Tips to Incentivize Early Renewals

Are you incentivizing early renewals?

If not, you should definitely consider doing so.

Incentivizing early renewals can be a strategic win for both the company and the customer. 

For business, early renewals secure revenue, improve cash flow, and increase customer lifetime value (LTV).

For customers, the benefits can range from cost savings to enhanced continuity and deeper partnership opportunities. 

Here, we’ll explore why early renewals matter, their mutual benefits, and how to structure incentives for Customer Success and Account Management teams to encourage these renewals effectively.

Why Incentivize Early Renewals?

First, let’s start with the why. Why would you want to do this?

Securing Revenue and Stability for the Company

Early renewals provide revenue stability, which supports forecasting and strategic planning. 

Organizations can reduce churn risk by securing revenue earlier, ensuring long-term stability and financial predictability. This particularly benefits companies with aggressive growth targets or those facing uncertain market conditions.

Enhancing Customer Lifetime Value (LTV) 

Plus, encouraging early renewals increases a customer’s LTV by extending their contractual commitment and deepening the partnership. 

This is especially valuable for SaaS companies, as higher LTVs improve financial health and contribute to more sustainable business models.

Strengthening Customer Relationships

Lastly, offering early renewal options with incentives demonstrates a proactive approach to customer success. 

It shows that the business values the customer’s continued success and is committed to supporting their needs. This can foster trust and loyalty, leading to future opportunities for upselling and cross-selling.

Benefits for the Customer

And, the best part about incentivizing early renewals is that the customer wins, too.

For customers, early renewals often come with exclusive benefits that make it advantageous for them to commit early:

• Cost Savings: Early renewals may come with discounts or price locks, protecting customers from potential price increases.
• Customized Offers: Companies can offer value-added services, additional product features, or priority support to incentivize early renewals and enhance the customer experience.
• Enhanced Continuity: Customers are assured that they’ll continue receiving uninterrupted service, reducing the administrative burden of renegotiating later and maintaining steady access to valuable tools and services.

Starting to see the win-win scenario? You ultimately align incentives with customer benefits, resulting in loyalty and long-term partnerships.

Structuring Incentives for Early Renewals

Now, how do you actually get your team to ask for the early renewal?

Sure, you can coach them and review the benefits to the organization and customer, but that kind of ignores the rep’s “what’s in it for me” perspective.

The answer is in the compensation structure. 

Creating a compelling incentive structure can significantly encourage early renewals. 

Here are some strategies recommended by experienced professionals from the RevOps community:

1. SPIFFs and Bonuses Over Core Metrics

A common recommendation is incentivizing early renewals through one-time bonuses or SPIFFs rather than adjusting core metrics like Gross Revenue Retention (GRR) or Net New ARR.
Offering a SPIFF tied to a specific percentage of the renewing ARR can motivate Customer Success Managers (CSMs) without distorting long-term performance metrics.

Example: Reward CSMs with a one-time SPIFF for securing renewals 90 days or more before the contract ends. This ensures early revenue without impacting standard performance measures, providing CSMs with a short-term win without altering their primary targets.

2. Use Booking Date for Accelerators

Another approach is to allow early renewals to count toward accelerators by using the booking date rather than the start date. 

This gives CSMs a reason to advance renewals, especially if they have GRR or ARR targets. 

However, caution is necessary to avoid creating an incentive to “pull forward” renewals artificially, which can disrupt long-term targets.

RevOps Leader Darryl Heffernan suggests setting up the incentives so that early renewals count towards achievement (numerator) and target (denominator). This structure can encourage early renewals without skewing the team’s ability to achieve sustainable long-term results.

3. Retain the Start Date for Core Metrics but Offer a Bonus for Early Closures

Ryan Milligan, VP of RevOps at QuotaPath, also advises keeping the contract start date so you don’t tamper with measuring GRR while focusing on genuine retention and renewal rates. 

To incentivize CSMs, offer an additional bonus based on the ARR percentage for early renewals.

This setup maintains clarity around retention metrics while offering an extra reward for those who secure renewals ahead of schedule.

4. Incentivize Multi-Year Conversions

If early renewals align with the company’s broader strategy, consider offering additional incentives for customers transitioning from one-year to two-year (or longer) contracts. 

Multi-year agreements lock in revenue for a more extended period, reduce churn risk, and allow for deeper engagement with the customer. For CSMs, this comp plan provides an extra reason to focus on renewals as a strategic priority, supporting customer loyalty and revenue predictability.

5. Implement One-Time Year-End Adjustments

Lastly, consider one-time year-end adjustments.

To keep incentive structures straightforward, some companies only calculate early renewal incentives at year-end. 

By allowing early renewals to count in end-of-year recalculations, you can create an additional retention lever without complicating ongoing commission calculations. This also prevents potential “gaming” where CSMs might otherwise rush renewals merely to inflate short-term performance.

Final Thoughts

Incentivizing early renewals can be a win-win for both organizations and customers.

Offering structured bonuses or SPIFFs without impacting core retention metrics can encourage their Customer Success and Account Management teams to pursue early renewals. This approach secures revenue and strengthens customer relationships, increases customer lifetime value, and supports more accurate revenue forecasting.

The proper incentive structure aligns customer success with company objectives, ensuring that teams remain motivated to foster long-term customer success. 

If your organization wants to boost early renewals, start by defining clear, manageable incentives that promote genuine engagement and encourage CSMs to prioritize customer needs and company growth.

For additional help aligning your compensation structure with your most important metrics and streamlining your compensation process, schedule time with our team.