How to build a business case for contract lifecycle management

How To
May 24, 2022

You’ve decided that you want to invest in contract lifecycle management software for your business. Great. But what happens now?

Well, wanting CLM software and buying CLM software are two different things, and there are a few barriers you’ll need to overcome first. The biggest one? Buy-in. In this deep dive we'll show you how to get it.

If you're not at the business case stage yet, and your'e looking to evaluate vendors, hit the button below to find out more about Juro's all-in-one contract automation platform. Otherwise, read on.

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You’ve decided that you want to invest in contract lifecycle management software for your business. Great. But what happens now?

Well, wanting CLM software and buying CLM software are two different things, and there are a few barriers you’ll need to overcome first. The biggest one? Buy-in. In this deep dive we'll show you how to get it.

If you're not at the business case stage yet, and your'e looking to evaluate vendors, hit the button below to find out more about Juro's all-in-one contact automation platform. Otherwise, read on.

1. Know who you’re addressing (and why)

Before you begin to build your business case for contract lifecycle management software, you first need to establish who you’re trying to persuade. It’s critical to establish this early on, as who you’re seeking to get buy-in from will usually shape your case. 

Avoid wasting stakeholders’ time talking about matters that don’t affect them and create a personalized case for each. 

For example, if you’re a legal counsel trying to convince the GC to pay for something, then freeing up your own time might be persuasive. If it’s operations that need to sign off, then control over approvals and data they can trust to be accurate will be crucial. If HR is the main use case, and they’ll provide the budget, then the signing experience might be a factor. If it’s the CFO then you know your ROI calculations need to be overwhelmingly persuasive. 

Keep each stakeholder’s interests in mind when pitching your case for CLM software and ensure that you’re feeding them the information they care most about. It’s often also effective to bring them into discussions with vendors, as they’ll hear first-hand how the software can transform their daily work and ability to meet targets. 

2. Start with the problem, not the solution

It’s no secret that starting a discussion about adopting contract lifecycle management software with ‘I want’ is unlikely to get you buy-in. While you might be all too familiar with the growing pains you’re experiencing with a manual contract workflow, external stakeholders won’t be. Before you dive straight in with a solution, it’s important to introduce them to the problem first. 

To illustrate the problem, you want to narrate it. Explain clearly why the current situation is bad, and what its tangible downsides are. 

You should also draw upon real examples and figures when describing the problem, as this helps stakeholders understand the severity of your problem and how urgently it needs their attention. One of the best methods of persuasion is to build trust and credibility, and numbers help you do that.

4. Dig deeper into the problem

If you really want to go into detail about the problems posed by a manual contract workflow, you could even take a more granular approach. This can help to illustrate exactly how not implementing contract lifecycle management software can affect growth in all areas, including critical company-wide objectives. 

Try describing the problem at different levels within the company:

🔝 Top-level: how will inaction affect the company strategy?

  • Is increasing contract risk damaging the chances of you merging with another company or raising funding?
  • Are slow contract turnaround times blocking sales teams and making it difficult, if not impossible, to meet aggressive revenue targets?
  • Will ineffective contract processes hinder HR teams in their pursuit of top talent and rapid headcount growth? 

💰 Mid-level: what are the financial consequences of inaction?

  • How much are the costs of managing legal documents inflated at present? When will this exceed the budget?
  • How much are you already overpaying for multiple licenses on existing tools that haven’t been adopted properly or don’t solve the fundamental problem?
  • Are you experiencing contract value leakage as a result of slow turnaround and contract review times? How much?

🏃 On the ground: what does the current process look like in practice?

  • What does the existing process for contract lifecycle management look like? Does it create unnecessary risk? How much time does it waste?
  • Are existing contract processes resulting in poor job satisfaction or high turnover rates?
  • How much time is being spent responding to repetitive queries from other departments about contracts?

5. Look beyond legal - who else is suffering?

For the best chance of convincing your stakeholders to buy contract lifecycle management software, relate it back to them. Who else is suffering, aside from the legal team?

Are sales teams waiting too long for legal review, causing contracts to lose momentum? Are finance departments having to foot the bill for missed contract renewals? Are HR teams falling behind the hiring curve due to inefficient contract processes for HR contracts and employment offer letters?

Bring whoever is affected by inefficient contract workflows into the discussion and get their buy-in. An investment for the business is often far more compelling than an investment for a department working in silos, so focus on who else is losing out. 

6. Explain why now and not later 

One of the most common reasons for pushback when proposing new business software is a lack of urgency. Contract lifecycle management software proposals are no exception. Convincing stakeholders that you need to adopt CLM software is half the battle. The other half is convincing them that you need it now. 

The best way to establish this sense of urgency is to make it clear what will happen if you don’t implement something within the desired timeframe.

For some businesses, this might be that they’re fast approaching their next funding round and without a robust system of record in place for contracts, passing due diligence is unlikely. Perhaps it’s because you have recently suffered from a huge compliance issue as a result of ineffective contracting processes, and this has proven costly for the company. Maybe you’re in a critical stage in your growth where inefficiencies that slow down sales cycles put aggressive revenue targets at risk. 

Whatever your why is, use compelling events to demonstrate the need and the risks of not implementing contract lifecycle management software soon. 

7. Sell them on the potential

Don’t stop at sharing the problems the legal function is encountering. You also want to sell stakeholders a dream of what the function could be like, and achieving, if CLM software is introduced. 

How would implementing contract lifecycle management software transform your existing contract workflow? How can it enable other teams to perform more efficiently? What would it allow you to do that you can’t currently? Why is that important?

Let the stakeholders know what you could achieve from adopting CLM software and set out metrics that make these aspirations measurable. For instance, you could say that:

  • We’ll cut contract creation from 2 hours to 10 minutes
  • We’ll reduce the need to hire an additional lawyer to manage contracts
  • We’ll cut the number of systems of record for our legal documents from 5 to 1
  • We’ll cut approval time for a sales-generated document from 2 weeks to 3 days
  • We’ll cut the proportion of time our core legal team spends managing contracts from 40% to 10%
Juro business case lightbulb

8. Tie adoption back to revenue and cost-savings

You’ve set out a proposal that means a serious investment. Now it’s time to show your stakeholders the return they’ll get on that investment. The best way to do this is through ROI calculations, largely because the average cost of employing a legally trained employee is so high. But also because contracts have a direct impact on revenue, and contract leakage creates a financial risk that’s felt throughout the business. 

When calculating the ROI for adopting contract lifecycle management software you’ll want to consider factors such as:

  • Cost savings (from saving time)
  • Increased revenue (from closing faster) 
  • Financial risk reduction (from ensuring better contract compliance)

To calculate this, you’ll want to carefully consider various, more specific factors. These include:

  • The number of contracts created per month 
  • The amount that your employees are paid per hour 
  • How much of legal’s time is spent on manual contracts
  • How many legal team members there are 
  • How many contracts typically require approval 
  • The current contract turnaround time 
  • The signing rate
  • The average value of the contracts
  • How many sales happen per month 
  • How many salespeople are currently hired
  • How much money has been lost previously due to missed renewals

9. Explain how you’ll combat risk on your end

The first reaction of any decision-maker will be to greet your numbers with a healthy pinch of suspicion. And they’re right to do so; software implementations fall down for any number of reasons, and a failure to deliver on the ROI that you promised will only hurt your reputation internally, making it harder to push through a successful business case next time. 

It’s important to call out the key risks that could threaten these financial benefits, and explain how you’ll meet them. It’s worth putting these concerns to your proposed vendor on any demonstrations or calls you have with them. Examples might be:

  • Low adoption: will people actually use the tool? If only two of your proposed ten users actually migrate to the new solution, the cost savings and boosts to revenue will be smaller in scale and harder to justify. Look for a solution like Juro that prioritizes ease of use and has a strong evidence base in terms of adoption.
  • Long, tricky implementation: how easy is it to set up and get to value with the new tool? If it takes your IT team six months to configure, this cuts your year one ROI in half. Look for a solution with fast onboarding and demonstrably quick time-to-value.
  • Hard to integrate: does your proposed solution talk to, and work with, all the other tools you use? For example, if the entire sales team uses Salesforce every day, it’s unrealistic to expect them to use a tool that doesn’t integrate well with their CRM. Avoid this risk with a solution that fits easily into your current tech stack.

By addressing these concerns proactively, you’ll be able to build trust faster and put these nagging concerns to rest. 

Juro business case working

10. Propose your plan of action 

To recap: by now, you’ve identified the precise problem that’s causing pain to the business. You’ve made clear that it’s not just you who suffers – individuals in teams in various functions feel the pain too, and it’s affecting the business in measurable ways right from the bottom to the top. You’ve painted a picture of a world without this problem; and finally you’ve identified the allies you need to pull the trigger on this decision. 

Now it’s time to state your plan clearly. Set out what you intend to buy, when, on what basis, for which teams, and the length of any trial periods. At this point you’ll want to compare different contract lifecycle management platforms and assess these against your core business requirements.

This can be a lengthy process. But if you truly want to nail adoption and reap the rewards of implementing a CLM system, it’s well worth the time invested. 

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