- Statement of work or deliverable requirements. Drill down to specify what your customer should provide for you to be able to provide the service or good. Remember the adage--who, what,when, where, how and why in drafting your SOW. What assumptions need to be spelled out, e.g. expensive items that you will not be providing? Provide an extension of time budget in the SOW so that you don’t lose the contract over a minor delay. Can you specify that the development of the deliverable is a separately priced item? Coming up with the deliverable specs is work you should be compensated for as many companies have not clearly formulated what device, capabilities, etc. they need.
- Shipping terms. FOB shipping point or FOB shipping origin means the customer pays shipping and takes ownership as soon as the goods leave the dock. FOB destination—means the seller pays shipping terms and bears risk of loss until goods arrive. Shipping costs and insurance affect your bottom line.
- Termination Rights. Yes, there may be a customer that requires so much hand holding and extra work for your company. There are some contracts that cost a seller far more than they will ever make on the sale. Make sure you have termination rights to get rid of the customer from hell.
- Payment Terms—Cash flow can allow a company to live or die. Whether it’s a net 10 discount (some inflate the total price by that 10%), getting some money up front, or phasing payment to deliverables, you need to keep a tight rein on payment. If you can get a retainer up front, have that apply to the final invoice. Consider selling your time in prepaid blocks (particularly useful where you are consulting or providing maintenance and the customer is notoriously slow pay).
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As Warren Buffet puts it, "Risk comes from not knowing what you're doing" and"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."
We hope this blog series on contract terms has helped educate you on how contract terms can make you money.