When my client cancels their contract, it can feel like a breakup. Why don’t they want to work with my company anymore? Don’t they love our products? We invested so much in each other, but now they want to cancel their contract. Where do we go from here? Can I save this account?
I work the Software as a Service (SAAS) industry. This means my company sells the service of using our software on a subscription basis. The customer typically signs a contract to pay for a year of using the software service. Sometimes they pay annually and other times they pay the contract monthly but are still obligated to pay for an entire year. This is similar to a mobile phone service contract or paying for cable television. I have an annual contract with my cable company, which means I will have to pay a set price monthly for a year. Even if I don’t want to use it after the 6th month. Even if my internet goes out for no reason and their customer service gets on my last nerves…
There are several Red Flags that can lead to cancelations. Look out for the signals mentioned below when you are communicating with your clients.
Red Flags that can lead to clients canceling their contract:
Acquisition – Your client was acquired by another company. Maybe the parent company uses another product and they are forcing your client to change.
- As soon as you are notified about the acquisition – Schedule a meeting with your primary contact asap. Connect with the new leaders and contacts to re-sell your product’s value.
- During an acquisition, a company will be an influx, but you need to secure your place and be at the top of the client’s mind as they are making changes.
- Best case scenario, you’ll know about the upcoming acquisition well in advance so you can start working with your client to help them navigate through the transition.
New Leadership – Your main point of contact (POC) has changed. The previous primary contact was fired, retired, transferred, or they moved on to a new organization. Now a new person is in place and they do not understand or like your product.
- If you know your POC is leaving before their actual end date, have them schedule a meeting to transfer information to the new contact within the company.
- If you find out about the change after your contact is already gone, immediately connect with this client. Pull in other contacts within the company and schedule a meeting to discuss the value of your product and how you can make their work life and their company better with your product.
False Expectations of Your Product – Sometimes your client thinks your product can do something, but your product was not made to solve that particular problem. The client could have been confused during the selling process or the sales team could have made magical promises to close the deal and oversold the client.
- Find realistic ways to meet your client’s needs. Take the direction off of what your product does not do and focus on what you can do.
Opt-Out Clauses in the Contract – The client might have been given a buy-out clause in the contract. They signed up for a pilot or trial period with an opt out.
- Keep in close contact with these clients. Have an action plan executed and delivered well before the opt-out date. I like scheduling a review meeting with the client a month before they can opt-out. This way I can gauge their interest and make adjustments if necessary.
No Time to Implement the Product – When the client purchases your product make sure they understand how to use it. First impressions matter. If they don’t know how to properly use your product, they might get frustrated and think it isn’t worth the money or the time.
- Sometimes clients purchase your product and then they disappear. They say they are to busy to work with the product now. This is a No Go! Make it clear that you want them to be successful with your product. You want the product to solve their problems and this requires you to train them on how to use the product. Taking time to teach your client about your product and make sure they understand how to use it is the key to building a longterm customer.
Low Usage of the Product – This ties into the implementation of your product. Typically people are not adopting your product because they do not know how to use it. Ask them why they have not been using the product?
Limited Budget – Should your client use their budget for your product or for office supplies and other necessities? Find out when your client has to solidify their budget and make sure your product fits within their budget constraints.
First Steps to take when your client decides to cancel:
Immediately schedule a call with the client to review the renewal process.
Find out why they want to cancel – Were they implemented correctly? Do they understand your product and know how to use it properly? The client might be canceling because they don’t understand your product, so make sure you review exactly why they want to cancel before you throw in the towel.
Offer to freeze their contract – You can put the contract on hold until they need to use it. Not all companies allow this, but it can be very helpful for a client to have the option to pause payment and use until they really need your product.
Review the Contract Terms: Sometimes your clients throw a curveball and try to cancel right before the end. Check the terms of your contract. In many cases, companies are adding auto-renew terms into the contract. This requires your client to cancel x number of days before the contract renews automatically. Personally, I like to inform clients that the auto-renew will occur, so they are properly prepared and not shocked when you angry when they receive the new invoice.
There are only a few of the reasons your client might decide to cancel their contract with you. The best way to combat canceled contracts is to prevention. Communicating with your client early and often will give you a better chance of securing a contract renewal.