What is agreement renewal rate?
Agreement renewal rate is the share of service agreements up for renewal in a period that renew. It can be counted by agreements or by annual contract value. In fire protection, mechanical or environmental services, it measures whether customers keep the recurring relationship that every inspection, maintenance visit and repair depends on.
Why it matters to a revenue leader
Renewals are the cheapest revenue a services company books, and a lost agreement also takes future repair and replacement work at that site with it. The SaaS equivalent, gross revenue retention, leaves out expansion so it shows the pure keep rate; agreement renewal rate does the same job for services. Renewal mechanics matter as well. In New York, an automatic renewal clause in a service, maintenance or repair contract is unenforceable against the customer unless the provider sends written notice 15 to 30 days before the cancellation deadline. A renewal rate that rests on clauses which fail that kind of test is weaker than it looks.
How to calculate it
Agreement renewal rate = agreements (or contract value) renewed ÷ agreements (or contract value) up for renewal in the period.
Common mistake: adding price increases or new scope to the renewed value. That measures growth on the base, so report it as a separate number.
Example
Fictitious numbersAn environmental services company has 300 agreements worth $3.6 million up for renewal this year. 264 renew, worth $3.06 million at prior-year pricing. The renewal rate is 88% by count and 85% by value, which says larger accounts are leaving at a higher rate.
"Which agreements up for renewal in the next 90 days have no named owner working them?"