Best Practices for Obtaining Contract Renewal Opportunities With Vendors
When it comes to contract 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? What about increased loyalty in relationships?
Okay, so everyone’s happy and they sign the deal. Now, there’s one more thing to do: track the renewal clause. The healthiest business relationships are always looking ahead to what’s coming next, for starters.
In a contract’s lifecycle, that means the renewal. Addressing the renewal opportunity means reviewing what’s occurred over the history of that contract. Additionally, you need to consider the advantages and drawbacks of a renewal. Here are a few guidelines to capitalize on a contract renewal opportunity.
1. Communicate and Build Relationships from the Start
First of all, 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 everyone signs the contract, maintaining the conversation and making sure both parties are satisfied improves the chances of renewal.
Renewals are typically the easiest option for both parties. First of all, one side doesn’t have to go looking for a new supplier, and the other side continues to get revenue. However, they aren’t worth it if the relationship is bad or the contract isn’t valuable.
2. Leverage CRM and CLM Platforms
Next, 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). For one thing, a CLM tracks the entire duration of a contract and determines whether or not it is worth renewing.
Furthermore, 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 adds value for teams.
3. 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.
Luckily, this is where contract lifecycle management, or CLM comes in. A good CLM should have automated alerts that will tell you when renewals are coming up well before their deadlines. Obviously, deadline summaries provide visibility into all the upcoming contracts that are expiring. That way, there is plenty of time to prepare for renewal options.
4. Hold Yearly Reviews
Regardless of what a contract’s renewal date is, evaluate every contract at least once a year. This gives perspective into how the contract is going. Also, it outlines what the value is for a company, and if a renewal is appropriate.
Clearly, planning ahead is key to approaching a renewal. It needs to be done in a way that continues a successful business relationship, even if the decision is to not renew.
5. Refine the Contract
Finally, even the most valuable contracts often need improvements. Budgets, products, and strategies change, and a contract keeps up with the pace of business. The yearly reviews should identify what needs to be changed in the contract, if anything. Also, updates should be made at that point. These changes will most likely only need a quick legal review. However, they have a significant impact on revenue and the contract’s overall worth.
Renewals are all about continuing valuable relationships. Also, 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.
