Is your contract with an important client coming up for renewal or rebid? If you miss out on these 10 important steps, your client could walk away!
The end of a contract period is an exciting time. It offers opportunities, but there are also risks. Clients start looking around in the market, and competitive pressure increases. Therefore, it’s important to start preparing for the contract renewal early and to create a plan for it, but what’s the best way forward? Through trial and error, I've learned many lessons myself. Sometimes I started preparing too late, assumed everything would be fine, or didn’t know all the stakeholders well enough. In this article, I’ll share tips and tricks to achieve a successful contract renewal and create a strong negotiating position.
Start Early
A contract renewal doesn’t start when the contract is about to expire. Begin this process 12 to 18 months in advance. This gives you enough time to prepare for the renewal, address any issues, and even create opportunities in what could otherwise be a potentially risky situation.
It'd be great if you could evaluate whether the contract, which was initially signed, is still relevant to the client. Your relevance may decrease after you’ve solved the client’s problem. Are there indicators showing that relevance is declining? Are the key decision-makers as involved in the collaboration as they were at the start? These are important factors to consider in your preparations.
Key decision makers: Reassess who the key decision-makers are at the client and who will ultimately make the decision. Use a stakeholder analysis form and evaluate the relationships you have with your stakeholders. This is not just about the people signing the contract, but also those who determine its value. Do you still have access to the right group of decision-makers and influencers, and are they sharing with you what you need to know?
The expected value. Ask the key decision-makers what they expect from the new contract. Does the client expect more than what is in the current contract? Then it’s important to address this. Also, discuss what the client expects to achieve in the future and incorporate these expectations into your renewal strategy. How great would it be if you could extend the contract without even rebidding?
The client’s perception of current performance. How does the client perceive your performance? Are you delivering the value they expect? And how do they view your organisation? Is this something you believe will work in favour of contract renewal, or not? Discuss this with the key decision-makers and influencers at the client. Use your manager or a colleague to challenge you on this and think about how you will act on it.
Value proposition for contract renewal. It’s important to consider the value proposition of the new contract. Is it enough to keep doing the same thing? It’s crucial to know the client’s goals, problems, and challenges and how you can help with your value proposition. Do you really know what the client wants to achieve in a new period of collaboration with you or with a competitor?
What are the renewal objectives? Reflect on your goals for the new contract. An expiring contract is not just a risk but also an opportunity. For example, do you want to increase the margin, extend the contract duration, or use the client as a reference? By setting a goal early, you still have a chance to influence it. If the client has already prepared for a rebid, you’re likely too late. Make sure you have a strong negotiating position and consider the alternatives the client has, beyond your competitive position.
Competitive strategy. As the current partner, you have an advantage over the competition. Use this advantage to optimise your competitive position. Moreover, you have more data and information about the current contract and the client.
Decisive renewal milestone (DRM) To know if your renewal plan will work, it’s important to determine a Decisive Renewal Milestone. This is a milestone you use to decide whether your current contract renewal plan will succeed. A milestone is a goal that must be achieved by a certain date.
Competing solutions. It’s also important to know which alternatives the client is likely to consider to solve their problem. We often think of the competitor as the biggest threat, but a substitute or internal solution can also be competitive. As an account manager, you must determine whether your solution is and remains more attractive to the client. Don’t make a general competitive analysis, but describe which alternatives the client is likely to consider and what the client will value most in them.
Action plan. Finally, an action plan is essential. This outlines the key actions with which you will implement your renewal strategy. This action plan is based on the conclusions from the previous 9 steps.
The above might seem easier said than done. Doing nothing is certainly not an option. And that’s where the danger often lies. The assumption that the client is happy with you and will happily continue is very dangerous. We have developed the Contract Renewal Canvass for this purpose. With it, account managers can create a contract renewal plan that they can discuss with the organisation. In the renewal phase, you need to ask yourself different questions, and different topics are important than in the operational phase of a contract. This is a phase in which you look at the collaboration with a much more strategic perspective and consider what you want and need to change. An account plan is not enough for this.
At Xenos Business Excellence, we’re happy to help you organise this. A fresh look at your own situation can also be very valuable. If you’re open to this transformation and want to discuss it, don’t hesitate to send me a personal message at adam@xenosbusinessexcellence.co.uk or go to our website https://www.xenosbusinessexcellence.co.uk/client-retention The better you organize and execute this, the greater the chance of a potential extension.
