It’s no secret that the reason SaaS companies are so valuable is because of their recurring revenue model. But many teams forget that recurring revenue is a function of recurring impact and find themselves scrambling to hold onto business as the renewal date looms.
Today’s market is way too competitive to leave renewals to the last minute. With over 25,000 SaaS companies competing dozens deep in every niche, customers are more inclined to renew with vendors who demonstrate an ongoing commitment to partnership.
Demonstrating that commitment begins in the pre-sales process, continues during onboarding and continues again through the renewal process. Instead of waiting to kick off a renewal process 3 months before a contract ends, start it as soon as onboarding is complete and the customer has seen the initial impact they were expecting. This keeps the momentum going.
A renewal process spans 3 stages:
1. Nurture
The goal of the Nurture stage is to conduct multiple business reviews with the key stakeholders to demonstrate both rational impact and emotional impact.
Examples of rational impact are things you can measure, such as customers acquired, revenue gained, costs saved, time saved etc. Rational impact stories generally land well with senior stakeholders as they are often measured on these same metrics.
Examples of emotional impact are things that your stakeholders are able to accomplish as a result of the rational impact, such as being able to work on higher priority projects that are key to the organization. Emotional impact stories generally land well with stakeholders who are closer to the day-to-day work.
Its very important to get both senior and day-to-day stakeholders to attend business reviews as you need the senior folks to hear from the day-to-day folks about the emotional impact they are getting and join the dots to realize that its a result of using your solution. If you don’t get the senior folks to attend they will just default to evaluating on price when presented with a renewal proposal.
Given that your business reviews will naturally be spaced out every 2-3 months, the Nurture stage will normally last for several months.
2. Propose
The goal of the Propose stage is to “re-propose” your existing solution to the key stakeholders and secure a verbal agreement to renew. The most effective way to do this is with an Impact Proposal.
An Impact Proposal includes 3 sections: a summary of the impact you’ve delivered, a description of your solution and two or more budget options.
Creating a summary of the impact you’ve delivered is fairly straightforward if you’ve had multiple business reviews with key stakeholders as you’ll already have the relevant slide(s). If you haven’t had business reviews with all stakeholders, or have just been meeting with the day-to-day stakeholder, you will find yourself scrambling to articulate the impact and throwing around panic discounts.
The description of your solution should focus on the features and capabilities that have driven the most impact for your customer during the contract period. Be careful not to bore the buying team to death by describing every detail of your product. Nobody will read it and at worst it will just put people off.
Presenting two or more budget options gets ahead of the default reaction of most buyers, which is to say “its too expensive”. A simple way to lay this out is with a Maintain option and a Growth option. Have the Maintain option continue to deliver the existing impact while the Growth option delivers any additional impact that you’ve discovered your customer is seeking (from having conducted multiple business reviews with them).
3. Trade
The goal of the Trade stage is to agree to business and legal terms and get a new contract signed.
Agreeing to legal terms for a renewal is usually much simpler than for a new logo, as a master service agreement will typically already be in place. However, if you are upgrading a self-serve customer from month-to-month credit card to an annual or multi-year invoice, your customer may want to switch from online terms to a negotiated agreement, which means you ’ll need to pad your timeline to allow for legal review.
Agreeing to business terms is usually driven by (real or perceived) budget constraints on the customer’s side, which can lead to last minute panic discounting if there is not adequate preparation. The best way to avoid this is to provide two or more budget options tied to impact (as described above), as it enables your customer to select the option that gives them the most impact for their budget.
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