How to ensure contract renewals with your clients

Contract renewals are critical when you operate a service-centric business. Find out why contract renewals are important, learn the difference between renewals and extensions, and get some tips for managing your contract renewals here. 

Contracts play a significant role for most businesses. After all, contracts serve multiple purposes.

They: 

• Offer protection for you and your clients
• Clearly outline the expectations of all parties involved
• Ensure that all parties agree to the terms of the engagement
• Help avoid miscommunication

But most contracts don’t have indefinite time frames. Instead, they’re limited to the term of the agreement. When that term ends, you’ll need to either extend or renew your contract. Find out why that’s important and learn how to manage contract renewals below.  

Jump to:

• Why it’s important to renew your contracts
• Contract renewal vs. contract extension
• When should you start the contract renewal process?
• What should the contract renewal process include?
• Tips for managing contract renewals

Why it’s important to renew your contracts

Contracts are designed to protect you and your clients. For example, if you don’t have a contract, you may end up in a dispute with a client who believes your services were less expensive than they are or expected those services to be completed earlier than possible. On the other side of the coin, contracts hold you accountable for what you promise your clients. They outline service dates and expectations that must be met to avoid a breach of contract. 

But those protections end for all parties when the contract expires. As such, it’s important to renew your contracts to ensure that all parties involved are constantly protected for as long as the relationship lasts. 

Contract renewal vs. contract extension

Contract renewals and contract extensions may seem like the same thing. While they are similar, there are key differences between the two. The most important differences include: 

• Contract renewals: Contract renewals are completely new contracts. That means they open the door to changes. For example, after you provide a service for two years, inflation may lead to price changes. A contract renewal allows you to make those changes. 
• Contract extensions: Contract extensions simply extend the existing contract. That means nothing can change, and all of the terms of the existing contract remain valid through the life of the extension.  

When a contract renewal is better

A contract renewal is often the better option when you need to make changes to the agreement upon expiration. These are typically best when: 

• Services change: When your contract period ends, your clients may want to take advantage of additional services when they renew their agreements. 
• Prices change: Inflation leads to an increase in the cost of operating your business. As such, you’ll need to increase your prices from time to time. If your price is changing, a contract renewal makes more sense than an extension. 
• Terms change: You may decide to change the terms you operate under from time to time. This may be done to give you more time to complete projects, to offer stronger protections for you and your clients, or for any number of other reasons. In any case, when your current contract terms change, renewals make more sense than contract extensions. 

When a contract extension is better

While contract renewals are better when something changes, contract extensions are typically the best option when there are no changes to the agreement. So if you’re simply extending the time you’re providing the service for and you’d like to extend the protections your current contract provides, a contract extension makes sense. 

When should you start the contract renewal process?

The contract renewal process can take some time. So it’s not a good idea to wait until your current contract expires to address a renewal. Instead, you’ll want to address renewals well in advance of your contract expiring. 

While some businesses start the contract renewal process 30 days before their current contracts expire, it’s typically best to give yourself and your clients between 60 and 90 days to come to a new agreement. 

That’s important because your schedule and your client’s schedule may not meet up. Moreover, it’s important to have time to hash out any details that may require negotiations. 

What should the contract renewal process include?

The contract renewal process typically includes the following steps. 

1. Inform your client: The first thing you’ll need to do is reach out to your client to let them know their contract will be expiring soon. You should give plenty of time between your first contact and the contract renewal date. This should be done 60 to 90 days before the contract expires. 
2. Have a conversation: As you near the expiration of your current contract, have a conversation with your client to determine their level of satisfaction with your services and whether or not they need to change anything. 
3. Determine if a renewal or an extension is best: Based on the factors above, determine whether the contract should be renewed or extended. Keep in mind that renewals are best when the agreement changes; extensions are best when the agreement stays the same. 
4. Obtain signatures: Once you’ve come to a new agreement, it’s time to send that agreement out for reviews and signatures. HoneyBook makes this process easy by giving your clients a way to digitally sign your agreements while offering you legally approved templates to work from.  

Tips for managing contract renewals

Here are a few tips that should help you better manage your contract renewals. 

Start early

As mentioned above, waiting until your original contract has expired or is nearly expired is typically a mistake. While you may be able to quickly renew contracts with some clients, it’s usually best to give yourself and the client between 60 and 90 days to come to a new agreement.

Use a contract management software solution

Technological innovation has changed the way we do just about everything, making various parts of life more efficient. Why not let it make contract management more efficient too? There are several software solutions out there that are designed to help you manage your contracts. 

While many of these dedicated contract solutions are great, there are other options too. For example, HoneyBook offers a host of contract management features alongside other features, including the ability to accept payments, let your clients book appointments online, and automate some of the mundane tasks associated with running a business. 

Share and sign your contracts digitally and securely

Pen-and-paper contracts are quickly becoming a thing of the past. In today’s fast-paced world, clients are expecting things to happen immediately, including contract renewals. The best way to meet these expectations is to send your contracts digitally, and securely, with a platform like HoneyBook. 

Make sure your new contracts are legally binding

Contracts are worth having only if they’re legally binding. But some things can’t be legally binding. So how do you make sure your contracts are? 

One option is to chat with an attorney and have them go over your contracts, but that can get expensive. You can also use HoneyBook’s contract templates. All of HoneyBook’s templates have already been reviewed and legally approved. 

Final thoughts

Contract renewals are a critical part of most service-based businesses. After all, you don’t want your clients to end their relationships with you after a single term. Follow the tips above to determine whether you need to renew or extend your contracts and to ensure that when the time comes, you’re able to do so successfully.