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Forecasting renewals shouldn’t feel like looking into a crystal ball, but for many Customer Success Managers (CSMs), that’s often what it feels like.
Trying to predict how much revenue your current customers will bring in next quarter can be challenging, especially when you're dealing with unpredictable customer behavior, inconsistent data, and a lack of visibility into customer sentiment.
These uncertainties can result in missed targets and unexpected churn, making it difficult to plan effectively and achieve business goals. It’s not just about numbers on a spreadsheet; it’s about understanding your customers, anticipating their needs, and ensuring they see the value in continuing the partnership.
In this blog, we’ll break down the essential components of renewal forecasting, explore best practices to improve accuracy, and share how the right tools can make this process easier and more reliable.
Let’s dive in and take a look at how you can turn renewal forecasting from a guessing game into a strategic advantage.
Understanding renewal forecasting
Renewal forecasting is the process of predicting the future revenue that will come from renewals and expansions of your existing customer base over a specified period.
It’s more than just a number – it’s a way to gauge the health of your customer relationships and the effectiveness of your Customer Success strategies.
A reliable forecast allows you to allocate resources more effectively, focus your engagement efforts on at-risk accounts, and proactively manage renewals. It also helps set realistic revenue expectations for the business, so you’re not caught off guard by unexpected churn or missing growth opportunities.
In short, a good forecast is your roadmap to building stronger, more predictable customer relationships.
Why traditional methods fall short
Traditional methods of renewal forecasting often involve manual data entry, gut feelings, and spreadsheets. While this might work in the short term, it’s not a sustainable approach.
Manual forecasting is prone to human error and bias, and it can be incredibly time-consuming. Even the most meticulous CSMs can overlook crucial details, leading to inaccurate forecasts.
Additionally, traditional methods rely heavily on historical data, which may not reflect current customer sentiment or behavior. If your data is outdated or incomplete, your forecast will be, too.
That’s why it’s essential to adopt a more structured and data-driven approach to renewal forecasting.
A modern approach combines quantitative data, such as customer health scores and product usage, with qualitative insights, like customer sentiment and feedback. This provides a more holistic view, allowing you to predict renewals more accurately and act on risks before they turn into losses.
As we move into the next section, we’ll explore the key components that make up a robust renewal forecasting strategy. By understanding these elements, you can build a more reliable forecast that not only predicts revenue but also guides your customer engagement efforts.
Key components of accurate renewal forecasting
A strong renewal forecasting strategy relies on several key components that go beyond just looking at past data. It’s about understanding your customers’ current health, sentiment, and overall engagement with your product.
By integrating these elements, CSMs can build a more reliable forecast and proactively address potential risks. Let’s break down the main components that can help you get a clearer picture of your renewal landscape:
1. Customer health score
A customized customer health score is like a report card for your accounts, giving you a snapshot of how each customer is doing. It combines various metrics such as product usage, support interactions, and contract age to provide an overall score that helps predict the likelihood of renewal.
Monitoring these scores allows CSMs to identify at-risk customers early and intervene with targeted strategies to prevent churn.
Customer Success tools like Velaris make this process easier by offering customizable health scores that can be tailored to reflect the unique needs and behaviors of your customers. By tracking key metrics and alerting you to changes in customer health, Velaris ensures you have a clear view of who’s on track and who might need a bit more attention.
2. Customer sentiment analysis
Numbers can tell you a lot, but they don’t always capture how your customers are feeling. That’s where sentiment analysis comes in.
By understanding the emotional tone in customer communications – whether it’s emails, support tickets, or social media interactions – you can gain insights into their satisfaction or frustration.
Velaris’ AI capabilities take sentiment analysis to the next level by flagging emails and messages with indicators of positive or negative sentiment. This allows CSMs to quickly spot potential issues or opportunities for upsell, so they can take action based on how customers truly feel, not just what they say.
3. Historical data and trends
Looking at historical data is still an essential part of renewal forecasting, but it needs to be done with context.
By analyzing past renewals, churn rates, and customer behavior patterns, you can spot trends that might indicate future outcomes. However, this data should be integrated with current metrics and insights for a complete picture.
Tools like Velaris can unify data from various departments – such as sales, marketing, and support – giving you a comprehensive view of all past interactions and patterns. This unified approach helps in creating a more accurate forecast by ensuring that no relevant data is left out.
4. Success plans
A well-defined success plan is crucial for keeping customers on the path to renewal. It outlines the tasks, milestones, and goals that need to be achieved to ensure the customer sees continuous value from your product.
When success plans are aligned with customer goals, the likelihood of renewal increases significantly.
Velaris provides robust success planning tools that allow you to map out these plans, track progress, and monitor KPIs in real-time. This helps CSMs stay aligned with what the customer needs and ensures that everyone is on the same page, working towards the same objectives.
By focusing on these key components, CSMs can create a more holistic and accurate renewal forecast. But having these elements in place is just the beginning.
In the next section, we’ll dive into some best practices that can help you put these components into action and fine-tune your forecasting approach for even better results.
Best practices for renewal forecasting
With the right components in place, the next step is to adopt best practices that make your renewal forecasting process more effective and less stressful. Here are some best practices that can help you refine your forecasting approach.
1. Automate and standardize processes
Manual data entry and analysis can be time-consuming and prone to errors. Automating key processes not only saves time but also reduces the likelihood of mistakes that can skew your forecasts.
By using automation, you can ensure that your data is consistent and up-to-date, providing a solid foundation for accurate forecasting.
Playbooks can complement automation efforts by outlining best practices for data collection, task management, and other standardized processes, ensuring consistency and effectiveness across the team.
Velaris offers an easy-to-use drag-and-drop automation builder that allows you to automate various CS processes, from data collection to task management.
This ensures that your team spends less time on repetitive tasks and more time engaging with customers, ultimately leading to a more streamlined and accurate forecasting process.
2. Leverage AI for predictive insights
AI can be a powerful tool in renewal forecasting, providing predictive insights that go beyond traditional data analysis.
It can identify patterns and trends in customer behavior that might not be immediately apparent, helping you make more informed decisions about where to focus your efforts.
Velaris’ AI copilot can analyze a wide range of customer data, from emails to support tickets, and suggest next steps based on its findings.
This helps CSMs manage renewals more proactively, identifying potential issues before they become problems and highlighting opportunities for upsell or expansion. By leveraging AI, you can move from reactive to proactive customer management.
3. Regularly update and review forecasts
Forecasting isn’t a one-and-done task. It’s important to regularly update your forecasts with new data and review them to ensure they still align with current realities. Market conditions, customer needs, and even internal processes can change over time, and your forecasts need to reflect these shifts.
Using a tool like Velaris, you can connect data across sales, marketing, onboarding, and support teams, ensuring that your forecasts are always based on the most current information.
This integration allows you to automatically populate the data needed for accurate forecasting, reducing the need for manual updates and ensuring that you’re always working with the latest insights.
4. Proactive customer engagement
Don’t wait until the last minute to engage with your customers about renewals. Reaching out well before the renewal date gives you a chance to understand their current needs, address any concerns, and reinforce the value they’re getting from your product.
Proactive engagement helps you build a stronger relationship and reduces the likelihood of surprises when it comes time for renewal.
This can be done through regular check-ins, personalized communications, or tailored content that addresses their specific goals and challenges. The key is to make them feel supported and valued throughout their journey, not just when it’s time to renew.
5. Targeted upsell and cross-sell opportunities
Renewal time is also a good opportunity to explore upsell and cross-sell possibilities. By identifying customers who could benefit from additional products or features, you can not only increase revenue but also provide more value to your customers. The key is to target these opportunities based on their specific needs and usage patterns.
6. Customer feedback and satisfaction surveys
Before diving into renewal discussions, it’s crucial to understand how satisfied your customers are and where there might be room for improvement. Tools like NPS, CSAT, and CES surveys can provide valuable insights into customer satisfaction and highlight areas that may need attention.
Velaris makes it easy to build customized surveys and aggregate responses in one place, helping CSMs analyze feedback and make data-driven decisions. This proactive approach allows you to address any issues before they become barriers to renewal and show your customers that their feedback truly matters.
By implementing these best practices, you can improve the accuracy and reliability of your renewal forecasts, making it easier to plan and execute your Customer Success strategies. In the next section, we’ll look at a few challenges you might face while forecasting renewals and explore ways to overcome them.
Common pitfalls to avoid in renewal forecasting
Even with a well-thought-out plan and the right tools, it’s easy to fall into certain traps that can throw off your renewal forecasting. These common pitfalls can lead to inaccurate predictions and missed opportunities, so it’s important to be aware of them and take steps to avoid them:
1. Ignoring early warning signs
One of the biggest mistakes CSMs can make is ignoring early signs of potential churn. Declining product usage, negative feedback, or even reduced engagement in regular check-ins can all be indicators that a customer might not be seeing the value they need to continue the partnership.
Waiting until these issues escalate can lead to last-minute firefighting, which is both stressful and often ineffective.
This is where proactive monitoring comes in. Velaris’ AI copilot can help by flagging early warning signs in customer communications and interactions.
By identifying these issues early, you can take preventive measures, such as reaching out to offer support or scheduling a strategic review to address any concerns before they become reasons for churn.
2. Relying solely on quantitative data
Numbers are important, but they don’t always tell the whole story. Relying only on quantitative data like product usage metrics or renewal rates can lead to a skewed understanding of customer health.
It’s essential to combine these numbers with qualitative insights from direct customer interactions, such as feedback from surveys, customer calls, and emails. This balanced approach gives you a fuller picture of how your customers are feeling and what they might need.
Velaris can help by bringing customer collaboration and communication into one place, making it easier to integrate both quantitative and qualitative data.
By uniting all your customer interactions and feedback, you can ensure that your forecasts are informed by both hard numbers and real-world customer insights.
Being mindful of these pitfalls can significantly improve the accuracy of your renewal forecasts and help you build stronger, more resilient customer relationships.
Conclusion
Accurate renewal forecasting is more than just a numbers game – it’s about understanding your customers and anticipating their needs.
By focusing on key components like customer health scores, sentiment analysis, and success plans, and by following best practices such as automating processes and leveraging AI, you can create a reliable forecasting strategy that keeps you ahead of potential challenges.
Avoid common pitfalls like ignoring early warning signs or relying solely on quantitative data, and leverage technology to integrate your tools and standardize your processes.
A well-rounded approach not only improves forecasting accuracy but also strengthens your relationship with customers, leading to better renewal outcomes.
If you’re looking to enhance your renewal forecasting and make your Customer Success processes more proactive, consider exploring how Velaris can help.
From automated workflows to comprehensive customer insights, Velaris offers the tools you need to create a more predictable and effective renewal strategy.
Interested in seeing how Velaris can support your team? Book a demo today and discover a better way to manage renewals.
