One of the conversations we’ve been having with agency owners is the pros and cons of annual contracts, especially for ongoing offerings like web maintenance, SEO packages, or any other product or service.

The conversations have circled around the idea that annual contracts invite clients to reconsider the purchase. Do they really want to renew for another year? A couple of agencies have talked about the success they’ve had with evergreen contracts, which have the annual increase built in, and there’s a 30-, 60-, or 90-day out, but they are perpetual contracts that just keep going.

So the question is — are annual contracts really your smartest option?

Hey, everybody.

Drew McLellan here from Agency Management Institute this week coming to you from home here in Denver.

You know, I've been having some conversations with agency owners, we’re in our peer group cycle. And one of the conversations we've been having is the pro and cons of annual contracts, especially for things like web maintenance or things that are just your goal is – or SEO packages. Your goal is for that just to be ongoing.

One of the conversations is sort of circled around the idea that annual contracts invite clients to reconsider the purchase. Do they really want to renew for another year? And a couple of agencies have talked about the success they've had with just evergreen contracts, that it that the annual increase in the contract is built in, that there's a 30, 60, 90 day out, but they are just perpetual contracts that just keep going. Because the reality is, even if you sign an annual contract, almost all of you have some sort of an out, a 30, 60 or 90 day out. So it's not really an annual contract. It is for you. You want to count on that income for a year, but your client could still get out of it with proper notice. And so the argument has been maybe you just invite scrutiny that you don't necessarily need to have, and it would be better just to have it be a perpetual contract that allows you to, again, in essence, have an annual contract without triggering that, hey, do you want to do this for another year?Just a reminder, there's going to be a 5% increase or whatever the contract specifics are.

And maybe if you're doing a good job, that just keeps rolling along. So depending on the work you do, depending on the kind of contracts you have, probably depending on the kind of clients, some clients are going to mandate an annual contract or if it's a government entity or an RFP, it's going to have a start and end date. But for some things that you do that are purposefully ongoing and you just keep adding value, the longer you do it, like web maintenance or something like that might be worth thinking about a perpetual contract as opposed to an annual one.

Some food for thought. All right.

I'll see you next week.

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Annual contracts?

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