Your Contract Is A Hidden Sales Asset

Your Contract Is A Hidden Sales Asset


If you own or run a business, or sell services or products yet to be delivered, then you are very familiar with the stress of closing deals. You’ve called, emailed, pitched, and presented for weeks. You’ve got the client revved up and excited about the future, and you’d give anything to just book the deal right now.

Do you have the right contract for your transaction though? Do you care at this point as long as you get signatures and a check clears?

Maybe not, and that’s an unfortunately natural response we all might have when the reward is so close. We’re focused so intently on the end goal that getting signatures and negotiating “legal terms” becomes an obstacle instead of an asset.

It doesn’t have to be that way. In fact, many companies are able to fly through all negotiations, close more deals with better customers, and keep more of them happy. Why? They pay attention where others don’t: the contract itself.

Why does the contract often take a back seat?

If you’re not focused on your contract, you’re not alone. When we’re building relationships, we tend to trust whatever feels normal. Think back to when you were a kid: playing games didn’t involve writing any rules down. Let’s be honest, even though rules were sometimes written, nobody ever read them (Monopoly, anyone?). Somehow, though, everyone figured out how to play the game and usually had a good time. That was normal.

Even many years later, we’re all prone to assuming that our customers will figure out the game our business is trying to play. We assume that they’ll play along, and that we don’t need rules or that the services and products we’re providing are exactly what the client is expecting. The problem is that in business, everyone is ultimately playing their own game. Each party’s expectations necessarily differ.

“Standard” Form Contracts

Most people understand that businesses really do have competing interests. So, we do sign something. It’s often a template taken from an old business relationship. Or, it’s a “standard” form downloaded from the internet, used without much review.

If you’re convinced that one of these form templates is suitable for your business, I can’t say that you’re wrong. It may be; it may not be. The smartest companies have figured out something else though.

These companies know that creating and using a proper contract to fit the company’s business model is the tide that lifts all boats. Creating and using a proper contract 1) forces you to think through and plan your business model, 2) starts a vital conversation with your customers, and 3) reinforces trust with your customers.

If you recognize and seek out these benefits, then you’ll turn your contract from the last obstacle in the sales process to a valuable asset in closing the deal.

The Contract as a Hidden Asset

Thinking Through the Business Model

The process of drafting a proper contract forces you to define your business model. Your contract is nothing more than the rules to your game, but if you’ve never tried to write them down then your business may not be as defined as you thought. There may be intricacies of how to deliver, with what contingencies, and with what allocation of risks, that are specific to your product or service. Knowing all of this info allows you to better sell the entire package.

If you’re struggling with direction or have trouble focusing on a specific business model, drafting a contract with the right help will force you to think through the issues in a systematic fashion.

Even if the business model is defined, within each industry there are many subtle variations. A “standard” form contract is likely only “standard” in the general sense of the industry. It may not meet your requirements because your specific model may be slightly different.

For example, take the game of Monopoly. Some people play a version of Monopoly where if you land on “Free Parking,” you receive cash that was paid to the center of the board (usually the income tax collections, or fees based on community chest or chance cards). This version of the game is like your specific business model.

Unfortunately for those who play the game that way, if they try to assert the official Monopoly rules (like a “standard” form contract), they’ll look foolish. “Free Parking” has, according to the official rules, zero consequences to the game. Nobody collects any money.

If you go through the process of drafting a contract which matches your business model, there’s an excellent chance you would uncover differences between any “standard” contract and your actual business practices. Reconciling these ahead of time saves stress, time, and money.

Starting a Conversation with Your Customer

A contract that matches your specific business model catalyzes important discussions with your customers. The contract shares details that may not have been discussed during the sales cycle. The parties then get a chance to raise objections and discuss solutions ahead of time, before any issues become toxic.

This is great for business because it reduces the likelihood of a dispute. Too many disputes occur because of a lack of communication. If you draft the proper contract, the contract does some of the communication work for you.

You might wonder whether all the discussion would slow the sales cycle. It might, in a marginal way. But the benefits drastically outweigh any loss in speed. Being forced to talk about key issues ahead of time requires the entire organization to become better informed about the product or service. Armed with quicker access to more accurate information, a few things happen…

The marketing team improves communication. The sales team sets clearer customer expectations. The product team delivers against clearer objectives. Eventually, the sales cycle regains any speed lost, with a greater rate of success in snagging better customers.

Reinforcing Trust

When you put a proper contract in front of a customer, you reinforce the trust you’ve worked so hard to build in the relationship. It’s an open house for your business, and the contract is the staging. The customer sees how your business operates, and how each part is organized and purposeful. They continue to imagine themselves working with you, because the contract matches the carefully curated image you’ve worked so hard to sell.

Not only should your contract show that your business is thoughtful and prepared, it should look good too. The staging should be practical and realistic, but also elegant. Customers notice when the document is formatted properly, the edges align, and the numbering is consistent. You’re putting your best foot forward, and it makes the sale that much easier.

Though they’re often overlooked, contracts are valuable assets to your company. Don’t let yourself treat your contract as an obstacle to closing deals, because it doesn’t have to be that way.

You’ve called, emailed, pitched, and presented for weeks. You shouldn’t jeopardize that effort by presenting just any agreement. Draft a proper contract for your business model, and uncover the sales asset that you and your business have been missing.

3 Essential Questions to Answer Before Signing an NDA

3 Essential Questions to Answer Before Signing an NDA

Non-disclosure Agreements (NDAs) are ubiquitous in Silicon Valley. They appear (or in many cases should appear) at the beginning of most commercial transactions. Yet, these important contracts are often signed without thoughtful review of terms or the context of the relationship. Here are three questions that you should ask prior to signing an NDA.

woman-sorting-nda-documents

NDAs Are Not One Size Fits All

An NDA protects information that one party may want to share with another but wouldn’t want to be made available to the public.

It protects confidential information by detailing what information may not be disclosed or used beyond the terms of the NDA. This limit on disclosure and use can be especially important when it comes to trade secrets or product development prior to seeking a patent where disclosure to the public could invalidate patent rights.

There are generally four forms of NDAs that are used to address various business discussions: (i) NDAs to be used where a company wants to enter discussions with another party but wants to be certain that no confidential information is disclosed; (ii) a unilateral NDA favoring the discloser; (iii) a mutual NDA protecting the confidential information of both parties; and (iv) a unilateral NDA favoring recipient.

This blog post does not analyze the attributes of these forms of NDA. It provides threshold questions that should be considered in light of these forms.

1. Should I sign an NDA Under the Circumstances?

Determining whether an NDA should be signed (and what type of NDA) is a vital precursor to entering commercial discussions. In addition to considering whether you want your information to be kept confidential, be sure to ask yourself whether it’s prudent to agree to keep the other party’s information in confidence.

The results of this decision are significant: Signing an NDA increases the risk of being sued for misappropriation of trade secrets and the recipient will be “tainted” by the confidential information.

Not signing an NDA may be equally problematic. A client of mine wanted to sue a large manufacturing company for stealing one of his inventions. The manufacturing company had just started mass production and distribution of a product that was incredibly like the prototype my client had provided the company about a year earlier when attempting to sign a licensing deal.

He had not yet attempted to patent his invention and, unfortunately, the absence of an NDA was an insurmountable obstacle to his efforts to show that the company had stolen his invention.

2. What Information Should be Treated as Confidential?

Recipients and disclosers of information will want to limit, in the case of recipients, and expand, in the case of disclosers, the scope of the information treated as confidential under the NDA. Scope can be addressed by marking requirements, subject matter specificity and dates of disclosure.

While negotiating an NDA for a development relationship between one of my clients and a company that had recently launched a record-breaking Kickstarter campaign, we discovered that the Kickstarter company was planning on competing with my client at some point soon. How did we find this out? I asked them — after being tipped off by the scope of the NDA.

My client decided to go forward with the relationship but rejected specific NDA language in order to maintain the scope of the confidential information and protections in a potentially competitive landscape.

3. What Can the Confidential Information be Used for?

NDAs create obligations to do or refrain from doing certain things. In addition to nondisclosure, it is important for the disclosing party to prohibit the receiving party from using trade secret information for its internal use or for any business purposes (other than evaluating the proposed transaction).

Without this clause, the recipient may use the information for any purpose so long as it does not disclose the information to third parties. On the other hand, it is important for a recipient of confidential information to maintain its ability to use the information for its intended purpose.

I recently received a call from a CFO who was struggling with an NDA. The CFO wanted to inspect the books and records of a company for which he was a shareholder. The company’s lawyers asked him to sign an NDA.

When he reviewed the NDA he was taken aback to discover a release clause that restricted him from using any information that would be disclosed to him as the basis of a law suit. Signing the NDA would effectively immunize the company against any bad acts evidenced in its books.

Be sure to understand what the NDA requires you to do and what you want to require the other party to do with respect to the information being exchanged.

Should you Sign an NDA