Per Seat Pricing For Team Software: Questions To Ask Before You Sign

Per seat pricing looks simple: number of people times a price. The surprises come from the definition of a seat and from what the contract does when your headcount changes. Before you sign anything priced per seat, get written answers on who counts, what happens to occasional users, and whether the bill can go down as well as up.

Terms vary by vendor and by contract, so treat everything below as questions to ask rather than rules that apply everywhere. On a small team, settle whether a dedicated tool is worth it for six people before you negotiate a rate for one.

What counts as a seat

The word means different things in different contracts. Common definitions:

• Anyone with a login, active or not
• Anyone who logged in during the billing period
• Anyone assigned work, whether or not they log in
• Named individuals, where sharing a login is a breach

The gap between the first and second matters most for teams with turnover or seasonal staff. Ask specifically: if someone leaves in the first week of the month, are we billed for them that month, and can the seat be reassigned or only removed at renewal.

Also ask what happens to a suspended account. Some contracts keep charging until the account is deleted, and deletion may take the person's history with it.

Contractors, clients and people who only read

Almost every team has people who need to see the work without doing it: a client, a finance reviewer, an external contractor for six weeks, a board member who looks once a quarter.

Questions worth asking:

• Is there a read only or guest level, and does it cost anything
• Are guests limited in number
• Can a contractor be added for one month and removed cleanly
• Does a guest count towards any plan limits that trigger a tier change

If read only access costs the same as full access, that changes the maths for any team that shares work outside itself. Some vendors include limited guests, some do not. It is not something to assume.

What happens when the team shrinks

Growth is easy: you add people and pay more. Shrinking is where contracts differ sharply.

• Can seats be reduced mid term, or only at renewal
• Is there a minimum seat count for your plan or discount
• If you drop below a threshold, do you lose a negotiated rate
• Does an annual commitment lock the count for twelve months

A company that grew fast and then reorganised can find itself paying for a headcount it no longer has, for most of a year. Ask for the reduction terms in writing before you agree an annual discount, because the discount is usually what carries the lock.

Modules, tiers and the upgrade trigger

Many products split features across tiers, and the feature you actually need often sits one tier up. Two things to check:

• Which of the features we discussed today are in the tier we are buying
• What triggers a forced upgrade: a feature, a number of users, a volume of data

Modular pricing helps here, because you can pay for the part you use. SicherOne, for example, is sold per seat with modules separable, so a team can buy one area rather than the whole system. Whatever the vendor, ask whether you can add a module later at the same rate you are being quoted now. That matters most when the modules overlap with something you already pay for, which is the separate tools or one system trade.

The renewal clause

The least read paragraph is usually the most expensive one.

• How much notice is required to not renew, and in what form
• Does the contract auto renew, and for how long
• Is there a cap on price increases at renewal
• What is the process for getting your data out, in what format, and how long do you have

Ask for an export sample during the evaluation. A vendor that can show you a real export in an hour is telling you something useful, particularly if your fallback is the spreadsheet you were running before.

Before you sign

• Get the seat definition in writing
• Confirm the treatment of guests, clients and contractors
• Confirm whether seats can be reduced mid term
• Confirm the renewal notice period and put a reminder in a calendar
• Confirm what a data export looks like

Per seat pricing is predictable only when the definition of a seat, the treatment of occasional users, and the rules for reducing count are all written down. Everything else is a forecast.

None of this means per seat pricing is a bad deal. It is often the fairest model available. It just rewards the buyer who reads the definitions before the renewal reads them for you.