With over ten years of experience in the cost-saving industry, I’ve seen some radical changes. But here’s something that hasn’t changed: Companies continue to devise inventive ways to take your money. One of the more insidious is through self-renewing contracts

When I meet with a business owner, we discuss how we can work together to reduce their operating expenditures. The conversation inevitably begins with a dialog about their contractual obligations to their current supplier. In my experience, 80% of business owners don’t realize their contracts contain a self-renewing clause. In fact, some contracts have both a self-renewing clause and a fiscal commitment—also known as a Monthly Usage Guarantee (ironically termed a ‘MUG’ in the industry).

A self-renewing clause stipulates that your contract—regardless of duration or date of signature—automatically renews at the same rates (or higher!) at which you first signed your initial contract. This provision remains in effect unless and until you indicate in writing your desire to terminate the contract. Typically, you need to give your service provider at least 60 days’ notice of your intent to terminate—or your contract self-renews.

When your contract self-renews:

  • You become locked into a company that may no longer be competitive
  • You lose the opportunity to take advantage of new technologies or price plans
  • You forego significant leverage in negotiating for better or more appropriate plans

Here’s the key to savings: When you enter into a contract with a service provider, give them a self-renew nullification letter. This letter notifies the service provider of your desire to nullify the self-renew clause at the end of your initial contract.

It should read as follows:

Contract Provider,

Per the Auto Renewal clause of your Terms and Conditions agreement, YOUR BUSINESS NAME is giving written notice to not auto renew our services located at YOUR BUSINESS ADDRESS. At the end of the current term agreement, please convert our service to a month-to-month basis. We do not want our services to auto renew.

If you’re about to sign a new contract for these services, provide a copy of the signed the form. Have your sales representative sign. Keep a copy for your records.

If you’re already in a contract, or you’re not sure, ask your sales representative if your current contract is self-renewing. If he or she tells you it is, here’s what you need to do:

  • Copy and customize the verbiage above onto your letterhead
  • Call your provider’s customer service department and get the address, fax, and email for where you have to send the completed form
  • Sign the letter and send it Certified Mail, Return Receipt Requested to the address customer service provided
  • Email and fax a copy of the completed form; keep copies for your records

When carriers merge, price plans and service offerings change. New companies enter the market offering discounted rates to capture market share.  If you’re locked into your contract, you can’t take advantage of these offerings. So free your company from the bonds of self-renewing contracts: Use the self-renew nullification form.