Get Your Contracts Signed More Quickly
I enjoy the contract development and negotiation process. I’ve been doing it for nearly 30 years, and it rarely gets old.
I’m guessing you may not feel the same way. For most businesspeople, contracts are not fun; they are simply the final step that needs to occur before two businesses can get down to working together.
So, let’s talk about how to get your contracts completed as quickly and easily as possible (while still protecting your interests). What groundwork can you put in place to expedite the negotiation process?
#1. Standardize the Basics
As a vendor, especially in today’s SaaS world, your ability to deliver an affordable and effective offering is closely correlated with the degree of standardization in your processes. That means consistency on things like support, data security, privacy, and more. Absent these constants, efficiencies of scale will be lost, added expense will be incurred, and additional resources will be consumed.
I understand — if yours is a new business and/or your client is a large enterprise, you may feel compelled to provide custom solutions rather than standardized processes. Try not to. While taking a firm position and refusing custom changes may be difficult, I’ve seen it succeed. To do otherwise will eat into your profitability.
In particular, when it comes to providing SaaS services, tightly customize your policies and procedures so you can deliver services uniformly across your customer base. Spend resources working with your infosecurity, data governance, legal, engineering, and operations teams to ensure your documents reflect the nature of your services, while also supporting your customers’ requirements in a customer-friendly manner.
The more “in stone” your policies and procedures seem to be, the less pushback you will get from the potential customer. Toward that end, make sure your terms are fair, evenhanded, and consistent with industry standards; provide links to your posted policies on your web site; and share your terms as a PDF file only, as opposed to a Word document that invites edits.
#2. Separate the Business Negotiations from the Legal Negotiations
In many cases, when representing a client (whether buyer or seller), I’m asked to negotiate the contract before the business terms have been completely ironed out. This can be a mistake. The contract’s purpose is to formalize the business arrangement — not develop it.
For example, as a seller, you’ll want to make clear up front that the pricing you are offering (including any discounts) is dependent upon other key parameters of the transaction, such as contract term, number of units or licenses being purchased, acceptance of standardized practices, auto-renewal, etc. These terms should not be negotiated separately.
If you don’t iron out the business terms, and instead “give it to the lawyers,” the customer’s negotiating team may separate each item– such as the term of the commitment, termination for convenience, and pricing. Those might not be unreasonable requests, but they need to be viewed as part of the overall business terms. If the prospect wants changes, all the other specifics should be back on the table as well.
#3. Educate Before You Negotiate
When negotiating for the buyer, I often receive a request to review some type of master agreement with little background information. I can learn more by speaking with the business owner, who might not be familiar with the specifics of the vendor’s business model.
If that’s the case, I’ll take a look at the vendor’s web site, along with the vendor’s proposed terms. Although it’s not perfect, I usually arrive at some understanding of the vendor’s business model and important business requirements.
Things tend to work out in the end, but the vendor could expedite and simplify the process by initiating the contract review with a phone call (or Zoom meeting) to explain the unique characteristics of its offerings and any related contract requirements. Alternatively, a one-page primer explaining these items would be helpful.
In whatever way the “education” is accomplished, you’ll save time, effort, and cost by getting everyone on the same page at the start.
#4. Offer Fair and Balanced Terms
If your goal is to have the contract negotiation go on forever, the best way to accomplish this is to develop a template that is egregiously slanted in your favor. Doing so may seem like a shrewd negotiating stance, but all it does is alert the other side to pay close attention and prepare for a fight.
Conversely, if you draft your template as fairly and evenhandedly as possible, you’re signaling your intention to work in partnership with your customer. Not only does this speed up the process, but it contributes to a stronger relationship overall.
Similarly, as I discussed in a previous newsletter, the same goes for your standard NDA. A two-way NDA is by definition fair and balanced and ensures that both parties are equally protected.
Contracts and the negotiations that lead up to them are a standard part of doing business. Laying the groundwork with some thoughtful preparation not only expedites the process but also achieves positive, lasting results for both parties.