How do you manage upgrades and downgrades of your B2B SaaS product

[OlivierBeaujean]

Hello, 

I've been searching for a while for the good way of managing upgrades and downgrades in Hubspot. 

As an example for UPGRADES: 

I have a client with a 12.000 euros licence, billed each year on the 1st April, the ACV and ARR is 12.000 eur. In Jan, that clients decides to increase the licence to the next level and take the 15.000 euros licence. I want to be able to track the 3.000 euros upgrade we did to report it in a waterfall diagram like this one : . I created a product "upsell" for that but I'm not sure it's the right way for doing this. In the DEAL that needs to be invoiced, once we learn about the upgrade, we add the product upgrade for the correct amount. Once billed, we duplicate the DEAL with the new total contract value. 

As an example for DOWNGRADES: 

I have a client with a 12.000 euros licence, billed each year on the 1st April, the ACV and ARR is 12.000 eur. In Jan, that clients decides to size down the licence to the lower level and take the 8,000 euros licence. I want to be able to track the 4,000 euros downgrade we did to report it in a waterfall diagram. I created a product "downsell" for that but I'm not sure it's the right way for doing this. 

How do you guys do this ? 

[louischausse · Accepted solution]

Hi @OlivierBeaujean !

Interesting use case!

It will depend of the term of your contract but...

I would recommend creating a new deal for the upgrade or downgrade at the date of the change with a discount for the pro rated amount that was paid. It creates a new contract with a term of one year beginning at the upgrade/downgrade date

So for you upgrade use case:

12 000 / year = 1000 / month

4 month left = 4000 pro rated discount

So you create a new deal with a product at 15000 -4000 discount = 11 000 total

You can do something similar for downgrade as well

Don't forget to mark my reply as a solution if you are satisfied. If not, do not hesitate to ask me anything!

[PedroMarzagao]

Hi @VSairam2, we didn't yet begin setting up a platform such as Chargebee since we're not yet monetising, but this is definitely on our roadmap. 

So the system I mentioned before isn't yet put to practice. However, I'm curious to know if you've been able to work it out with automation and Chargebee. I'm assuming that for someone that won't use such tools, they'd have to open/close deals manually yes.

[PedroMarzagao]

Hey @OlivierBeaujean and @louischausse 

I'm trying to replicate what you show above. Did you manage to report it correctly in Hubspot without the Enterprise version? 

Are you able to share your report set up in any way?

I'm managing a SaaS business with both a monthly or yearly subscription. I've built the following setup:

- New business pipeline

- Renewals pipeline

- Upgrades pipeline

- Downgrades pipeline
- Churn pipeline

Let's suppose we're dealing with a customer that pays month-on-month:

• Have 4 product line items. One for a (M) monthly subscription (Term = 1) and another (Y) for a yearly subscription (Term = 12). 
• Each has 2 tiers of subscription.
  • Tier 1 (M/Y) = $100/$1000
  • Tier 2 (M/Y)= $150/$1500

1. On every new customer I create a New Business Deal with the end date = end of subscription and add the correct product line item.
2. Once that the subscription ends, the deal ends and it either renews or not. If it does, I close this deal and open a new one in the Renewals pipeline and a new close date. I add again a new product line item similar to what I had before.
3. If the user does not renew, I close the deal and create a Churn Deal with same value as the deal I had before. I also close the churn deal at the creation date.
4. If the user upgrades, I close the current deal, and follow your rationale of creating a new Upgrade Deal worth the difference between Product line items. I also create a new Renewals Deal with the new product line item discounted with the pro-rata difference from the previous deal. This Renewal deal will also have a new close date = (product line create date + term value).
5. If the user downgrades, I do the opposite of an upgrade, as you suggested.

Am I missing something here?

[VSairam2]

Hey Pedro, I'm trying to solve the same use case but through automations. We are using Chargebee for billing & subscription management and we have integrated it with hubspot. 

With respect to upgrade/ downgrade/ churn do you manually close deals and create new ones or have you integrated to a subscriptions platform like chargebee/ chargify and the likes? 

[Osnovyanenko]

Hello @OlivierBeaujean !
Maybe this article can help.

[OlivierBeaujean]

I know but you need Enterprise level for this, we are not at that level (yet 🙂 )

[louischausse · Accepted solution]

Hi @OlivierBeaujean !

Interesting use case!

It will depend of the term of your contract but...

I would recommend creating a new deal for the upgrade or downgrade at the date of the change with a discount for the pro rated amount that was paid. It creates a new contract with a term of one year beginning at the upgrade/downgrade date

So for you upgrade use case:

12 000 / year = 1000 / month

4 month left = 4000 pro rated discount

So you create a new deal with a product at 15000 -4000 discount = 11 000 total

You can do something similar for downgrade as well

Don't forget to mark my reply as a solution if you are satisfied. If not, do not hesitate to ask me anything!

[Schwarz]

Hi @louischausse 

I am currently building an OKR dashboard for our sales team and one has to do with upgrades. I don't know how to report ARR from Upgrade deals as we have Upgrades and Renewals which can include upgrades too.

Most recently we seperated our "Sales Pipeline" into a "New business" and "Existing Business" pipeline to track upgrades. All deals in Existing business will therefore, also be labled as Deal type = Existing business and Recurring revenue deal type = Upgrade.

However, we have the renewal pipeline and I don't know how to track upgrades in this renewal to report. Here is an example

Customer A - New business - 1000 ARR - Closed: Aug. 2023
Customer B - Upgrade - 2000 ARR - Closed Aug. 2023
Customer C - Renewal - 3000 ARR - Closed Aug. 2023 (2000 ARR = Renewal; 1000 ARR = Upgrade/Rollout)

For Customer C I can't just report the ARR into our report as it's not quite clear how much is ARR increase.

Do you have any idea how to solve this problem?
Thanks in advance and best regards,

Jakob Schwarz
Business Analyst - simpleclub - We educate the world

[SGaur0]

good answer Louis!

[OlivierBeaujean]

Hello Louis, thanks for taking the time to answer. If I read you well, I don't thin that with your solution I'll be able to reproduce the waterall graph I mentioned in my post. How would you find back the 3K upgrade that was sold ? 

[OlivierBeaujean]

@louischausse also, can I have a negative price product ? I'm not so sure it would work for the downgrade part...

[louischausse · Accepted solution]

If you apply a discount bigger than the unit price your line item amount will be negative 

Don't forget to mark my reply as a solution if you are satisfied. If not, do not hesitate to ask me anything!

[OlivierBeaujean]

thanks Louis ! We'll be able to manage like this indeed. 

[natsumimori]

Hi @OlivierBeaujean ,

Thank you for reaching out to the HubSpot Community.

I wanted to tag in some top Community contributors here: @Dan1 and @louischausse , would you mind sharing your ideas for @OlivierBeaujean ?