Renewals – they are the lifeblood of the SaaS business model today.
While there are many metrics that Revenue Operations can look at, one that stands out from the rest – Lifetime Value.
The Lifetime Value of your customers is indelibly linked to the length of time they remain a customer. Hence, Lifetime value.
After a contract is signed, the work is not done. Not by a long shot. You need to ensure that you are fully set up to close a renewal before the customer churns.
The North Star of any Revenue Operations professional is revenue, but there are five measurable factors that help drive that revenue:
Renewals can often be the lowest hanging fruit if you take the appropriate steps upfront to optimize for them.
A fact to keep in mind is that it can be up to 25x more to acquire a new customer than renewing an existing customer.
As someone in RevOps, that number should hit you like a ton of bricks.
Now that we've established the importance of renewals, here are some tips for making sure you optimize your renewal process.
Predictability, especially with regards to revenue, is crucial to businesses in the SaaS era. As someone in RevOps, enabling this predictability often falls on your shoulders.
When it comes to predictable revenue, having a solid renewal strategy and process is critical.
The easiest way to guarantee a renewal is to implement an auto-renewal clause by default on all contracts. By doing this, all you have to concern yourself with is making sure the customer gets value out of the product or service you have sold them.
However, this clause must be fully understood ahead of time not to catch the customer by surprise.
While it should be the default, you should be able to remove it as needed.
Keep in mind that a few areas in the United States have laws that regulate auto-renewals.
Vermont, for example, requires that the terms of the automatic renewal be clearly stated in unambiguous language in bold-face type.
Nothing satisfies a sales rep more than marking an opportunity and closed/won. However, that should never be the final step.
Once a deal is closed, a sales rep should immediately create a new opportunity in the CRM for the renewal. Even if the renewal is a year or two out, it's important to take this step immediately – both in terms of keeping track of the opportunity, as well as for revenue forecasting.
Be sure to assign the correct close date for the opportunity based on the date of the renewal.
When the time comes to close the deal, it's one more minor step in the process.
Just as the sales process for a new opportunity can take longer than expected, so can a renewal. It's important to make sure that you begin the conversation well before the renewal date.
The best way to do this is to set an automated outreach immediately, ideally a drip cadence, to trigger 3-6 months before the renewal to begin the conversation and stay at the top of your customer's mind.
In addition, this will allow you to find out if there are any blockers or issues that would inhibit them from renewing or if there are any problems they have been having with your product or service.
By not initiating this conversation early, you may miss an opportunity to stop a customer from going to a competitor. As, for all you know, they may have already started conversations with them.
There are two key moments in the early stages of a customer's lifecycle. The first is when they sign up; the second is when they reach that "a-ha" moment of success with your product.
The time between steps 1 and 2 often is the most treacherous and where most churn takes place.
The process of going from 1->2 in this scenario is the entire focus on customer onboarding. It is to make sure a new customer is comfortable with the ins and outs of your product and knows how it can bring them value.
A poor onboarding process of experience will make a successful renewal highly unlikely.
Beyond onboarding, the handoff of a new customer to the appropriate customer-facing team is crucial.
For folks in Customer Success, there is one thing that keeps them up at night – churn.
Churn is to Customer Success as Kryptonite is to Superman.
While many companies will set a standard number for expected churn, the ultimate goal of a Customer Success Manager is that magical phrase – negative churn.
CSMs must go above and beyond to help customers fall in love with your product with that goal in mind.
If you think you will onboard a customer, forget about them, and they will magically come back in a year and renew… you may be in for a surprise.
A CSM should be proactive in its communications with customers. Have them reach out if they see that the customer has been inactive for an unexpectedly long period. As the time for renewal approaches, CSMs should spend extra time ensuring there are no blockers that would stop a customer from renewing.