A founder I worked with discovered, during a diligence process, that a software vendor contract signed at $50,000 a year when the company had thirty employees had auto-renewed annually for six years and now cost $340,000 — for a tool the team barely used at full capacity anymore. Nobody had looked at it since the original signature.
The Contracts That Get Attention, and the Ones That Don't
Founders review vendor agreements carefully when the number is large and the decision feels significant — a new ERP system, a major lease, a key supplier relationship. Smaller contracts, especially recurring software and service agreements, get signed under time pressure and then filed away. Auto-renewal clauses do the rest of the work, quietly, year after year.
Individually, none of these feel worth revisiting. Collectively, at a company doing $5M to $10M in revenue, I routinely find $100,000 to $300,000 a year in contracts that are outdated, overpriced relative to current market rates, or simply no longer matched to what the business needs.
Why This Compounds Specifically as You Scale
As a company grows, the number of vendor relationships grows with it — more software tools, more service providers, more specialized contracts for compliance, logistics, or benefits. Each one gets added under the same time pressure the last one was. Nobody owns the full portfolio, because no single function is responsible for vendor relationships as a category; procurement often gets treated as a set of one-off decisions rather than an ongoing discipline.
The result is a portfolio of contracts that reflects the company's history more than its current needs — priced for a headcount or usage level that no longer applies, often with terms nobody would agree to if they were negotiating fresh today.
A Simple Audit That Pays for Itself
I recommend an annual vendor audit: list every recurring contract above a modest threshold, note the renewal date, the auto-renewal terms, and when it was last actually negotiated. Flag anything that hasn't been touched in over eighteen months. For each flagged contract, someone has to answer two questions — do we still need this, and is this still fairly priced for what we use today?
This exercise routinely finds savings in the tens of thousands of dollars within a single review cycle, sometimes far more. It also surfaces contracts the company no longer needs at all, which is pure savings with zero negotiation required.
Treat It Like a Standing Function, Not a Cleanup Project
The mistake is treating this as a one-time cleanup rather than an ongoing responsibility. Someone in finance or operations should own a renewal calendar and flag contracts thirty to sixty days before they auto-renew. That small structural habit prevents the six-year drift that turned a reasonable $50,000 agreement into an unreasonable $340,000 one — and it is far cheaper to build than to discover in diligence.