Renewal and Upsell Contracts: Best Practices for Your Business
Contract renewal is an integral part of many companies’ business models. However, it can be challenging to manage all the moving pieces involved in the renewal process. If you perform upsells as well, the difficulty increases. However, it’s worth the effort — the cost of renewal and upsell contracts is four to five times cheaper than new customer acquisition.
There are many ways to improve the renewal and upselling contract process. By following a few best practices, you can streamline your contracting process and renew more agreements. In this article, you’ll discover:
- What renewal and upsell contracts are
- When you need renewals and upsells
- Best practices for managing the contract renewal process.
What are renewal and upsell contracts?
There are three main kinds of contracts: new contracts, renewal contracts, and upsell contracts. If your business works on a contract basis, all of your clients will fall under one of these three categories.
A new contract is simple. It’s the initial contract you sign with a new client with whatever services they choose to receive.
A renewal contract is a contract that was previously established but has come up to its original expiration date. For example, if you sign a year-long contract with someone to mow your lawn, the first year would be a new contract, and subsequent years would be renewed contracts.
Renewal contracts are all about keeping your current clients on board. When you’re working to renew contracts, you should be building relationships with clients, so they remember why they chose your business in the first place. Keeping your customers gives your organization security and stability.
An upsell contract is similar, but more valuable to you. Instead of just renewing the contract, the client adds more services to their agreement. When it comes time to renew your lawn mowing contract, you could choose to upgrade to lawn mowing and regular landscaping maintenance, which is an upsell.
When you upsell, you not only retain the customer but convince them to work more closely with your business. The additional services the customer accepts mean extra revenue for your business without the work of finding new prospects. Considering that renewing current contracts costs just 28% of what it takes to acquire a new client on average, upselling is an excellent and cost-effective way to grow revenue.
Parts of renewal and upsell contracts
A renewal or upsell contract is a contract like any other. Many renewed contracts will look almost identical to the original. The items most likely to be updated include:
- Duration: How long will the new contract last? When does it start and end?
- Objectives and deliverables: What services are you providing? Are you providing more benefits because of an upsell?
- Pricing: How much does the client pay for the contract? It’s common for prices to rise from year to year, even if the client hasn’t been upsold, to keep pace with inflation.
Limitations of renewals and upsells
While renewal and upsell contracts have many benefits, they’re not perfect. There are a few limitations that can prevent you from closing on these agreements.
First, if you’re in a crowded market, your clients are likely being courted by your competitors. That means that renewals and upsells are far from guaranteed. You can build great relationships with your clients, but you still may lose some to tempting first-year sign-on deals from other companies.
Second, renewals and upsells take time and effort. Without the right tracking solution, clients can fall through the cracks and fail to renew their contracts at all. To renew your customers’ agreements on time, you must be able to monitor them and get in touch in advance.
How to create renewals and upsells
The process of renewing and upselling contracts takes effort, but it’s worthwhile. You can start renewing and upselling contracts more effectively by following three simple steps.
- Staying in touch with contracted customers. You can’t ignore a customer for the length of their contract and expect them to feel connected to your brand. The sales process doesn’t end once the original contract is signed. Instead, stay in contact with the customers and ensure they’re satisfied with what they’ve received. At a minimum, you need to keep track of which contracts are ready for mid-year check-in meetings and which are up for renewal in the next 60 days.
- Managing value realization. You can sell and sell and sell your company’s services, but your clients will only truly understand their worth once they use them. You can encourage them to realize the actual value of your services by managing their expectations and providing them with data about how you’ve helped them.
- Highlight features and benefits. Whether you want to upsell a contract or simply renew it, you can spotlight the benefits and features your company offers. Talk about new features coming out soon, the improvements you’ve already made, and the help you provide that the client can’t find anywhere else.
By building a relationship with the customer, helping them understand what they’ve already gained from your services, and showing them how you’ll continue to assist in the future, you can create renewals and upsells more effectively.
Managing renewals and upsells
Managing renewals and upsells can be complicated. There are many moving parts, from maintaining regular contact with each client to collecting data to demonstrate how you’re helping them achieve their goals. However, neglecting any of those elements leaves your clients less likely to renew.
For example, appropriately managing contract renewals requires you to track where every client is in their contract period. Since established companies are likely to have contracts up for renewal every month, you’ll have to remember and perform check-ins and renewal meetings every month, too. Just managing these meetings alone can consume hours of payroll and leaves you at risk of forgetting someone.
Furthermore, it’s likely that your company stores information about contracts and renewal deadlines in different systems that don’t communicate with each other. This leaves each part of the contract process isolated, requiring you to manually coordinate different databases and schedules. It leads to a complete lack of transparency in your contract renewal process.
Automating workflows for renewal and upsell contracts
So how can you simplify the renewal process? Automation can help. The most effective way to automate any kind of contract process is through a templatable workflow.
A templatable workflow allows you to design the workflow you want to follow for every contract, then apply that template to all the contracts that fit your criteria. You can create different templates for renewing and upselling contracts depending on how you design your process. These templates can cover everything, from knowing who’s in charge of various process steps to sending automated reminders when it’s time for someone to take the next step.
Of course, templatable workflows only work if your systems can communicate with each other. If your contracts, renewal dates, and customer information are all siloed off from each other, you can’t implement effective automation.
This is why an all-in-one contract lifecycle management (CLM) solution is invaluable. A CLM acts as a single source of truth for your entire contracting process, from landing clients to renewing and upselling contracts. A good CLM will offer complete transparency into the process, so there’s never doubt about the status of your contracts. There’s a reason why “best-in-class” businesses routinely store 78% of their contracts in a centralized, searchable database.
Ironclad product features that help
When it comes time to produce templatable workflows, Ironclad’s Workflow Designer makes it easy. Teams can design workflows that fit their actual processes. It’s as simple as uploading a contract template and tagging the fields that need to be filled out by the requestor. You can customize the workflow as necessary by adding approvers, signers, and even conditional contract clauses.
Why use digital contract management for renewals and upsells? Because it’s transparent. You can check every contract in a single place. With Ironclad’s contract repository, you can easily monitor which contracts are up for renewal soon. The CLM lets you track the renewal process at a glance for every client, every time. You’ll never miss a renewal opportunity again.
Renewing and upselling contracts is an invaluable process for your company, but it’s time-consuming and labor-intensive to manually manage. By implementing best practices, like automating reminders to reach out to clients and using a CLM, you can give your customer support team the resources to perform more renewals and upsells.
Ironclad’s innovative contract management platform can help you accomplish that. To learn more about how Ironclad can help you improve your renewal and upsell contract process, request a trial today.