Negotiating Renewal Terms

Folks, words really matter. Every time you say "your contract is expiring," you're inviting your customer to reevaluate you. There's language account teams use in renewal conversations that subconsciously frames the renewal as a reset. A decision point. An off-ramp. And buyers respond accordingly. They get cautious, loop in procurement, and start asking about alternatives they weren't even considering 5 mins ago. The worst part is you're doing it to yourself. You wanna know what it sounds like and what to say instead? Well, fortunately Pamela Marsh broke all this down during a session she led for SA last week on Renewal Strategy & Risk Mitigation: No bueno: "Your contract is up in January." Bueno: "As you're building next year's capability roadmap, let's align on what we've delivered so far and how we evolve the program together." No bueno: "Let's review your adoption ahead of renewal." Bueno: "Where have you seen the most impact so far, and where else in the organization should we be expanding this?" No bueno: "Are you planning to renew?" Bueno: "As you evaluate your vendor landscape for next year, where does this initiative sit in terms of strategic priority?" No bueno: "We should discuss pricing." Bueno: "Let's align on the strategic outcomes you want funded for next year, then we'll structure the investment so it's easy for your team to request budget internally." Feel the difference? You betcha. The first set treats the renewal as something that might end. The second set assumes momentum and asks how to build on it. And that last swap is the gangster one. "We should discuss pricing" feels routine. But what the customer hears is "we're about to ask for more money." That verbal judo move Pam lays out turns you from a vendor requesting budget into a partner helping them secure internal resources.   Same exact conversation. Completely different power dynamic. This matters because renewal decisions get made in ROOMS YOU'RE NOT IN. Your champion has to defend your budget line against 6 other priorities. If the language you've been using all quarter frames you as a contract up for review, that's the narrative they carry into that room. A line item to evaluate. But if every conversation has been about evolution and strategic alignment, that's what they say when someone asks "do we still need this?" They don't say "their contract is up for renewal." They say "this is core to the roadmap we're building." The words you choose shape how your champion sells for you when you're not there.

I've saved companies millions on enterprise software deals. Here's the negotiation framework I developed at Microsoft, VMware & Instacart: The hard truth: Most SaaS products cost almost nothing to run. Yet I once rushed into a 3-year contract that ended up costing us double what we expected. That expensive mistake taught me something powerful about enterprise deals. Most companies have a broken process: • See a need • Pick a vendor • Rush to close • Overpay massively Here's my 5-step framework to fix this: 1. Start Early (3-6 months before renewal) Companies who begin negotiations early consistently get 5-15% better terms. This isn't just about timing - it's about leverage. When you're not rushed, you control the conversation. 2. Create Competition Never negotiate with just one vendor. Ask each competitor: "What can you offer that others can't?" This simple question reveals hidden costs and scalability issues you'd never find otherwise. 3. Focus Beyond Price The real value is in: • Service level agreements • Integration support • Training resources • Future scalability • Data ownership Pro tip: Demand performance penalties. If they won't include fee refunds for missed SLAs, that's a major red flag. 4. Master the Slow Play Never take live meetings with sales reps. Force all communication over email. Then be slow to respond. This drives sales teams crazy - especially near quarter-end. They'll often improve offers without you asking. 5. Talk to Leadership If the head of sales or CEO isn't deciding your deal, you haven't reached the best possible terms. How to get there? Say "no" frequently. Let the deal drag on. Make it appear lost to the vendor. Using this framework, I consistently negotiate: • 30-50% discounts on list prices • Better service levels • More flexible terms • Additional features at no cost The secret? Software costs almost nothing to run. Vendors depend on recurring revenue. They'll bend significantly to keep your business - if you know how to negotiate. Want to master the founder mindset and build better? Join Founder Mode link in my Bio for free weekly insights on startups, systems, and personal growth.

One of our clients came to us excited about a wholesale opportunity. A well-known stockist wanted to place a big order. It felt like a breakthrough. But when we looked at the terms, the numbers didn't add up. The stockist wanted: → 60-day payment terms → Sale or Return (so unsold stock would come back) → The right to discount without approval Here's what that actually meant: They'd need to fund production upfront. Wait two months to get paid. And risk getting stock back at the end of the season that they'd then have to shift themselves. All while the stockist could discount the product and erode the brand's pricing position elsewhere. The margin looked okay on paper. But the cash flow impact and the risk? It would have tied them up for months. We helped them push back. Not to kill the deal. But to renegotiate terms that actually worked: → 30-day payment terms instead of 60 → Outright purchase instead of Sale or Return → A minimum order quantity that made the admin worthwhile The stockist agreed. Because they wanted the product. And here's the thing: most stockists need independent brands more than the brands realise. Your job isn't to say yes to every opportunity. It's to make sure the ones you say yes to actually work for your business. 💬 Have you ever negotiated better terms than were first offered?

Our property manager sent renewal offers to three residents. 3% increase. Industry standard. Nobody responded. So I asked a question nobody was asking: "What do they actually want?" Here's what we changed. Instead of sending a number and waiting for a response, we started with a phone call. Not to negotiate. To discover. "Your renewal is coming up. How have you liked living here? What would make you stay?" The first resident said: "It's not price. It's parking. I can't find a spot after 6pm." The second resident said: "I love it here. I just didn't know if the increase was negotiable." The third resident said nothing. Because they'd already decided to leave. No offer would have changed that. Here's what we learned: -> Resident one: We offered a parking spot instead of flat rent. They signed immediately. -> Resident two: We held rent flat. They signed the same week. -> Resident three: We saved two months of back-and-forth on someone who was always leaving. The math: Three renewals at an average rent of $1,665/month. One vacancy costs $3,330 in lost rent plus $1,487 in turn costs plus $725 in leasing fees. Total: $5,542 per turnover avoided. $5,542/month x 12 = $66,504 annually At a 5% cap rate = $1,330,080 in protected property value If the phone call saves even one of those three renewals, we protected $5,542 in immediate costs from a 10-minute conversation. Most operators send the offer and wait. We call first and listen. The answers to the test are available before you take the test. You just have to ask. For our investors, phone-first renewals mean we're solving the real problem, not guessing at it. Comment ONE if you want to see our renewal discovery call script. Our newsletter documents renewal strategies and resident retention systems like this one. Subscribe to our newsletter for actionable frameworks.

I'm wrapping up another quarter negotiating SaaS deals, and for one deal, I was debating what term length to pursue. (Contract term length has become one of our most critical strategic decisions in procurement.) 🔹 The Current Landscape 🔹 The market has shifted dramatically. SaaS contract lengths plummeted in 2023 and have only slightly rebounded in 2024 (still averaging under 15 months). Meanwhile, price uplifts have soared to unprecedented levels. 3-15% is now standard, with some vendors pushing shocking increases (just heard from a fellow procurement leader facing a 200% increase on a multi-million dollar spend... ouch). 🔹 The Pendulum Swing 🔹 I'm seeing two distinct approaches emerge: Some companies have instituted strict policies capping contracts at 12 months (too many got burned in 2022 with oversized multi-year commitments). Others still pursue 3+ year terms to maximize discounts and shield themselves from those aggressive annual uplifts. 🔹 My Portfolio Breakdown 🔹 Looking at deals I've personally negotiated over the past few months: 1-year terms: 56% 2-year terms: 31% 3-year terms: 7% < 1-year terms: 6% > 3-year terms: 0% Surprisingly, 2-year deals weren't higher. For me, they often hit a sweet spot: enough leverage for better pricing, reasonable commitment timeframe, and price protection for 24 months without being locked in forever. 🔹 My Decision Framework 🔹 While every situation demands nuance, here's my general approach: 1-Year Terms When: 🔸 New vendor (even thorough due diligence has blind spots) 🔸Highly competitive market (optionality is a beautiful thing) 🔸Rapidly evolving space (avoid lock-in with outdated tech) 🔸Low switching costs (maybe we go in another direction). 🔸Current vendor with performance issues or pricing concerns (goal here is to start shopping alternatives) 2-Year Terms When: 🔸Stable, predictable growth projections for seats/usage 🔸Balanced need for pricing leverage vs. flexibility 🔸Vendor relationship is solid but not critical infrastructure 3-Year Terms When: 🔸Core enterprise systems (sticky, difficult to replace) 🔸Vendors with consistent, aggressive YoY increases that are hard to push back on (although sometimes we pivot to a 1 year deal to switch to someone else). 🔸 We've validated long-term fit and negotiated favorable terms (partnership). I know everyone loves a three year term but if it's pushed to hard (by either procurement or sales), it can hurt trust. The dataset isn't massive but interesting not the less. Anything surprise you here?

The worst move when a customer says they want to cancel? Jumping straight to a discount. 🤦🏻♀️ If they’re not seeing results, no amount of price reduction will fix that. Sure, if you're a skilled negotiator... a discount might save this renewal. But it's not going to save the next one. Because discounts don’t drive retention. Outcomes do. Not long ago, my team worked with a customer who’d been trying to get off the ground for 2 years. They were technically set up, but the product wasn’t delivering. Their team quietly started relying on spreadsheets and manual processes to plug the gaps. When renewal time came around, they told us flat out: We’re not renewing. The CSM offered a generous discount. The customer didn’t hesitate: No. They had already decided to move on. That’s when I stepped in to support the CSM, and followed a simple 3-step approach that changed everything: 🔍 Step 1: Reopen the conversation I asked: Is the original goal still relevant? They said: More than ever. Their business had grown and so had the problem. They were already evaluating new tools. 🗺️ Step 2: Propose a plan I offered to come back with a "path to green" plan, no commitment, no strings. Just: Let us show what we can do. They agreed. We came back with a clear roadmap to success, examples of similar customers, and even offered to connect them directly. Their response? Frustration that this level of partnership hadn’t happened earlier. But hope, because after talking to a customer in their industry, they believed the plan could work if we could execute. 🤝 Step 3: Secure commitment I asked: Do you have the resources to execute this plan? They didn’t. So we offered dedicated resources, free for 6 months, to support the rollout. They were thrilled. I closed with: If we deliver this plan and hit these goals, will next year’s renewal be a no-brainer? Their answer: Yes. One week later, the deal was signed. We added resources, but not a single dollar of discount. And a year later? - They achieved their goals - They became a promoter - They renewed with an expansion Huge win! So when a customer signals churn, don’t panic. Don’t lead with price. Instead: 🔍 Have a discovery conversation 🗺️ Propose a success plan 🤝 Secure a commitment tied to outcomes Only then talk commercials. Because the real win isn’t a discounted renewal. It’s a customer who sees value and wants to stay long term. 📩 Want to master the fundamentals that will 10x your CS success? Join 17k+ CS pros already subscribed to Unconventional Growth — [link in comments]. #CustomerSuccess #CX #CustomerExperience #CSM #RevOps

From studying finance in my MBA to practicing law, one lesson stands out: contracts aren’t neutral. They can be working capital generators or cash flow killers. The truth is, contract clauses shape far more of your financials than most people realize. Get them wrong, and you bleed cash. Get them right, and they actively strengthen your financial position. #1: The Cash Flow Killer - Aggressive Payment Terms "Payment due within 15 days of invoice." Looks fine, until you realize it clashes with your 45-day customer payment cycle. One manufacturer learned this the hard way: 15-day vendor terms forced them into a $500K credit line just to cover timing gaps. Quick fixes – • Negotiate payment terms that match your cash conversion cycle • Add early payment discounts (2/10 net 30) to create optionality when cash is flush • Build in seasonal payment adjustments if your business has cyclical cash flows #2: The Auto-Renewal Trap That Holds Your Budget Hostage "Contract auto-renews for successive one-year terms unless terminated with 90 days' notice." Miss the deadline by a single day, and you’re locked in for another year. I’ve seen companies budget for exits in Q4, only to miss November deadlines and carry unwanted costs well into the next year. Protection strategies: • Cap auto-renewal to 30-day notice periods for contracts under $50K annually (adjust according to your unique situation) • Include mid-term termination rights for material budget changes • Add "convenience termination" clauses where possible • Build in annual spend review meetings with mutual adjustment rights #3: Unlimited Liability - The Balance Sheet Bomb " Each party shall indemnify the other for any losses arising from breach of this agreement." Sounds balanced, until “any losses” means regulatory fines, lawsuits, or data breaches. One logistics company signed this and saw a $30K software project balloon into $1.2M liability after a vendor breach. Protection strategies: • Require mutual indemnification where the commerce lends credence—don't be the only party at risk • Exclude consequential damages from indemnity obligations • Carve out gross negligence and willful misconduct from caps #4: Service Level Penalties That Exceed Contract Value "5% of monthly fees per day of downtime." Seems fair, until 20 bad days wipe out 100% of monthly fees, while your real damages often exceed contract value. Better structure: • Graduated penalties: e.g. 1% for first violation, scaling up for repeat failures • Cap total penalties, e.g., at 50% of annual contract value • Include service credits instead of cash penalties where possible Almost every contract is a financial instrument. Treat it that way. with the same rigor you’d apply to any financial decision. #Contracts #LegalTech #Finance #WorkingCapital #CashFlow #GeneralCounsel #RiskManagement #MBAPerspective #BusinessStrategy #CorporateLaw

When customers say they’ll churn, most teams panic. And that panic shows up as activity. “Here’s a report.” “Can we meet?” “Want to talk to an executive?” It feels busy, but it’s not a plan. I see this all the time: a customer says they’re going to churn, and instead of building a formal save plan, CSMs throw everything at the wall, hoping something sticks. During a coaching session this week, I helped a team reframe that behavior into something structured and accountable, and a program both sides agree to. Here’s the exact approach we walked through, step by step: 1) Get a live commitment first, not later Book a call and open with a calm reset: “I want to align on a short plan to prove value in the next 30 days. If we do the work and you see the outcomes we agree on, will you continue with us instead of churning?” 𝙋𝙚𝙤𝙥𝙡𝙚 𝙖𝙧𝙚 𝙛𝙖𝙧 𝙡𝙚𝙨𝙨 𝙡𝙞𝙠𝙚𝙡𝙮 𝙩𝙤 𝙨𝙖𝙮 𝙣𝙤 𝙬𝙝𝙚𝙣 𝙖𝙨𝙠𝙚𝙙 𝙡𝙞𝙫𝙚. 𝙂𝙚𝙩 𝙩𝙝𝙚 𝙫𝙚𝙧𝙗𝙖𝙡 𝙮𝙚𝙨 𝙤𝙣 𝙩𝙝𝙚 𝙘𝙖𝙡𝙡, 𝙣𝙤𝙩 𝙫𝙞𝙖 𝙚𝙢𝙖𝙞𝙡. 2) Name the problem in their words Summarize what they said is blocking renewal, then play it back. “You mentioned [X) as the reason- Did I miss anything?” 3) Propose a 30-day proof plan Replace scattered tasks with a simple, shared program. Use bullets, dates, and owners. *Week 1: deliver A, fix B, or show C *Week 2: validate with your stakeholders *Week 3: quantify impact and ROI deltas *Week 4: review, decide, and schedule go-forward 4) Make the commitment explicit Ask the decision question, clearly and directly: “If we do X by [date], and you see Y results and Z ROI, will you move forward with us rather than cancel?” 𝐆𝐞𝐭 𝐚 𝐲𝐞𝐬, 𝐭𝐡𝐞𝐧 𝐫𝐞𝐬𝐭𝐚𝐭𝐞 𝐢𝐭 𝐛𝐚𝐜𝐤 𝐭𝐨 𝐜𝐨𝐧𝐟𝐢𝐫𝐦. 𝐓𝐡𝐢𝐬 𝐜𝐫𝐞𝐚𝐭𝐞𝐬 𝐦𝐮𝐭𝐮𝐚𝐥 𝐚𝐜𝐜𝐨𝐮𝐧𝐭𝐚𝐛𝐢𝐥𝐢𝐭𝐲. 5) Define how value will be shown, not just sent Agree on exactly what you will deliver and how they will validate it. 6) Assign owners on both sides Document who from their team will attend reviews, who gives final sign-off, and who you will avoid single-threading with. Ask for a backup contact. 7) Put it in writing, same day Email the one-pager plan with bullets, dates, and the previously captured “yes.” Reference that the next emails and reports are part of this plan, not random touches. This reframes every follow-up as progress against a shared program. 8) Run weekly proof reviews, live Short calls to show progress, remove blockers, and reaffirm the commitment. Keep artifacts tight: 1-page recap, 3 bullets, 1 decision. 9) Close with the agreed decision On week 4, ask the decision exactly as framed at the start: “We did X, you saw Y results and Z ROI, as agreed. Are we renewing and moving forward?” Because they already agreed to decide on these terms, the close is natural. Why this works: *Random actions feel like noise; a plan creates purpose and timeline. *Verbal commitment on a call reduces ghosting and creates accountability

I get asked all the time: what resources can you share to help CS teams with renewal conversations? Here's the honest answer: Most renewal training focuses on the mechanics. How to structure the call. What to say. What objection handling frameworks to use. That's not your problem. Your problem is that renewals are being treated like a transaction that happens at the end instead of a conversation that started at kickoff. If the first time you're asking "are you comfortable renewing" is on the renewal call, you already lost Here's the framework I actually use and share when people ask. 𝟭. 𝗦𝗲𝘁 𝘁𝗵𝗲 𝗳𝗿𝗮𝗺𝗲 𝗲𝗮𝗿𝗹𝘆. "Let's align on outcomes and what next year looks like, then we'll talk terms." 𝟮. 𝗖𝗼𝗻𝗳𝗶𝗿𝗺 𝘃𝗮𝗹𝘂𝗲 𝘄𝗶𝘁𝗵 𝗿𝗲𝗰𝗲𝗶𝗽𝘁𝘀. "In the last 90 days you achieved X, Y, Z. Which matters most internally?" 𝟯. 𝗙𝗶𝗻𝗱 𝗴𝗮𝗽𝘀 𝗯𝗲𝗳𝗼𝗿𝗲 𝘁𝗵𝗲𝘆 𝗯𝗲𝗰𝗼𝗺𝗲 𝗼𝗯𝗷𝗲𝗰𝘁𝗶𝗼𝗻𝘀. "What would block you from renewing?" 𝟰. 𝗔𝘀𝗸 𝘁𝗵𝗲 𝗿𝗲𝗻𝗲𝘄𝗮𝗹 𝗾𝘂𝗲𝘀𝘁𝗶𝗼𝗻 𝗱𝗶𝗿𝗲𝗰𝘁𝗹𝘆. "Based on what we just reviewed, are you comfortable renewing?" 𝟱. 𝗜𝗳 𝗽𝗿𝗶𝗰𝗶𝗻𝗴 𝗰𝗼𝗺𝗲𝘀 𝘂𝗽, 𝗮𝗻𝗰𝗵𝗼𝗿 𝘁𝗼 𝗼𝘂𝘁𝗰𝗼𝗺𝗲𝘀 𝘁𝗵𝗲𝗻 𝘁𝗿𝗮𝗱𝗲. "If we adjust commercials, let's tie it to scope or term. What matters most?" 𝟲. 𝗔 𝗱𝗲𝗮𝗱 𝘀𝗶𝗺𝗽𝗹𝗲 𝗰𝗮𝗹𝗹 𝘀𝗰𝗿𝗶𝗽𝘁: Open: "Confirm value, align on next year, cover renewal terms." Value: "Here's what we delivered. What should we highlight to your leadership?" Risk: "What would make this a no?" Close: "If we keep X and solve Y, are we renewing?" Commercials: "If budget is tight, we can talk term, scope, or payment structure. Which lever matters?" Now here are the actual resources that are useful if you want to go deeper:  • Winning by Design has a solid renewal blueprint that breaks down the mechanics properly. Link in comments.  • Gainsight runs a "Negotiation to Renewal" masterclass that's worth the time. Also in comments.  • Never Split the Difference by Christopher Voss. If you haven't read it, read it. If you have read it, read it again. Every renewal conversation is a negotiation. Most CS teams are terrible at it because they were never taught.  • Pavilion University has a Retention and Renewals course if you want structured training for your team. All the links are in the comments. 👇 💡But remember this: The best renewal framework in the world doesn't fix a customer that should have been flagged six months ago. Renewals don't break at the call. They break upstream. #CustomerSuccess #Renewals #ChurnPrevention

Most renewals do not die because the customer is unhappy. They die because no one can prove why the contract should exist. Last quarter, a CSM told me with confidence, “They love us. CSAT is 9.2. Relationship is strong.” Two weeks later, procurement reduced the scope by 40 percent. What changed? Nothing emotionally. Everything financially. The executive team asked a simple question. “What measurable business outcome did this investment drive?” There was silence. This is the uncomfortable truth most Customer Success teams avoid. Customer satisfaction is a sentiment metric. Renewals are economic decisions. You can have: • High CSAT • Positive NPS • Strong champion relationship And still lose the renewal. Because satisfaction does not answer: • What revenue did we protect? • What cost did we reduce? • What operational risk did we eliminate? • What happens if we are removed tomorrow? In my latest newsletter, "Why Customer Satisfaction Is One of the Weakest Defences in a Renewal Conversation" I break this down in detail: • Why satisfaction is a lagging indicator • Why CFOs do not renew based on “happiness” • The four real renewal defences that actually protect ARR • How to shift renewal conversations from sentiment to strategy If you are serious about Net Revenue Retention, this shift is non negotiable. The best CSMs do not defend renewals with emotion. They defend them with evidence. Read the newsletter here: https://lnkd.in/gmMxdbtD Question for you: In your last renewal, did you lead with satisfaction or with quantified impact?