Renewal ARR management

Erika Villarreal
Erika Villarreal Member Posts: 41 Expert
10 Comments Second Anniversary 5 Likes Name Dropper
Hello everyone!! It's been a while since my last question to the community. As you all may know, I joined a new company recently and I'm trying to figure out how to help on our renewals management process. Current customers have multiple renewal dates because of the timing they decided to buy a specific product. So for instance, they might have bought $100K initially, but then... with the pass of time, added $50 and then $20... and so on. 

In total, they might have bought $170, but each revenue chunk is managed separately. In your experience, which is the best way to manage this? Is it common that the ARR that was bought at a later date is pondered into the initial ARR depending on which month of the year it is? Should each chunk of revenue be managed separately or together? I think that it is going to be really difficult to manage 5-7 different renewal dates for each customer and it can get really complicated.

Any suggestions on the best way to approach this?
I really appreciate it!

Erika

Comments

  • Greg Williamson
    Greg Williamson Member Posts: 1 Navigator
    Second Anniversary
    edited June 2021
    Hi Erika,
    I've handled it in the past by pro-rating the add-ons to co-term with their original renewal.  Since you're handling this after the add-on sales, you could work with the customer to select the right renewal date to align with their fiscal year, for instance, then offer a deal that gets each of their products to co-term 1+ years in the future potentially with a free month or two.  This gives them a bit of a deal, allows them to have a single renewal date that's most relevant to them, locks them up for an additional year, and reduces complexity on your end.  Your mileage may vary on business need and product suite though I've defaulted to having one CSM manage the entire chunk of revenue and CSM duties for an account and manage the co-term deal through them. 
    Hope this helps!
    Greg
  • david lapedis
    david lapedis Member Posts: 2 Navigator
    Second Anniversary Photogenic
    edited June 2021
    I think it is much easier to manage one renewal date. Do you pro-rate additional modules or services?

    That's how we add ARR to an account. 

    It took a bit of cleanup for our team to start getting all orders on the same date, but saves our billing team time (and helps with our sanity).  As long as you have a clear talk track about why and how you are doing for the customer during renewal conversation (if you do those), these go straight forward for us. 

    We add additional upsells as additional ARR. 
  • Mohammed Asif
    Mohammed Asif Member Posts: 7 Seeker
    edited June 2021
    You can segment the renewal opportunities on a quarterly basis. This gives you a renewal quota every quarter without having to worry about different renewals.

    As time moves, Based on your relationship, you can suggest the customer to consolidate all the different renewals and merge them as one. Most customers would agree. 

    How to do the merge? Check for the renewal which is the furthest. Match the dates of all the renewals to that renewal date. This way you get confirmed longer renewals and all the different renewal opportunities are superceded for convenience.

    However, if it's a large account, then be mindful that after consolidation the renewal amount becomes large and that might get the unnecessary attention of the customer. 

    It would be a good project to consolidate all the renewals and then be tactical in dealing with the customers.

    I hope it helps.
  • Sana Farooq
    Sana Farooq Member Posts: 28 Expert
    First Anniversary
    edited June 2021
    We pro-rate additional modules and services as well, so that it's all co-termed with the larger contract. For comp and data purposes, we record the full ARR, but the invoice paid by the customer is on the pro-rated amount.
  • Marcus Sparks
    Marcus Sparks Member Posts: 11 Contributor
    GGR Blogger 2021
    edited June 2021
    Hi Erika,
    Plenty of sage advice here pointing to the need for consolidation into one common renewal date via pro-rating. Reduces cost and complexity for both parties and often that is enough incentive for the customer to agree to consolidation. Sometimes the revenue pieces are owned by different parties or functions with their own budgets, so moving to a Master Services Agreement can be very helpful. That way, your additional revenue adds can be via very simple order forms; as simple as a "yes I agree" email with all orders tied to the MSA term. You may still have to get creative with invoicing vs one master invoice if you have multiple budget owners. Often, your customer's Finance/Accounting team will accept a consolidated invoice and handle internal chargebacks, so keep that in mind as an option.
  • Erika Villarreal
    Erika Villarreal Member Posts: 41 Expert
    10 Comments Second Anniversary 5 Likes Name Dropper
    edited June 2021
    Hey all! Happy Friday!

    Thanks so much for all the feedback @david lapedis @Sana Farooq @Mohammed Asif @Greg Williamson @Marcus Sparks

    It looks like most of you have dealt with this in the past, and just as I thought, adding additional revenue to the initial contract would be much easier to manage in a pro-rated manner. My next steps will be trying to understand the challenges for our Finance team to have add pro-rated revenue into our Master contract.

    I guess it makes sense to have the renewal date where the biggest amount of revenue comes in. 

    Thanks so much for sharing your experiences.
    Best,
    Erika