A strong understanding of contracts is often overlooked, but it is key to successfully growing your company.
While contracts seem to lie in the murky landscape of legalese, ideally a strong partnership between your legal team and your business folks can facilitate sales, expedite accounts receivables, increase cash flow to the business and reduce disputes and risks, thus driving growth to your business faster.
I’ve been doing commercial contracting deals for over two decades. In that time, I’ve closed B2B deals with companies of all sizes, from startups to globally established brands. I’ve seen amazing things happen when businesspeople and legal teams partner up to grow businesses!
Contract Drafting and Presentation
Contracts should be simple. Your sales contract template should describe your service or product and terms of sale in clear, unambiguous terms.
You and your legal team should work together to make sure you are on the same page before sending out the document to customers:
- Check in early and often with your legal team to provide sales perspectives on key terms in your template so as to facilitate negotiations (e.g. “our buyers will hate this”).
- Make sure you can sell through terms you need to protect your company (indemnities, limitations of liability, payment terms).
Partnering with your legal team to create and present a clear, simple contract that covers your risks and is palatable to your customers will allow you to close deals faster and grow your business more quickly.
Many times, established companies will want to start with their form. Convincing them to use your specially developed template is half the battle. Doing so will yield dividends down the road and is well worth the effort.
Negotiating and Closing
If your customer will not accept your template, you will be negotiating terms, likely through the exchange of redlines. If this happens, what should be a great deal between parties eager to do business with one another could instead turn into weeks or months of back-and-forth legal wrangling that will delay revenue.
Here is what you can do to get through the logjam:
- Get aligned with your point of contact at the customer on the commercial and business points in the deal.
- Get aligned with your legal team on legal issues.
- Get a call scheduled with the customer and both companies’ legal teams after the first exchange of redlines to go through the issues.
- Be prepared to tag-team with legal on the call to sell through the hard issues and give up in situations where it may be a lower risk to your company.
- Make sure your decision-makers are on call.
Make sure you and your internal teams are aligned with answers to all the salient commercial points in the document prior to any customer calls and that any concessions that are made during such calls that require adjustments to other terms will not require additional authorization from stakeholders who are not present.
Schedule contract negotiations based on customer deliverable or urgent customer need, making it more likely to ensure timely closure. For example:
- Customer needs your service by May 1.
- It will take 90 days to deploy your service; contract must be signed by Feb. 1.
- You send out your template Jan. 15.
- Contract is negotiated and signed in two weeks.
Partnering with your legal team to manage contracts is key to growing your business more quickly. Here’s how:
- Create and present a clear, simple contract that covers your risks and is palatable to your customers.
- Negotiate from a place of knowledge after aligning with your legal team and your customer point of contact.
- Timing is everything. Schedule the negotiation of the contract based on the customer’s business needs.
Want to learn more? Email me to speak about more best practices!
Wendy Chung is general counsel at ModCounsel, a law practice designed for growth companies.