Rock, Scissors, Contract

It’s a Good Day in the “Beef” Department When…
November 16, 2011
Confused About Cash?
November 16, 2011

Screen-Shot-2011-11-15-at-10.25.09-PMYou’ve heard it said that “good fences make good neighbours”?  Well, there’s a commercial analogy: “Good contracts make good business relationships”.

Does this come as a surprise to anyone?  I doubt it.  Every vendor business worth its salt understands (ideally, at least) that when it comes to selling products or services, there needs to be some form of document outlining who’s going to do what for whom, when, where and at what price.  It doesn’t need to be “constitutional” in length or complexity.  And while it’s never a bad idea to run a contract template by a commercial lawyer to make sure that you’re crossing the “T”s and dotting the “I”s, most small businesses with simple product or service propositions can construct their own common-sense, holographic contracts.  Cover the bases, embed the details, obtain signatures and file diligently so that the papertrail can be found when needed.  To employ the tired but serviceable vernacular: “No, it’s not rocket science”.

We know what the “ointment” is: documentation.  But don’t forget the “fly” in that ointment.  We heard the beat of fly-wings in the proviso in the previous paragraph: “…ideally, at least…”  Entrepreneurs may have a basic appreciation of the importance of a standard contract in frontend operations, but too many fail to take the “ideal” and make it real.  Too many businesses provide products or services on credit without having secured even the simplest contractual proof of their commercial arrangements with their customers.  That’s highwire work – and no net below.  I don’t recommend it.

So why is that?  Why do sellers of products and services fail in the contracts department?  Where are the constraints?  Where are the mental blocks?  And what creates them?

A contract (or reasonable facsimile) is a necessary safety net for supplier and customer alike.  Vendors overlook clear necessity because…

  • …they can’t be bothered
  • …they have no ability to execute a standard contract
  • …they’re devoted to “easy” sales with no “negatives”

Let me deal with these alibis one by one…

Can’t be bothered??  Too much work?? Hel-looo out there on the rim of the Galaxy of Discouraged Creditors!!  How’s that no-cash, no-oxygen atmosphere?!!

Contracts – even minimal, holographic ones – are an integral part of the business process.  They’re not “unnecessary” or “extra”.  Lose a few thousand bucks because your papertrail was non-existent or just too thin, and you’ll see how “extra” they are!

Working without contractual safety net due to laziness or a lack of interest is not smart business.  Would any supplier be that lazy or disinterested when it came to product/service safety?  Well, it’s the same order of magnitude.  Contracts reduce risk and enhance predictability.  Reducing risk is always good practice; the same goes for keeping things predictable.

Next…don’t know how to board the contractual choo-choo?  A standard contract template for your industry may be available on-line.  Alternatively, your competitors’ or vendors’ contracts may provide you with a decent template or a set of basic ideas you can pilfer.  Or you can draw up your own basic contract in your own words and have it vetted and standardized by a commercial lawyer, contract-savvy paralegal or anyone experienced in contract administration.  Fact is, you have viable options here.  No one has to play the “party-of-the-first-part” game.  Business isn’t a Marx Bros. sketch.

A legally binding contract can be short, sweet, simply drawn, crystal clear and still do its job properly.  And remember, the cost in time and money is nothing compared to the time and money costs of no-contract disasters.

Lastly…the contract as sale impediment…

Okay, let’s be frank about this.  We all want easy, breezy sales with no negatives, hiccups or speedbumps.  Right, and I also want to win the next Lotto Max mega-jackpot!  I have to be uncategorical and unsympathetic.  Any supplier of goods or services who thinks sales potential will be jeopardized by the formality of asking a customer to sign-off on a print version of sale details is in desperate need of an attitude change.

The contractual process is a potent customer-qualifying tool. Think about that for 10 seconds, then read on…

Here’s the drill.  If you’re going to become my customer, it’s because you value the product or service I’m going to supply.  If I ask you to confirm and sign a clear, simply-executed, non-controversial quote, deal memo or contract that articulates what’s being supplied, at what price, when, where and governed by which industry-standard terms and conditions, are you really going to balk?  Are you going to refuse my confirmation request and take a long walk, seeking out a different vendor who “can’t be bothered” with businesslike certainties?  I don’t think so.  And the reason I say that is because, if you’re a smart customer, you already understand that the prophylaxis offered by a contractual process protects supplier and buyer alike.

However, if you do take that long walk rather than sign on, then I’m going to let you.  I’m not going to run after you as you stride toward the exit.  I’m not going to compromise my requirement for a contractual safety net just to make you a non-compliant “customer”.  Instead, as you walk out my door, I’m going to wave goodbye and breathe a sigh of relief because I’ve just had a narrow escape with someone who, from the very get-go, showed every indication of becoming a problem client somewhere down the long, lonesome road.

Nobody needs more junk-clients than they have on their roster already.

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