Auto-renewing or “evergreen” contracts can save you time and hassles.
After all, you’re not haggling over a contract every year, comparing rates from other vendors, etc.
Yet you could be losing out on savings by just letting a vendor deal renew year after year.
In fact, the Aberdeen Group estimated that a company can lose 3%-5% of the total annual contract by auto-renewing.
How can you leverage more savings from your long-term vendors? Ask these two questions first:
1. Are we getting anything back?
One way you can make sure you’re not paying a vendor too much money: Get the price break you deserve.
Vendors reduce administrative hassles with evergreen contracts and make more money over the long haul because most companies prefer not to switch — even with vendors they rate as “just OK.”
Why shouldn’t your company be rewarded for the convenience and risk you take for agreeing to do business this way?
Look for ways to negotiate a price break, an improvement in service, etc.
2. How do we get out of it?
Insist that you contract include a termination clause and/or a 30-day window of notice.
That way if you want to break off a long-term contract, you won’t encounter any “gotchas” that make ending a contract tough — and pricey.
