There are 10 critical terms in business contracts that can make the deal profitable and save your company time.
The contract price is not the end all, be all.
Many businesses have signed a contract only to find hidden costs, losses and unexpected time commitments as the contract job unfolds.
Here are the contract terms you can negotiate to make profit instead of unexpected hits on the bottom line.
1. Insurance requirements—big companies often ask suppliers, consultants and contractors to have a high dollar amount of insurance, e.g. 5 million in catastrophic general liability (CGL) coverage. You may have no CGL coverage or only $1 million. Before you give them your bottom line dollar amount for providing services, widgets, etc., find out what their insurance requirements are and if they will allow you to have less coverage (they typically won’t allow you to have zero insurance).
Also, cyber insurance is being required by many companies now. Do you know what your cost is for cyber insurance and have you factored it into the price?
2. Personnel are required on the job. If you only need one person to get the job done in the required time and the customer wants two, your costs could double. Make sure the contract specifies tasks to be done in a certain period not the number of personnel. Also, have you correctly factored the number of employees required to do the job into the price?
3. What is warranty on service or good you are providing? If they want 90 days and you only provide 30, you need to figure out how likely warranty service is going to be required. Have you factored in likelihood of warranty work into your cost structure? Is an extended warranty a selling point that won't erode your bottom line? What's the industry standard on warranties for the goods or services you provide?
We'll continue next time with more contract terms that can make profit not losses from your business agreements.