The Importance of Service Contract Renewals for Repeat business


Starting a business is a major challenge in and of itself . Finding and keeping your customers is yet another especially if your business is service driven. Now that you’ve secured their business and provided them with top-quality service, leaving behind you a satisfied customer. Once your client’s contract ends, that concludes your involvement with them for that specific job. But if you want your business to be successful, you should recognize that the end of a specific contract shouldn’t be the end of your relationship with them.
The service contracts expire, but they can also be renewed– this will ensure that you continue to receive business from the client time and time again. Your clients don’t always know or remember when to renew their contracts, but as the business owner you are uniquely positioned to give them that little push and turn them into repeat customers.
The following two tips will better understand the importance of this often-neglected part of the client’s buying cycle and ensure that your business relationship with them continues well into the future.

1) Contract renewals allow you to have predictable income.
Predicting the cash flows of any business isn’t always easy, thus, having analytics will greatly assist with this.  While you can often grasp the seasonal fluctuation of your sales to some degree, you can’t always ensure that you will have a steady source of revenue through the year. Renewing your contracts with your customers can be one of your easiest ways to make sales, given that they are already (often loyal) customers in the first place!
For example, a freelance writer’s entire income and workload is decided on a per-contract basis. Unless you are experience in the field, you will have to work hard to earn and maintain these customers who you hope will purchase from you on a regular base. Getting the customers is difficult enough, but many times you will do one job for them and then never hear from them again. Just providing them with high-quality writing isn’t enough. It’s important to go the extra mile to get my customers to renew their contracts to get monthly sustainable revenue.
Keep in touch with them, offer them additional incentives, even offer them some additional level of customization in their contracts! There are many different tactics to encourage past and present clients to become repeat customers. In doing so, you ensure that you have a steady stream of revenue that you can rely upon even if business slows down.
2) Track the Lifetime Value of a Customer
If your client has agreed to renew their contracts for a pre-set length of time into the future, you can immediately quantify the revenue that customer will generate for that length of time. Furthermore, you will also be able to understand the precise nature of the value they bring to your business by analyzing the patterns and frequency of their buying patterns. If you keep track of the contracts and purchases you have received from this customer over the duration of their sales, you’ll better understand the value they bring to your business.
This number is important because it gives you insight as to the repeat business you can get from a customer and what they are willing to spend over a period of time. It helps to understand how much you are spending on each customer. It’s a way for you to figure out how much resources you need to allocate (i.e. time and marketing dollars) to retain and keep this customer happy.
The easiest way to figure out a lifetime value is:
(Avg Value of a Sale) X (# of Repeat Transactions) X (Avg Retention Time in Months or Years for a Typical Customer)
For example, a business owner spends $10 every month for 3 years on website hosting. The lifetime value of that customer would be:  
$10 X 12 months X 3 years = $360 in total revenue (or $120 per year).
A hosting company should spend less than $120 per year to acquire a new small business owner who needs a web site. It becomes a benchmark to prove profitability and overall success of your business.
Once you have figured out the lifetime value of a customer, you can decide on the investment you want to reach short and long terms. It’s important when you are starting a business because you can create cost effective, measurable marketing programs to see how much you are saving per customer. Thus, understanding the lifetime value attribute to how successful you business will be.
When you renew a customer’s contract, you always have the opportunity to add further value to their purchase. In doing so, you give them an incentive to renew their contracts with you, adding value back to your business in turn. If you understand how to create and harness repeat customers, you will provide the lynchpin in your business model that will ensure that you remain profitable for years to come.

Source: The Importance of Service Contract Renewals for Repeat business

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With Mosspaper anyone can create, sign, track and accept quotes and contracts anywhere. Mosspaper provides a streamlined paperless quote and contract renewal SaaS solution from creation to sales renewals, allowing users to monitor and track work.  The company offers a quote creator tool, paperless approval process, centralized customer communications, e-signature, payment integration, real-time notifications, and data analytics for small businesses.

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