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4 Big Benefits to Outsourcing Renewals Management

4 Big Benefits to Outsourcing Renewals Management

Any small-to-medium (SMB) or global B2B tech company knows that customer retention is critically important to its bottom line. When renewals aren’t optimized, there can be unintended gaps in cash flow, customer churn in lower dollar segments, and even missed growth opportunities across all customer segments.

But here’s the good news: outsourcing the renewals management process achieves greater outcomes faster—without the burden of hiring and managing an internal team. Here are four benefits to outsourcing proven to drive profitability:

Reduce Overhead Cost

The cost of an in-house renewal team varies, depending on how it is structured and supported. Administrative burdens, the total number of required support roles, the renewal process’s complexity, and the learning curve for new hires all play a role. For example, hiring an in-house Renewals/Customer Success team typically drains between 5%-15% of a business’s ARR (annual recurring revenue).

When you outsource renewals management, you don’t have to incur these overhead expenses or worry about the complexities around hiring, training, and maintaining a high-performing team. A reputable service provider will have performance-based ROI built into the cost, so you can rest assured that standards, objectives, and results are met.

Improve Cash Flow with a Proactive Approach

While most enterprise companies focus on customer retention, they overlook the importance of on-time renewals and their impact on healthy cash flow. On-time renewals are critical to meeting your deferred revenue forecast (the expected schedule of recurring revenue per quarter).

For example, if a customer renews three months after a subscription expires, you have foregone three months of deferred revenue. As a result, your cash flow is impacted even though your retention rate is unaffected. Outsourced renewals management operates by a pay-for-performance model, which incentivizes the team to keep renewals on time.

To help you visualize what renewals outsourcing can do for your cash flow, see how ServiceSource helped a leading software company increase its on-time renewal rate by 20%.

Achieve Scalability and Reduce Sales Churn

Companies that rely solely on a limited internal renewals team must prioritize their efforts based on customer spend segmentation to maximize CAC (customer acquisition cost). They miss out on long-tail opportunities because they don’t have the resources to address lower-dollar customer segments.

Outsourcing renewals management gives your business the flexibility to scale customer spend sizes up or down as needed. Retaining more lower-dollar customers may also increase their spending and size over time. Ultimately, you can address every contract in an intelligent way to get the right return on cost.

Improve Approach to Renewal Performance Metrics

Renewal Team managers often track multiple KPIs (Key Performance Indicators) to coach reps and report to senior leadership. Making sure the right KPI is being used at the right time is key. How do you know if what your team is using day-to-day will drive the optimal return on performance and align with the company’s business objectives?

With an outsourced renewals management program, you’ll instantly gain best-in-class customer data analytics, HPS (High-Performance Sales) methodologies, and a consistent feedback loop that benchmarks performance against industry best practices. The program will identify essential renewal KPIs (Total opportunity amount, sales cycle length, contact days in advance, in-quarter renewal rate, final renewal rate, resolution rate, close rate, etc.) to ensure that you’re getting the most return on your revenue opportunities. You’ll gain a holistic view of your sales and renewals pipeline while freeing up your internal team to focus on strategic accounts.

Boost Your Bottom Line with Outsourced Renewals Management

There are many revenue opportunities in the contract renewal process. A dedicated team of inside sales experts can help you uncover these “hidden gems” so you can maximize the revenue potential of existing customers. The HPS model benchmarks your dedicated team against industry best practices and the most relevant KPIs. You can maintain a healthy cash flow with on-time renewals while maximizing profitability with upsell and cross-sell opportunities.

ServiceSource’s renewal management service is designed to scale your renewals management so you can improve renewal rates and maximize yield. Our dedicated team will develop an intimate understanding of your customer base and leverage our actionable intelligence to mitigate risk and maximize end-user value. Schedule a call with our experts to see how we can help improve your renewal KPIs.

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