A key concern for most business owners is how to sign up customers to their product or service offering. The second key concern becomes how to retain that customer base. One great way to ensure you are keeping customers happier for a longer term is to use rolling contracts instead of fixed-term contracts. This article unpacks rolling contracts and the three key benefits of using them for your business.
What is a Rolling Contract?
A rolling contract is an agreement with no fixed end date. It will continue to operate until one party decides to terminate it. This differs from fixed-term contracts, which end:
- after a specific end date; or
- when the services agreed on have been provided.
We all use rolling contracts in our day-to-day life, such as subscriptions to streaming services or month-to-month mobile plans. There are various benefits to both parties in using a rolling contract, including flexibility, longer-term commercial relationships, and financial security.
1. Flexibility for Both Parties
The biggest benefit of rolling contracts is the flexibility it offers your business and your customers. Rather than locking clients in for long fixed terms, most rolling contracts will be for shorter terms, such as month-to-month. This is beneficial for both parties as it allows customers to exit the arrangement if they are unhappy. It also allows you to end your relationship with a customer if they do not align with your business values.
Continue reading this article below the form2. More Clients for Longer Term
Although it may seem like fixed-term contracts are more likely to give your business longer-term clients, rolling contracts can do the same. Customers are more likely to sign up for your service or offering if they know they are not locked in forever. Likewise, once customers are on-board and enjoying your product or service, you can work hard to prevent them from leaving. These factors generally lead to happier clients and longer-term business relationships.
3. Financial Benefit
If your business is retaining customers for a longer period, this leads to a financial benefit. Having a rolling contract with no end date means that your business benefits from an ongoing stream of funds until either party terminates the contract.
The obvious downfall is that you do not know when a customer will cancel their contract, which can get in the way of having accurate forecasts and predictions about revenue. Therefore, you might consider including a minimum commitment period within which clients cannot cancel. This gives your business the financial security of knowing you have a fixed amount of money coming in for a set period.
Unfair Contract Terms
Although rolling contracts can benefit your business, it is important to be wary of unfair contract terms. An unfair contract term is a term that causes a significant imbalance between the parties. A rolling contract is not always unfair, though it can become unfair depending on the context.
It is best practice to ensure you seek your customer’s express consent if you roll them into an ongoing agreement and to always have mutual termination rights.
As a business owner, you have a legal obligation to provide a safe workplace for your employees and customers. This free guide explains how.
Key Takeaways
While rolling contracts may initially seem only to benefit the customer, there are many benefits to businesses moving away from fixed-term contracts. The key benefits include the following:
- increased flexibility to both parties;
- ability to bring in more clients; and
- increased potential for profit.
If you are interested in adopting a rolling contract for your business or would like to discuss some associated commercial options, our experienced contract lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
A rolling contract is an agreement that will continue to roll over until one party decides to terminate it.
Consider using a rolling contract if it suits your business, the product or service it offers, and your customer base. Some of the benefits of a rolling contract are that they offer more flexibility for both parties and can help you retain clients for longer periods of time. This can increase your potential for increased profits.
We appreciate your feedback – your submission has been successfully received.
