Dear SaaStr: When Is It Worth Enforcing an Autorenewal Clause if the Customer Doesn’t Want to Pay?

Dear SaaStr: When Is It Worth Enforcing an Auto-Renewal Clause if the Customer Doesn’t Want to Pay?

Never. Just turn it off.

Auto-renewal clauses are absolutely worth having in your contracts. You really don’t want to chase customers for an affirmative renewal every single year if you can avoid it — it creates unnecessary friction, adds operational overhead, and puts relationships at risk. A good auto-renewal policy quietly keeps your revenue base intact while you focus on growth.

But there’s a hard line between having an auto-renewal clause and weaponizing it.

The moment you threaten to sue a customer who doesn’t want to renew, or pressure them into paying for a product they no longer want to use — you’ve already lost. Not just the contract. The relationship. The referral. The potential return. All of it.

If a customer doesn’t want to use your product anymore, you failed somewhere. Maybe the product didn’t deliver. Maybe their needs changed. Maybe you lost your champion. Whatever the reason — that’s on you to own. Trying to extract payment from someone who’s checked out is not a business strategy. It’s a hostage situation, and it never ends well.

The Data Makes the Case

Before we get into best practices, look at what the 2025 numbers actually say.

The average B2B annual churn rate is 3.5% according to Recurly’s 2025 report — and the companies holding their ground right now are doing it through retention, not acquisition. With new sales under pressure across the industry, the battle is won or lost on your existing customer base.

That changes the calculus on how you treat customers who want to leave.

Here’s the number that should keep you up at night: churn risk jumps to 25% when a key decision-maker leaves a company, compared to just 8% when they stay. The churn you’re most afraid of isn’t angry customers — it’s the quiet churn when your champion moves on. That means the relationships you build on the way out matter just as much as the ones you build on the way in. The person you let leave gracefully today is at a new company making a new purchase decision in 18 months.

The Rough Best Practice That Actually Works

Here’s how to think about this in practice:

• Pursue annual contracts for deals over $3K/year — if the customer is on board. Annual contracts help enormously with cash flow and reduce the churn signal noise you get from monthly plans. But don’t force them. The goodwill of a customer who chose annual is worth more than the locked-in cash from one who resented it.
• Add auto-renewal to your standard contract — with a clean out. Customers should be able to cancel for any reason by providing notice before the renewal date. Make the notice window reasonable. Make the process easy to find. This isn’t weakness — it’s professionalism.
• If they don’t pay the renewal, just shut off the service. No threats. No drama. No legal letters. Just turn it off cleanly and move on.
• On refunds for pre-payments: generally say no. The entire point of offering a discount for annual prepayment is to get the cash upfront. That’s the deal. Reversing it defeats the purpose. But — if a customer is making significant noise and the relationship has real future value, sometimes the cleanest move is to refund the pro-rata unused months and end things gracefully. Use judgment. Not policy.

The Thing Most Founders Miss

If you leave a customer angry, do not expect them ever to come back.

And in B2B, customers come back all the time. Teams grow. Companies pivot. Champions move to new companies. The person who churned from your $8K contract today might be the VP at a $200K opportunity two years from now — but only if you let them leave with their dignity intact.

There are no shortcuts in B2B. You have to re-earn your customers, continuously. That means the off-boarding experience matters just as much as the onboarding.

So yes — have an auto-renewal clause. It’s good hygiene. It protects your revenue. It reduces the annual renewal circus.

Just don’t make it a prison.

The best B2B companies treat contract terms as a reflection of the relationship they want to have with customers — not as a trap. When customers feel respected on the way out, they remember you on the way back in.

And they come back more often than you think.