Blog · Wallet share and penetration
The honest answer to what renewal rate a contract business should have: the 85 to 95 percent figures commonly quoted depend on whether the rate is by contract count or by value, on what is done with contracts that renewed late or at a reduced scope, and on the mix of renewal cohorts by age. This page gives the ranges by desk, the three measurable things that set the right figure for one base, and the table to compute before anyone quotes a percentage.
Renewal rate is contracts renewed over contracts due, and the question is what should be in each. Three things decide it.
| Desk | Renewal rate by count, typical | Note |
|---|---|---|
| Enterprise SaaS | 88 to 95 percent | Value rate often higher |
| SMB SaaS | 70 to 85 percent | Value rate close to count |
| Commercial insurance broking | 85 to 92 percent | Value rate lower; large clients remarket |
| Managed services and telecoms | 85 to 93 percent | Long terms; renewals rare and large |
| Education and training providers | 75 to 90 percent | Budget-cycle driven |
| Sports partnerships | 70 to 85 percent | Few, large, renewal timing varies |
| Service contracts, equipment | 80 to 92 percent | Falls off with fleet age |
The renewal, retention and churn definitions piece covers why these ranges are not comparable across the row without the rule.
Renewal rate by count = contracts renewed ÷ contracts due Renewal rate by value = value of renewed contracts, at the prior value ÷ value of contracts due
| Basis | Renewed | Due | Rate |
|---|---|---|---|
| Count | 92 | 100 | 92% |
| Value, at prior value | $3,700,000 | $5,000,000 | 74% |
Ninety-two percent by count. Two of the eight lost were the largest contracts on the calendar. The value figure is the one finance feels.
| Outcome | Contracts | Rule |
|---|---|---|
| Renewed on time, full scope | 80 | Renewal |
| Renewed within 30 days, full scope | 6 | Renewal, flagged late |
| Renewed on time, reduced scope | 6 | Renewal by count; contraction by value |
| Renewed after 30 days | 3 | Lost, then new business |
| Not renewed | 5 | Lost |
By count with the rule: 92 of 100. Without it, counting the three late ones: 95. The reduced six: renewed by count, and their contraction shows in the value rate. The renewal calendar worked example applies the rule contract by contract.
| Renewal number | Due | Renewed | Rate |
|---|---|---|---|
| First | 40 | 34 | 85% |
| Second | 30 | 29 | 97% |
| Third and later | 30 | 29 | 97% |
| All | 100 | 92 | 92% |
A base growing fast has more first renewals and a lower blended rate, with no change in quality. Compare first renewals to last year's first renewals, not to the blend.
| Measure | Formula | From |
|---|---|---|
| Due in period | Contracts with end date in period | Contract file |
| Renewed, by rule | Renewed within grace window | Contract file, new contract dates |
| Rate by count | Renewed ÷ due | Above |
| Rate by value, prior value | Prior value of renewed ÷ prior value of due | Contract values |
| Contraction on renewal | New value ÷ prior value for renewed | Same |
| Rate by renewal number | Same, grouped by how many prior terms | Contract history |
| Identity | Due = renewed + reduced + late + lost | Contract file |
Count only. Ninety-two percent, and the two largest gone.
Late counted as renewed. A ninety-day gap called continuity.
Blended across renewal number. A growing base marked down for being new.
Retention quoted as renewal. Nothing was due; nothing was lost; the rate is 100.
A good renewal rate is one computed by count and by value with a stated grace window, at or above the base's own prior year within each renewal number, with the largest contracts on the calendar renewed. Most recurring B2B businesses sit between 80 and 92 percent by count; the value rate, the late rule and the first-renewal rate are what make one company's figure mean something. Covirage computes all of them from the contract file every month with the identity checked.
Renewal rate counts contracts that were due and renewed; retention rate counts customers or revenue at the end of a period against the start, whether or not anything was due. A customer with a three-year contract is retained this year without renewing. The two are swapped constantly, and the definitions piece on this site sets them out.
State a grace window and count within it. Thirty days is common. A contract renewed ninety days late was lost and won back, and calling it a renewal hides a ninety-day gap in which the customer was elsewhere. Late renewals within the window are renewals with a flag; outside it they are new business.
Because first renewals are where most losses happen. A customer who has renewed twice has decided; one at the first renewal is still deciding. A base full of first-year contracts will have a lower rate than a mature base with identical quality. The rate by renewal number is the comparable one.