If a customer is up for renewal and churns and they weren’t tracked, were they a customer to start with? Yes, but tracking contract renewals is one of the simplest and easiest ways to keep your startup healthy. Knowing how to track contract renewals will help plug the leaky bucket while you layer on more and more new customers.
Churn and the ability to retain customers have always been extremely important to SaaS companies. Churn is effectively a hole in the bottom of a bucket that you’re trying to fill. Leave it unattended and it will just grow and grow. You can do a lot of things to reduce churn. Keep driving product development to offer more and more value or just have a laser-focused customer experience team. Both of these are things you should do. But with all things in the software-as-a-service world getting the basics right makes life so much easier. And what is more basic than tracking contract renewals? So let’s dig into best practices for tracking.
How do I track contract renewals?
The first thing that you need to do is have clear and well-structured contract data. It sounds simple but extracting contract data from PDFs is tedious, and structuring it into a format that shows simple start and end dates is not something all startups have time to do or see value in doing until they are fifty customers in. Why is well-structured data so important? Well-structured data allows you to build on top of it. If it’s structured in your CRM you can set tasks and email/slack message reminders on top of this. If it’s structured in an Excel spreadsheet you can build calculations on this to let you know when it will be three months, two months, or one month before a renewal is due.
Why do I need reminders of upcoming renewals?
Other than what I hope is obvious, three of the key reasons for setting up reminders of upcoming renewals are that the customer may need time and warning to get the budget, a new statement of work may need to be raised with an associated purchase order number and in the worst case scenario you will give yourself time to convince a customer not to churn. Reminders will help you set up an effective contract monitoring and enforcement process.
How much time should I be giving my team before a renewal?
Well, it depends on a lot of factors. Some renewals are quick and easy, you may have an autorenewal clause in your contract and the total dollar amount may be low enough that you can simply assume that the autorenewal holds and bill against it. There may be times when you need to work with the customer to work through contract changes at renewal, such as renegotiating liability limitations. For a B2B SaaS contract of over ten thousand dollars per year, a minimum would be three months before a renewal is due.
When a SaaS company has a well-oiled customer experience team it can also be good practice to have check-in points along the way to ensure that a customer isn’t a churn risk. After three months have they started to fully use your product, after six months are they actively using all of the seats (insert any other pricing structure terminology here) that they have purchased?
These are all check-in reminders that can be set up based on having well-structured contract data to track your contract renewals.
What are some common limitations in tracking contract renewals?
Every solution will have its limitations. A lot of CRM software will build limitations into their cheaper tiers of product offering which will not let you do certain things that would help track contract renewals. Hubspot is a tool that has the limitation of not being able to calculate date data to set reminders unless you upgrade. The number of times I’ve wanted to set up a workflow to send me a notification ninety days before a renewal date and faced this limitation has been enough to cause a lot of frustration.
The more fluctuations we see in the tech industry the more it is becoming important to get details like contract renewal tracking right. It helps with keeping customers onboard, a customer in the hand is worth two in the bush as the saying goes.