Do You Have a Contract Renewal Strategy?

Key takeaways:

• Implement a contract renewal process starting 90-120 days before expiration to allow adequate time for performance analysis, stakeholder alignment, and negotiation without rushing critical business decisions.

• Centralize all contracts in a single digital repository with automated renewal reminders to prevent the 92% human error rate in manual tracking and eliminate the average 8.6% revenue leakage from missed or accidental renewals.

• Prioritize contract retention as a growth strategy, recognizing that increasing customer retention by just 5% can boost profits by 25-95% and that acquiring new customers costs 5-25 times more than retaining existing ones.

• Evaluate each renewal strategically by analyzing vendor performance, ROI, and contract value rather than defaulting to automatic renewals, and use renewal conversations as opportunities to negotiate better terms or pursue upsells.

How many contract renewals slip through the cracks at your organization each year? Maybe you’ve got a handle on the big ones, but when the average large company is managing 20,000-40,000 active contracts, what about those smaller agreements that quietly auto-renew without anyone noticing—sometimes with vendors you’d rather not be working with anymore.

Contract renewal strategy is a systematic approach to managing contract expirations and renewals that maximizes business value while minimizing risk. This proactive approach delivers several key benefits for your organization.

Instead of constantly searching for new business, you can leverage your existing relationships and accounts. You can assess the quality and ROI of each contract to determine whether you want to renew. The strategy you employ significantly impacts your ability to generate revenue through renewals.

You will find it difficult to remain profitable if you are constantly looking for new vendors or partners. Contract renewals are directly tied to customer retention. For example, research from Bain & Company shows that increasing retention by just 5% increases profits by 25% to 95%. Without a focus on retention, your business may struggle to compete.

What are contract renewals?

Contract renewal is the process of extending an existing contract beyond its original expiration date. This occurs at the end of the contract lifecycle when your business must decide whether to continue the relationship with the same terms, negotiate new terms, or terminate the agreement.

Once a contract reaches its expiration date, you have several options. Some contracts include built-in renewal mechanisms within the document itself. Others require active negotiation to continue the relationship. These mechanisms typically work in one of three ways:

• Setting an automatic renewal date: Many contracts build in an automatic date that the contract will renew unless either party decides otherwise. The contract terms typically state that the parties have by a certain date or within so many days of the contract’s expiration to terminate the contract. Otherwise, it automatically renews for another term.
• Creating opt-out conditions: Similar but notably different are opt-out condition clauses that require some performance in addition to the notice of termination. For example, a contract may require returning certain proprietary software or a piece of equipment to terminate the agreement. A business must know that these conditions exist and be ready for them.
• Renewal by date: Other contracts assume they will terminate on a specific date but provide an optional renewal. The optional renewal will state what actions must be taken to renew the contract. They may also indicate whether the contract continues with the previous terms, whether changed terms will apply, or whether negotiation must occur to renew.

A successful business has countless contractual relationships it must track—including renewals.

Be proactive with renewals to keep your best deals

Contract renewal rates directly correlate with business success. According to the Aberdeen Group, companies considered “best in class” renew 56% of their agreements annually, while less successful companies renew 25% or less of their contracts.

Missing profitable renewals creates three major business problems:

• Lost income
• Renegotiating deals with the same client
• Finding new business relationships

The flip side is accidentally renewing contracts you don’t want. Not every business relationship works out the way you had hoped. Perhaps a vendor has raised prices, been challenging to work with, or a better option is now available. You may be contractually obligated to another term if you miss an automatic renewal. This creates revenue leakage that hurts your bottom line—a significant risk given that organizations lose an average of 8.6% of total spending annually to cost leakage, according to The 2025 Contracting Benchmark Report.

Why contract renewal strategy matters for business growth

Let’s be direct. A sloppy renewal process is a quiet way to bleed revenue and opportunity. When you don’t have a real strategy, you’re either auto-renewing bad deals or letting good ones slip away because you weren’t paying attention. It’s not just about keeping customers; it’s about making sure the relationships you continue are actually good for the business.

A solid renewal strategy is your chance to re-evaluate. Is this vendor still performing? Are the terms still competitive? Could we get more value? Answering these questions protects your revenue, strengthens partnerships that work, and gives you a clear off-ramp for those that don’t. It turns a reactive, administrative task into a strategic part of your business.

Common contract renewal challenges

If you’re struggling with renewals, you’re not alone. Most of the problems fall into a few buckets. First, there’s a total lack of visibility. Contracts are saved all over the place—desktops, shared drives, and email—so you don’t even know what’s coming up for renewal until it’s too late.

Second, the process is completely manual. Someone is tracking dates in a spreadsheet, which is a recipe for human error—especially since 92% of errors in contract management are human errors, according to The 2025 Legal Operations Field Guide. Important deadlines get missed, and you either lose a valuable contract or get stuck in one you wanted to exit. Finally, there’s no clear owner. When a renewal notice comes in, who’s responsible? Sales? legal? finance? Without a clear process, everyone assumes someone else is handling it, and the ball gets dropped.

Step-by-step guide to developing your renewal strategy

Alright, let’s make this practical. You don’t need a 50-page playbook, just a clear process. Here’s how you can start building a real strategy.

• Get everything in one place. Before you can strategize, you need to know what you have. Gather all your contracts into a single repository. This is non-negotiable. You can’t manage what you can’t find.
• Analyze performance. For each contract coming up for renewal, ask the hard questions. Did the vendor meet their SLAs? What was the ROI? Talk to the business stakeholders who actually work with this partner. Get their honest feedback.
• Set clear objectives. Based on your analysis, decide what you want from the renewal. Is it better pricing? Different service levels? Or is the goal to terminate the agreement? Know what success looks like before you start the conversation.
• Engage stakeholders early. Don’t surprise your business partners or the vendor. Loop in the relevant teams—procurement, finance, and the business unit—to align on the renewal goals. Give yourself plenty of time; 90-120 days before expiration is a good rule of thumb.
• Negotiate and execute. Armed with data and clear objectives, you can now negotiate from a position of strength. Once you agree on terms, get the contract signed and stored back in your central repository with the new key dates and obligations tagged.

Increase gross renewal rate to meet customer needs

Once you’ve got your basic strategy in place, you’ll want to start measuring its effectiveness. One of the most important metrics to track is your gross renewal rate (GRR), which is the percentage of agreements renewed within a given period without including cross-sell or upsell revenue. This metric focuses specifically on contracts your company renews at their existing value.

Successful businesses track GRR as a core performance indicator. You can measure this annually, quarterly, or monthly depending on your contract portfolio and business needs.

A high GRR is a positive indication of customer success efforts. When people renew, you will see increased efficiency in your own business. It is also a sign that you meet customer needs and deliver value to them—a critical factor, given that McKinsey found eight in ten B2B decision-makers will actively look for a new vendor if performance guarantees aren’t offered.

How to increase GRR with contract management software

Contract lifecycle management software provides the data visibility and automation needed to improve your gross renewal rate. The key is having systems that give you better insight into contract performance and customer satisfaction. Your business can increase GRR by using CLM software to:

• Use data metrics to understand customer needs
• Analyze the value of a contract to determine whether it is worthy of renewal
• Scrutinize contract bottlenecks that reduce the customer service experience
• Identify and target high-value contracts for renewal
• Receive automated updates and important details from the software.

Provide a great customer experience to increase renewals

Customers who enjoy working with you tend to return. This may seem like an obvious statement, but too many companies ignore the customer experience related to contracts. Less sophisticated systems make contract negotiation and management cumbersome and difficult for the customer.

This starts with contract negotiation. Modern systems permit red-lining and collaboration between counterparties. They can negotiate on a single platform or work on their chosen platform. This saves time and makes it easy to do business with you—significantly enhancing the customer experience and driving renewals for the future.

The same is true for how a contract is signed. Modern businesses do not want to take significant time to sign an agreement. They want a valid and enforceable signature method that makes it easy to sign. The rise of electronic signatures and clickwrap agreements have made it easier to enhance the customer experience for everyone. (Assuming the corrected URL path) These methods often offer a one-click acceptance to simplify the experience in both B2B and B2C transactions.

Best practices for successful contract renewals

Experience shows what works and what doesn’t. Here are a few practical tips that make a huge difference.

• Standardize your review process. Create a simple checklist for every renewal. It should cover performance review, financial analysis, and stakeholder feedback. This ensures nothing gets missed, no matter who is managing the renewal.
• Set automated alerts. Don’t rely on calendars or spreadsheets. Use your CLM to set up automated notifications for renewal deadlines. Set multiple alerts: 120, 90, and 60 days out is a good practice. This gives you enough time to prepare and negotiate without rushing.
• Segment your contracts. Not all contracts are created equal. Tier your agreements by value and strategic importance. A multi-million dollar enterprise agreement needs a different level of review than a simple software license. This helps you focus your energy where it matters most.

Use renewals to increase revenue and upsell

Contract metadata offers you information to drive sales growth and contract renewals. The CLM software can identify areas in the contract for upselling that could enhance the value of your existing agreements. (Assuming the corrected URL path) This adds revenue on top of that already gained by the successful contract renewal.

You need to know how the client wants to grow to drive upsell. Your contracts can provide you with essential data to help make this happen. The digital contracting platform can identify helpful information such as:

• The previous sales terms and services offered to the customer
• Legal requirements requested by the client
• The previous length of the contract
• Potential services that were turned down before
• Optional or automatic upsell conditions in the contract renewal clause

It is cheaper to upsell a client than find new ones—as acquiring a new customer can be five to 25 times more expensive than retaining an existing one—and CLM software can help. Your sales team can analyze the benefits the customer already receives to demonstrate the company’s value to the client.

How CLM software can drive your contract renewals

The right technology makes all the difference in executing a successful renewal strategy. Contract lifecycle management software gives you tools to be proactive and successful with contract renewals. Implementing this technology drives real results, as the report found an average 55% improvement across value metrics for organizations using the platform. Contract metadata and metrics can provide critical insights into your agreements, and the software can even help you get ahead of important dates.

Automate contract renewal reminders

A proactive contract renewal strategy is an admirable goal, but too many companies lack the tools to achieve it. Their legacy systems are unable to analyze contract data to create automatic reminders. With an advanced CLM, the software and integrated AI analyze contracts for tagged fields that identify when a contract is set to renew.

Contract reminder software eliminates the need for employees to track and manage contracts and renewals manually. This reduces the high workload on a sales team; in fact, Gartner finds that effective CLM boosts sales effectiveness by reducing contract cycle times by 50% or more, letting them focus on generating more revenue. It also significantly decreases the chances of human error that lead to revenue leakage. It removes the guesswork by sending automatic reminders about upcoming renewals, so your team is proactive instead of reactive.

Store all your contracts in a digital repository

A digital contract repository keeps all of your agreements in one place. This makes them easy to capture, secure, and find later. More importantly, it gives you built-in access to contract metadata to help you automate your business and discover opportunities for contract renewal and upsell.

Many businesses still use antiquated storage methods that make contracts impossible to find, or they are scattered across many different systems. This makes the likelihood of missed contract renewals (or accidental renewals) extremely high. The digital repository lets you answer important questions in seconds rather than sifting through pages of contract terms.

The metadata provides you with renewal dates and key information to help you determine if you want to renew the contract, including data on contract performance, liability, and much more. With this information, you can make informed renewal decisions that improve your bottom line.

Measuring and optimizing your renewal strategy

You can’t improve what you don’t measure. To know if your strategy is working, you need to track a few key metrics. The most obvious one is your renewal rate—what percentage of contracts are you renewing? But you should also track churn rate, which is the flip side of that coin.

Look at the value of renewed contracts versus those that churn. Are you keeping your high-value customers? It’s also worth measuring the time it takes to complete a renewal. If you can shorten that cycle, you’re saving time and resources. Regularly reviewing contract process data will show you where your process is strong and where it needs work, allowing you to optimize your strategy over time.

Build a winning contract renewal strategy with the right tools

Building an effective contract renewal strategy requires the right combination of process, technology, and measurement. Many companies still rely on manual systems that waste employee hours on tasks that can be automated.

Automation reduces the risk of missed renewal dates, accidental renewals, and revenue leakage. By implementing these best practices, you can automate reminders, analyze contract metadata, and increase your gross renewal rate.

The right contract lifecycle management platform makes this transformation possible. Request a demo today to see how Ironclad can help you build a winning renewal strategy.

Frequently asked questions about contract renewal strategy

What are the key components of a contract renewal strategy?

A solid strategy has three main parts: visibility, process, and ownership. You need a central place to see all your contracts and renewal dates. You need a defined process for reviewing performance and negotiating terms. And you need to assign clear ownership so everyone knows who is responsible for driving the renewal forward.

How far in advance should I start the renewal process?

For most standard contracts, starting 90 days before the expiration date is a safe bet. For your most strategic or high-value agreements, give yourself more time—120 to 180 days is better. This gives you enough runway to gather data, talk to stakeholders, and negotiate without being rushed.

What metrics should I track for contract renewals?

Start with the basics: gross renewal rate (GRR) and churn rate. Then, dig deeper. Look at the renewal rate by contract value to make sure you’re retaining your most important partners. Also, track the average time-to-renew to measure your team’s efficiency.

How do I handle contracts that shouldn’t be renewed?

The process is similar to a renewal, but the goal is different. First, confirm the termination requirements in the contract, especially the notice period. You don’t want to miss that window. Then, communicate your decision to the internal stakeholders and the vendor clearly and professionally. Document everything and have a plan for offboarding and transitioning to a new solution if needed.

What’s the difference between automatic and manual renewal strategies?

An automatic renewal strategy relies on “evergreen” clauses that keep a contract active unless one party gives notice to terminate. It’s a passive approach. A manual strategy is proactive—it requires you to actively decide whether to renew each contract. While auto-renewals can seem efficient, a manual, strategic approach gives you far more control and prevents you from getting stuck in bad deals.

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Ironclad is not a law firm, and this post does not constitute or contain legal advice. To evaluate the accuracy, sufficiency, or reliability of the ideas and guidance reflected here, or the applicability of these materials to your business, you should consult with a licensed attorney. Use of and access to any of the resources contained within Ironclad’s site do not create an attorney-client relationship between the user and Ironclad.