It’s easy to fall victim of becoming the “yes” guy with clients, especially without the knowledge and gift of natural negotiation skills. Entrepreneurs quickly find themselves biting off more than they can chew without a set plan to negotiate business contracts. The end results lead to frustration, bad reputation, and ultimately failure. Obtaining and establishing the top 10 key points of negotiating and sealing the deal with your clients, affiliates, and outsourcers is crucial in staying afloat and obtaining the confidence you need as an entrepreneur.
1. Term and Renewal Contracts
Term contracts are the most basic contract entrepreneurs are faced with. Typically, aspiring entrepreneurs have limited or no access to a lawyer for contract guidance. This leaves the entrepreneur to make term negotiations on his own. Although left to his own knowledge, the terms are pretty straight forward depending on job or project details needed and provided by the client. Both parties agree and the contract is in play.
However, in negotiating the term contract, unseasoned entrepreneurs miss a crucial building block for their future. The renewal contract tends to be left out more often than not. The best form of renewal contract that should be entered into negotiation is an automatic renewal clause. With this clause, the contract will automatically be renewed at the end of the term, unless either party notifies the other of a termination. This is best put into play with long term business relationships.
2. Contract Termination
A termination clause should be put forth as the following: A termination of a contract can be implemented under two situations. First is where a breach of contract is issued by the opposing party, where the contract is terminated immediately. Second, by what is referred to as a ‘no fault clause’. With the no fault clause, the opposing party must provide written notification of contract termination within the negotiated time limit previously instilled the contract.
3. A termination’s consequence
Examples of consequences of issues of contract termination to be negotiated would be who is responsible for unpaid or incomplete services or an agreement for confidentiality regarding project details including employees of the other party.
4. Payment Obligations
It is crucial to establish the specific arrangements for payments and their deadlines. Negotiating payments related to milestones and their due dates covers any confusion and ratification due to no payment for services or products. Be sure to clearly state a time frame of sent and received invoice in contract.
5. Acceptable Payment Methods
It is important to establish how payments will be received prior to the project breaking ground. Different projects or services can be negotiated depending on contract details.
6. Notification of Actual Costs vs. Estimated Costs
This clause is put in place to establish the following scenarios:
- A third party is hired who is not included in original contract but yet costs have increased that hiring party has no control over.
- Submission of third party invoices will need to be contracted in to agreement when the third party is required to pay these services.
- Third parties may want down payments prior to services being rendered.
Though typically implied, the use of trademarks should be entered among the negotiated contract. Within this section of the contract, it should determine how, when and to what extent the hired contractor can use the client’s trademark. This would be of issue in projects such as SEO and marketing services where the company’s logo and other trademarks are being used.
8. Quality Expectations
Expectations of the quality of work to be completed for the client should be negotiated here. The level of standards for services should be determined with a service level agreement document (SLA). Within this section it would be determined how compensation would be given to the client if such expectations are not met.
Typically the warranties and representations can be copied and placed in this clause from a previous specified contract. Be sure to look this over with a keen eye, within this area many risks can be minimized.
10. Authorization of Signature
Something to keep in the back of your head after the draining process of contract negotiation is verifying that the person signing off on contract details is authorized within the contracted company to sign for the contract.
Author Bio: Davis Miller is a business owner who loves writing about business and offer tips on business growth at his articles. He is also editor-in-chief at thegappartnership.com, a place where you can get negotiation workshops in 12 languages.