How Contracts Can Protect Your Business
Guest post by Corinne Hammond.
A new business is far more vulnerable than an established one. All the time, money, and resources have already been invested, but you’ve gained none of the rewards yet. Understanding how and when to utilize contracts for your company will strengthen the deals you make and keep you from being taken advantage of. Here are some pieces of advice to help get you started.
What Are Business Contracts?
Any new venture has inherent risks, but educating yourself and preparing for them will always improve your chances. Contracts are legally binding agreements between two parties. They usually describe what payments will be rendered in exchange for what good or service, but they can be used to make a variety of arrangements enforceable. Without an agreement in writing, either party is far more able (and therefore likely) to back out of the arrangement before upholding their end.
In addition to defining the details on how either party will satisfy the contract, they also typically include contingencies in the event the deal is broken in some way. For example, a caterer who doesn’t receive compensation promptly after a successful event may have a clause in their contract describing additional charges the customer may accrue. Without a contract, it’s difficult to prove whether payment or services are in fact owed to either party.
How Do You Create and Negotiate a Contract?
Before you begin brokering any deals with your clients and contemporaries, you should first do your research. Find out whatever you can about the other party, such as what they may be looking to gain from a potential bargain, what prices they’ve charged in the past, and what they may perceive as deal-breakers. Educating yourself on the other party will help you make a stronger case when you sit down to discuss.
Once at the table, do your best to keep the contract mutually beneficial. Ethics aside, keeping the other side happy is how you continue to do business with them, so resist the urge to create a self-serving one-sided arrangement. Certain ambiguous phrasing and common loopholes can keep your contract from being enforceable. Bringing on a legal professional along as a third-party arbitrator is a good idea, as they’ll be able to help along the way to make sure the document is legally binding.
Negotiating prices with your clients can be tricky, especially if the two parties have very different expectations. It’s therefore important to have a good sense of your business’s financial health. Invoicing software tools are available online which will let you keep a constant eye on your company’s finances. You can set recurring payments and charges for long-term clients while giving you up-to-the-minute notice on what is owed and what’s been paid. Knowing where you stand financially will let you know what you can afford to lose and what you need to gain at the negotiation table.
When you’re just starting out as a business, you may not have everything you’d prefer to have in terms of branding. If you’d like to have a logo appear on your contracts, a free-to-use logo maker tool can help you create one easily. All you have to do is select a template that appeals to you, then you can customize the colors, text, and graphics. When finished you’ll have a professional-quality logo to use as you’d like on your contracts.
How Do You Maintain or Modify a Contract?
With the document created, both parties should receive a copy and begin upholding their ends. Contracts can be altered after signing, however, provided all parties involved agree to the changes. Tools are available online to distribute and alter contracts with ease, as well as to keep backups filed away.
Having a strong contract is the best way to keep your business protected during a given deal. Be sure to assess every detail and bring in a professional when you feel you should.
About the Author: Corinne Hammond, who has worked in venture capital, corporate management, and finance, understands the stress that comes with the daily grind of running a business. She developed Be Biz Minded to offer quick access to educational resources for entrepreneurs and small business owners to help them feel as prepared as possible as they work to grow their businesses.
Image via Pexels.
