How often do you sign a contract without reading it? You do that for hundreds of reasons. Six Common Excuses:
- If I delay to allow time to negotiate the contracts, the deal might go away.
- Been doing business with them for years. They’ve always done what they say they’ll do.
- They said the contract is non-negotiable.
- Lawyer cost too much.
- Contract is 2 pages long, how bad can it be?
- “It looks standard to me.”
If you’ve money to burn, sign a contract without reading it thoroughly and negotiating it aggressively. If you don’t ask for help, be prepared for a bumpy ride. Why? A written agreement remains long after the honeymoon glow wears off. Equipment breaks. Service falters or is inconsistent. The equipment doesn’t do what they promised it would do. Supplier and financial companies’ plus their contracts are frequently sold to competitors. You have new relationships to build. When times get rocky, neither old nor new relationships may carry much weight. Contracts are written by attorneys to protect their client, not you. Written agreements are one-sided and the balance on this teeter-totter is never equal. What can you do?
Play Worst Case
Assess the potential damages if the deal blows up in the first year. Be sure to add in the cost of paying the other guys legal fees, assumed damages, fines, late payment fees and penalties. If the case goes to court, there will be an expense to hire your attorney, pay court costs, filing fees, tax penalties and the list goes on. This expense is to defend you from the “unprincipled scoundrel” who used to be your trusted vendor/buddy.
Penalties usually include paying all remaining payments for the full term plus an amount to make up for lost profits the supplier experienced during the legal battle. And you still need to locate and pay for replacement service providers or equipment.
Weigh the Options
1. Read the agreement yourself. Consider how often you read contracts. What is your familiarity with the legal and contractual terms contained in the agreement? Do you know the laws in your state and how they apply to this contract? How familiar are with the laws in the state in which the case might be litigated. Seldom is the matter handled in your home state.
2. Hire an attorney. You can save the attorney a little review time by highlighting what you are most concerned about after you’re read the contract. Ask for a flat rate to review the agreement.
3. Hire a contract expert who is not an attorney. Propose that they work under a gain share agreement. Some agree to a flat rate (lower than that of an attorney) and a percent of the savings they achieve for you through their review and negotiation process.
These experts usually come from within your industry and have specialized knowledge of either the equipment or the service you require. They should also have knowledge of contract terminology and the financial terms and conditions specific to the project or transaction.
Did you open the doors to your company to serve your employees or to attract loyal customers? Sometimes those two groups appear to be at odds with one another. Choosing between the two may require the wisdom of Solomon to decipher where allegiances lies.
Many business owners say, I want both reliable employees and dependable customers. Successful companies want customers with whom they forge long-lasting business partnerships. Those businesses pay their bills on time, make reasonable service requests and treat your employees respectfully. In return, they rely upon you to help them achieve their growth goals. When they prosper, your future expands with theirs.
Entrepreneurs search for employees who, follow rules, policies and procedures, possess great attitudes,treat customers respectfully, arrive punctually,work for a fair wage, are competent to perform the work for which they are hired and are honest.
When conflict arises, being the boss gets complicated.
The Owners Dilemma.
EMPLOYEE Alienation : Side with the customer and the employee may feel you let them down. They were following orders when refusing to honor the customer’s special request.
CUSTOMER Abandonment: Back your employee and you risk losing a customer for today and maybe forever.
- Listen Care-Fully. “When you listen carefully, you show you Care-Fully” about both sides and their viewpoints. Sometimes you’ll locate some fine print in your policy and procedures manuals or sales contract that would allow this situation to be treated as “business as usual.”
Maybe neither your employee nor customer took time to read the agreement. Knowing your contract may save you from setting a new precedent. The fine print saved you.
- Make an Exception. As the boss, you have the right to make an exception for special circumstances. Let’s assume this buyer is one of your top 10% customers. They request a discount after your End of Month Inventory Reduction Special expires.You may choose to grant a one-time rule exemption. Explain your decision to both your employee and the customer so that everyone is clear this is a one-time occurrence granted as a reward for the client’s long-time loyalty.
- Back the Home Team. The final decision rests with you. Perhaps the request for a special discount is from someone who has never done business with your company before and has a “slow-pay” credit reputation. It’s easy to go with your employee on this one.
- Exception Exemption. Follow the original sale deadline, no discount extension granted. You back your employee AND offer a special customer discount, product rebate or incentive for their next purchase. Advise both parties that with the next purchase, the customer will receive advance sale notices and a bigger discount than all other customers because they were so accommodating this time. You rewarded them for their loyalty and patience.
You indeed are as wise as Solomon. Well done, boss!
Mom had a high school education and was a full time homemaker and mother of six. She died at a young age and never saw me apply her business basics and power negotiation lessons.
My favorite business seminar came at age 13 when I learned about market research, procurement, negotiation and the power of cash at the St. Joe, Missouri Friday Night Auction. At my mother’s side, I watched the family Chief Procurement Officer, Mom, conduct consumer investigation data collection, pricing comparisons, and demonstrate self-control and extraordinary patience.
Business Rules from a Master Negotiator
- Market Research: Know the market. Mom was searching for a sofa for our formal living room. The fabric had to be durable to hold up to a family of eight. The formal living room was frequently used for visits from 16 first-cousins and numerous aunts and uncles.
- Conduct Needs Assessment: Mom wanted a sofa with classic lines and a useful life of at least 10-years. It also must fit into the living room and co-ordinate with other furnishings.
- Product Availability: While visiting all the local retail suppliers to examine their brands, sales people educated her about spotting quality furniture. Never shy, she asked lots of questions.
- Warranties and Product Reliability: She read the manufacturer’s guarantees and warranties and knew which manufacturers stood behind their product.
- Price Comparison: She compared retail store pricing while learning when stores took markdowns and conducted sales.
- Negotiate: Never Pay Retail: She knew how to track down bargains and shopped in second-hand stores before it was cool.
- Acceptance: After completing the research, Mom realized we couldn’t afford new furniture. Used it would be. The next stop was an auction house known for carrying home furnishings.
- Financial Considerations: Know your budget. Mom knew Cash Was King! As a cash buyer, she didn’t have to ask for payment terms or credit. Nor did she have to ask her husband’s permission to make a purchase. Mom was the Decision Maker and she carried cash.
- Stick to Your Budget: Mom practiced self-control and would not overspend.
- Patience: She was the queen of patience and did not allow us to see her feelings of discouragement at buying used furniture. She kept her “poker face’ with everyone at the auction. No one could read how much she lusted for the tan and black,custom-made sofa she spotted in her reconnaissance mission the day before the auction. Sitting beside her I sensed her excitement as “her” sofa came up for bid.
At the end of the night, mom, triumphant was the owner of a fabulous “almost new” modern sofa that was the envy of the neighborhood. And she had cash to spare in her purse.
Thanks Mom for that lifetime lesson. I only hope I can be half as good as you were in business.