Let’s get tactical: Renewal tracking

Tracking your renewal transactions is essential in SaaS businesses. Proactively managing renewals allows you to address potential churn risks and maintain a healthy customer base. Investing time in setting up your renewal tracking process can save your organization multiple times your Average Revenue Per Account (ARPA).

Overview of the Process

New Business Opportunities should generate a corresponding Renewal Opportunity. Any mid-term expansions occurring before the renewal date should update and maintain the Renewal Opportunity, reflecting changes in products owned and the renewal amount.

Opportunity timeline

Approaches to Creating Renewal Opportunities

You can create Renewal Opportunities using either out-of-the-box (OOTB) CPQ functionality or standard CRM automation. Collaborate with your CRM admin to determine the best approach for your organization.

Key Opportunity Fields for Renewal Tracking

To ensure accurate reporting and workflow automation, capture the following key fields on Renewal Opportunities:

Originating Opportunity:

• Lookup to the Opportunity that triggered the Renewal. This will be your New Business Opportunity for initial land deals.

• Maintains data relationships for comparison purposes.

• Consider linking expansions either through the same lookup approach (create multiple lookup fields) or using CPQ-driven objects such as Contracts.

Type:

• Set this as "Renewal" to easily filter Renewal Opportunities.

ARR to be Renewed:

• Amount of contracts requiring renewal (ex: $100k contract = $100k in this field).

• For ramping deals (where the spend increases year by year) you want this value to be the ending year’s contracted amount. If you take the average over time, you may show CSMs a lower ARR to be Renewed than the final year in their contract. CSMs may try to renew “flat” but are actually building in churn.

Renewal Date:

• The date the prior contract expires.

• Keep this separate from the close date to maintain data integrity.

• Restrict updates to system or admin-level changes only.

ARR Renewed:

• The amount retained from the ARR to be Renewed.

• Set to $0 for lost accounts or the minimum of the new ARR or the ARR to be Renewed for retained accounts.

Total ARR:

• Annualized sum total of the committed contract’s ARR.

ARR Delta:

• Calculated as Total ARR - ARR to be Renewed.

• Positive values indicate growth, while negative values signal churn or downsell.

• Formula: IF (AND(Stage = 'Lost', Type = 'Renewal'), -1 * ARR to be Renewed, Total ARR - ARR to be Renewed)

Deal Classification:

• Classifies the transaction as part of your ARR waterfall. Resulting values will include New, Upsell/Expansion, Downsell, Churn.

Renewal Timing:

• Classifies the transaction as being on time, early or late. You can agree on the timing for what constitutes each of those categories. Do you want it within the month of the Renewal Date? Or same quarter?

• Understand that deals that go beyond the Renewal Date likely have lower renewal rates but may be necessary to save certain accounts.

Helper Values for Reporting:

• ARR at Renewal (Current): Stamped value of current ARR when the deal is closed.

• ARR at Renewal (Family): Stamped value of ARR within the account hierarchy at deal closure.

• Leverage tools like DLRS for Salesforce to automate this.

Sample lifecycle of a customer with some of the key fields described above

Forecasting Renewal Rates

Customer Success teams need to forecast their attainment against renewal and churn rates. Below are two forecasting approaches:

1. Likert-Based Forecasting:

• Field: Renewal Forecast with values:

  • Will Renew

  • Likely to Renew

  • May Renew

  • Unlikely to Renew

  • Will Not Renew

• Formula Field: Projected Renewal Amount

  IF(Closed, ARR Renewed, SWITCH(
    Renewal Forecast,
    "Will Renew", 90%,
    "Likely to Renew", 70%,
    "May Renew", 55%,
    "Unlikely to Renew", 30%,
    "Will Not Renew", 5%,
    0) * ARR to be Renewed)

• Map assumed renewal likelihoods to ARR and use snapshots to measure accuracy over time.

2. Projected Churn Forecast:

• Allow teams to enter a forecasted churn amount.

• Automate updates to reflect actual churn upon deal closure.

Key Metrics for Reporting

With the appropriate fields in place, you can generate both rear-view and forecasted reports.

Gross Renewal Rate (GRR)

• Filter: Type = Renewal & Closed = TRUE, cohort based on Renewal Date.

• Formula: SUM(ARR Renewed) / SUM(ARR to be Renewed)

Net Renewal Rate (NRR)

• Filter: (Type = Renewal & Closed = TRUE & Renewal Date = PERIOD) OR (Type = Expansion & Stage = Closed Won & Close Date = PERIOD)

Important Consideration:

• This approach focuses on the “Renewable Pool” - the ARR requiring a transaction in a given period; it excludes multi-year, out-year ARR from these calculations.

• Finance typically manages renewal rate calculations in an ERP, but CRM-based reporting can provide valuable insights when limitations are understood.

Projected Renewal Rate:

• Depends on the forecasting method chosen. In either approach, take the value less churn and divide by your ARR to be Renewed and cohort by Period. Take all renewals with Renewal Dates in the period whether closed or open.

Open Renewals:

• Understand how many and how much $ are remaining to renew in a period by looking at Type = Renewal and Closed = FALSE. By getting ahead of renewals and transacting as early as possible, you should avoid having large volumes of renewals in month 3 of the quarter.

Wrapping Up

Effective renewal tracking and reporting, combined with automation and workflows, are vital for Customer Success. If setting up this process saves even one customer per quarter, the value to the company is substantial. Investing in the right setup now pays dividends over time.

We’ve been there, we’ve done that. Let us help you get your renewal reporting up to par. Schedule time with us today!