calculating ARR and MRR for ramp deals requires careful consideration of fluctuating pricing. Typically, these metrics are based on the *current* contracted recurring revenue for MRR and its annualized equivalent for ARR, factoring in the specific rate for the period being measured. For accurate reporting, the system must precisely track each stage’s financial impact.
What are the best practices for implementing ramp deals in SaaS?
Best practices for implementing ramp deals in SaaS involve clear contract terms, a flexible billing system, and robust revenue recognition capabilities. Ensure your sales team is trained to position ramp deals effectively, and that your financial systems can accurately track and account for the evolving contract value. Regularly review the performance of ramp deals to optimize pricing strategies and customer acquisition.
How do you integrate CRM with billing for complex subscription models?
Integrating CRM with billing for complex subscription models requires a platform that offers bi-directional data flow and a unified view of customer information. The CRM should pass contract details, pricing, and customer changes directly to the billing system, which then handles invoicing, payments, and revenue recognition. This eliminates manual data entry, reduces errors, and ensures sales and finance teams are always aligned.
What are the advantages of ramp pricing for customers and vendors?
Ramp pricing offers customers a lower initial investment, making it easier to adopt new services and scale usage as their needs grow. For vendors, it reduces sales friction, accelerates deal cycles, and fosters long-term customer relationships, leading to higher lifetime value. It also provides predictable revenue growth as customers mature on the platform.
How does flexible billing software support dynamic pricing models?
Flexible billing software is essential for dynamic pricing models because it allows businesses to configure and automate various pricing structures, including ramp deals, usage-based tiers, and promotional offers. It adapts to changes in customer contracts, automatically recalculating charges and generating accurate invoices. This agility enables businesses to respond quickly to market demands and customer preferences without manual overhead.
Want to Go Deeper?
See how Ordway automates ramp deal pricing, rev rec, and billing changes over time. Request a demo
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