We’ve talked about the stages of a contract lifecycle and best practices for contract management, but when it comes to renewals, it’s much more than just a yearly check-in. How can the renewal phase of a contract be an opportunity for more revenue and increased loyalty in relationships?
The deal is signed and everyone’s happy. There’s one more thing to do—look at the renewal clause. The healthiest business relationships are always looking ahead to what’s coming next. In a contract’s lifecycle, that means the renewal. Addressing the renewal opportunity means reviewing what’s occurred over the history of that contract, and what the advantages and drawbacks to a renewal are. Here are a few guidelines to capitalize on a contract renewal opportunity.
Communicate and Build Relationships from the Start
Renewals factor in well before the deadline comes up—they start the moment the contract is first drafted. Communication is a key baseline as the relationship starts.
From that point, regular communication is the next step. Once the contract is signed, maintaining the conversation and making sure both parties are satisfied with the relationship improves the chances of renewal. While renewals are typically the easiest option for both parties—one side doesn’t have to go looking for a new supplier, and the other side continues to get revenue—they aren’t worth it if the relationship is bad or the contract isn’t valuable.
Leverage CRM and CLM Platforms
Powerful analytics from a CRM platform such as Salesforce give insights into the benefits of each contract. A CRM should integrate with a contract lifecycle management platform (CLM) to track the entire duration of a contract and determine whether or not it is worth renewing. An integration should provide data on value, efficiency, and contract deadlines. With this information, both sides have all the information they need to determine if a contract is producing significant revenue and adding value for teams.
Establish Automated Alerts
Smaller teams may be able to keep track of contracts with calendar reminders, but once a company grows, the number of contracts grows as well, into the thousands and even tens of thousands. No calendar is able to effectively manage all these reminders in an organized manner.
This is where a CLM comes in. A good CLM should have automated alerts that will tell you when renewals are coming up well before their deadlines. Deadline summaries provide visibility into all the upcoming contracts that are expiring so that there is plenty of time to prepare for renewal options.
Hold Yearly Reviews
Regardless of what a contract’s renewal date is, every contract should be evaluated at least once a year (or sooner, if the contract length is shorter than a year). This gives perspective into how the contract is going, what the value is for a company, and if a renewal should be considered. Planning ahead is key to approaching a renewal in a way that will continue a successful business relationship, even if the decision is made not to renew.
Refine the Contract
Even the most valuable contracts often need improvements. Budgets, products, and strategies change, and a contract should keep up with the pace of business. The yearly reviews should identify what needs to be changed in the contract, and updates should be made at that point. These changes will most likely only need a quick legal review, but can have a significant impact on revenue and the contract’s overall worth.
Renewals are all about continuing valuable relationships. Are both parties satisfied and interested in continuing a good relationship? Is the contract advantageous for both parties? If so, these 5 steps should help maintain the best renewal cycle possible.