renewals forecast

5 Reasons Why Building a Renewals Forecast Is More Complicated Than You Think

You may fall into the trap of assuming that a renewals forecast is much easier to put together than a sales forecast. The typical thought is that if your customers aren’t complaining, they’re happy with the service and ready to renew. In reality, your customers at risk are the silent majority. You don’t hear anything from them, negative or positive.

The lack of feedback makes it difficult to figure out exactly how many renewals are at risk in the pipeline. On top of that, you have five more things that cause this forecast to get complicated.

Renewals Vs. Upsells Vs. Downgrades Vs. Cross-sells

Are you separating your renewals into the above categories, or do you have them all lumped together as a single figure? The influence of each type can make a big difference in the renewals that you see in reality. If everyone chose the base renewal option, you wouldn’t have any complexity in this process.

However, some customers decide that they need a different level of service once they’ve been with you for awhile, and they downgrade their account. Others have changing needs that lead them to a higher-tier product or complementary upsells. Renewal incentives can also come into play at this stage.

Your forecast has no chance of being accurate if you don’t have better visibility into this figure. You need to know whether sales reps are actively working on growing these accounts, if customer engagement is dropping off or if you have a bunch of downgrades.

Senior Stakeholders Move On

The senior stakeholders involved in the original deal move on over time. They’ve been quiet for some time and may not even remember that they’re a customer of your company. Once someone in accounting realizes that they’re paying for a service that they’re not using, that renewal income is lost. In other situations, they simply lose interest in the solution or don’t see the returns they expected.

The original decision makers may change positions or companies during this time. Your account reps could end up talking with a completely new set of people every time they reach out. The relationship-building process may start all over again with stakeholders who are hard to predict. All of these factors need to be taken into account for a renewal forecast, especially if the customer seems on the fence about continuing with the original solution.

New Initiatives Kick Off

Your customers might have taken an entirely different direction with their business. They have new initiatives that change their needs, and the original solution is no longer working for them. The customer can go in several directions at this point, such as moving into a higher-tier product or switching providers altogether.

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If you’re not up to date on your customer’s moves, you can’t account for these possibilities in the renewal forecast or take advantage of the upsell opportunities. While some accounts may proactively reach out to see whether you have another product that’s suitable for their new initiative, many will just seek out other options.

Your Team Moves On

The initial deal gets an account’s foot through the door, but many sales teams leave the customers at this starting step. The opportunities for upsells, cross-sells and other value-increasing products get overlooked as reps focus their attention on the upcoming deals in the pipeline.

The accounts get minimal attention and nurturing going forward. Relationship-building strategies may focus on securing another annual renewal, but they don’t provide the resources for boosting the lifetime value in other ways.

The sales reps responsible for closing the original deal no longer have the inside information to know how to best handle the account. They may not be able to forecast whether or not they’re likely to renew, let alone whether they would be open to an upsell or cross-sell.

You Stop Talking to Decision Makers

Your sales team has a lot on their plate, and it’s easy to let communication with decision makers go on the back burner. Proactive communication makes it possible to identify at-risk customers and discover opportunities to retain the accounts. Some companies use a customer success team to handle this part of the process, with a multi-disciplinary approach that combines sales and support. For other businesses, account and sales reps may stay hands-on.

When you’re talking with the decision makers, you know what’s on their minds. You have the data necessary to improve the accuracy of your renewal forecast. The people who are neither pleased nor displeased with your solutions will rarely reach out to you on their own.

While losing an account due to a lack of engagement is frustrating, you also have to consider that you’re wasting potential referrals from that customer as well. This number could be significant, depending on the size of the company and the industry that you’re selling in.

It’s time to achieve accurate renewal forecasts. Many sales teams put most of their attention on getting the new sales forecast correct, especially if their quotas are tied to new accounts only. You can gain better insight into the types of renewals that are in the pipeline and what you can do to rescue at-risk accounts by addressing the five problems above.

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