A better way to handle renewals
A practical guide on the topic
It seems like on almost every call I get on these days people are stressed. The source of that stress for many tends to stem from the fact that companies are going through layoffs, tightening budgets, and as a result, tech stacks are shrinking along with other tooling and overhead. The CFO and Revops have more power than ever before and this has real implications for churn and renewal management.
I wanted to write some brief thoughts that I think can be helpful on the topic of getting better at renewals even in tough environments.
GO LONG
One of the classic mistakes of renewal management is waiting until the last minute to engage. It’s like being the person who calls you only when they want something—no one likes that person. Instead, we want to take the long view–to not be the stranger who only shows up when they want something. I recommend setting a regular cadence for this. For some, it may be monthly for others longer. The minimum should probably be quarterly. Set activity metrics here and make sure you hold to them. Ideally, you have alerts here to help you. Now you can spot problems long before they arise and glide into your renewals.
Then once you do this, you can start renewal conversations very early, knock out the easy ones and focus on the tougher ones working backward from renewal dates. If you’re working in month renewals you’re already setting yourself up to be reactive in the next month as well.
GET OUT OF REACTIVE FIREFIGHTING
This is the hardest one to overcome right now. So I might even add the words “where possible” to this subsection header. You’re trying to save every account you have right in front of you so you throw the kitchen sink hoping that “whatever is going on with the economy” gets better next year. We never know what the future holds, so it’s always best to have a plan from which we can work backward. A dollar kept in renewal is one you don’t have to make up for in expansions or at the top of the funnel.
The best way to do this is to chunk this down into plays.
Here are a few plays and also actions I might think of for someone who has ghosted:
If someone is unresponsive, try LinkedIn
Multithread for an intro
Send a calendar link (some people send calendar invites)
Send a gift card in exchange for time
Phone call
Here’s one for an attempted churn:
Understand the root cause of the want to churn at a deep level
Offer to contract as an alternative if need-be
Match power with power and bring in execs or your manager if you can
Plan the deal ahead of time
Do a pre-call plan exercise with your manager
Roleplay it out
Discount the product if you have to as a last resort
Understand where the request is coming from (usually execs on their side), what would they need to see to stay?
Reference usage data for insights
Offer an extension on their renewal, renew now get x months free, and get creative
GET GRANULAR (AND DATA-DRIVEN)
Most people don’t look at renewals in a very granular way. This hurts their ability to understand what’s happening at a macro level and also impacts individual deals as well.
So for example, the first thing to understand is what is happening at the time of renewal in general, what are the stages, what are the forecasts, next steps, probabilities, and dollar values.
So Opportunity stages with probabilities could look like
Outreach made 5%
Meeting Held 15%
Procurement 35%
Verbal Agreement 50%
Renewal Won 100%
A forecast could look like
Staying the Same
Increasing
Contracting
Churning
Value in $$$ Amount
$10,000
Next Steps:
Now we’re starting to build a post-sales renewal funnel that is like the well-worn sales funnel we have all come to know. The clearly delineated stages help us make decisions and we’re also able to report in a way that informs the entire business of insights on the entire customer base. This is your funnel to own and defend in weekly 1:1s.
LOOK AT LEADING INSTEAD OF LAGGING INDICATORS
In order to excel at renewals, we have to look at what causes actions to occur. A renewal happening is a result. That is a lagging indicator. What causes that result is a leading indicator. This is usually the level of service and general happiness of the customer (especially with the product).
Tracking customer objectives and making sure that they achieve what they set out to achieve upon initial purchase is key to success. Product usage along with this is great. Use objective criteria to score this. It’s best that you are seen as mission-critical.
GO FOR THE MULTI-YEAR DEAL
Companies ideally should be incenting post-sales teams for this, but sometimes they don’t. Nonetheless, it makes your job easier if you get the commitment for more than one deal.
First, identify what conditions would need to be met for this.
Second, try to give preferred pricing.
Third, ask on as many calls as you can.
GET CROSS SELLS and UP SELLS
They seriously help with product stickiness.
The first thing to do is make sure a customer is realizing the goal they intended upon purchase. I refer to the “Jobs to Be Done” framework here. What job did they hire you to do? Do that exceedingly well, then go look for “other jobs to be done”. And ideally, you can unsell competitors along the way.
Cross-selling and up-selling is what yields a higher Net Revenue Retention (NRR).
The formula for GRR is:
GRR = Monthly recurring revenue @ start of the month
- Churn - Contraction
_____________________________________
MRR @ Start of the month
The formula for NRR is:
NRR = Monthly recurring revenue @ start of the month
Expansions - Churn - Contraction
_____________________________________
MRR @ Start of the month
The expansion piece is what is added to increase NRR and is a metric that companies look at very closely.
Getting good at expansions ironically has another purpose, it helps fight churn and earn the renewal b/c of product stickiness.
Win for everyone.
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Thanks for reading!