IT and Business Insights for SMB Solution Providers

Contract Renewal Success Tips

All contracts eventually expire, but you can make the renewal process quicker and drama-free by following this advice from experienced MSPs. By Hank Hogan

MANAGED IT SERVICES and other subscription-based arrangements typically come with contracts, and those contracts eventually expire. When they do, renewal can be a time- and energy-consuming drama, or a quick, hassle-free affair, depending on how well you prepared in advance.

There are generally two reasons why channel pros face contract renewal difficulties, according to Wayne Hunter, CEO of Allen, Texas-based AvTek Solutions. The first, ironically, is that the provider’s behind-the-scenes support has been too good.

“The customer hasn’t experienced major issues because the MSP has performed the services [specified in the contract],” Hunter says.

That stumbling block dovetails with the second potential problem: a lack of communication about what the MSP has done to eliminate outages, which can leave clients questioning what they’re paying for, particularly if there’s any price increase.

The solution, according to Hunter, is to educate customers via regular business reviews about the value you offer and how you’re helping them succeed. “At a minimum, provide monthly reports to the [client’s] executive management that show what has been done,” he says.

Ongoing contact of this sort can help you avoid rate-change pushback, according to Manuel Palachuk, president and head coach of Boca Raton, Fla.-based Manuel Palachuk International. A business coach and consultant to IT and managed service providers, Palachuk notes that MSPs must raise their prices regularly due to higher labor, electricity, and other costs, and should gradually charge more even when underlying expenses like that don’t go up.

“Certain services may get cheaper because they’ve become more of a commodity,” Palachuk observes, adding that rates are based on more than price. “Overall, a managed service agreement should constantly be providing better value.” For example, while cloud storage may be getting less expensive, service providers utilizing more advanced methods to manage and protect data are doing more for their clients. Regular communication with customers through business reviews helps them see that value is increasing along with price, making rate changes easier to understand and sell.

Palachuk suggests considering a more radical strategy as well: eliminating contracts altogether. That’s possible for providers who have developed highly automated online solutions that allow customers to select services they want, such as cloud storage or malware protection, from a catalog. They can then enter how many seats they want, specify other applicable parameters, and pay for the services one month at a time.

CareWorx, an Ottawa, Ontario-based MSP, takes that month-to-month approach with its business clients. In addition to avoiding contract renewal hassles, the company can focus more on sales and customer retention, according to Marco La Vecchia, executive vice president and general manager.

“It’s easier to close deals this way,” he says, “and [it] also puts the onus on us to provide the best support so they never cancel.”

Image: Pixabay

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