Definition of Renewals
Renewals in a subscription or contract context refer to customers continuing their contract or subscription after the initial term expires. A renewal occurs when a customer decides to extend the relationship for a new term, such as another month or year, depending on the billing cycle.
How Renewals Work
Renewals can be either manual or automatic. In manual renewals, the customer actively agrees to continue the contract, often by signing a new agreement. In automatic renewals, the contract renews by default unless the customer cancels before the renewal date. Both approaches are common in SaaS and subscription-based businesses.
Why Renewals Are Important
Renewals are the foundation of recurring revenue models. High renewal rates indicate that customers continue to see value in the product or service and provide ongoing revenue at a much lower cost than acquiring new customers. Low renewal rates, on the other hand, are a sign of churn and can significantly impact growth and stability.
Renewals Explained for a General Audience
For a general audience, a renewal simply means a customer choosing to keep their subscription for another term. If you subscribe to an annual service and decide to continue for another year, you have renewed. From a customer’s perspective, renewal is often a moment to evaluate whether the product is worth continuing to pay for.
Renewal Metrics and Measurement
Companies track metrics such as Renewal Rate, which measures the percentage of customers or revenue that renews. Many businesses distinguish between Gross Renewal, which looks only at the same revenue renewing without expansions, and Net Renewal, which includes upsells and expansions as part of the renewed revenue.
Renewals in Business Operations
Managing renewals is a core responsibility of Customer Success and Revenue Operations teams. Businesses often maintain a pipeline of upcoming renewals, assign owners to manage them, and proactively address issues to secure continuation. For large customers, renewals can involve negotiation and procurement processes, while for smaller customers they are often automated.
Renewals and the Customer Lifecycle
Renewals are closely tied to churn and customer retention. A successful renewal means a customer has not churned at the end of a contract term. Renewal moments are also common opportunities for upsells, such as upgrading plans, adding users, or expanding services.
Renewals in Ratio’s Context
In Ratio’s context, renewals are part of the full quote-to-cash lifecycle. Ratio supports renewals by enabling financing and payment options for renewal contracts, just as with initial sales. By reusing buyer data, Ratio can streamline renewals without requiring full requalification, reducing friction and helping sales and customer success teams close renewals faster.
Why Renewals Matter in a Glossary Context
Including renewals in a glossary helps explain one of the most critical drivers of recurring revenue and long-term growth. Understanding renewals provides context for metrics like churn, net retention, and customer lifetime value.
Summary
Renewals represent existing customers continuing their contracts or subscriptions into a new term. They are essential to the stability and growth of recurring revenue businesses, as retaining customers is more efficient than acquiring new ones. By reducing friction and supporting renewals within the sales and finance workflow, Ratio helps companies maintain and grow recurring revenue more effectively.
