
I had an Epiphany about sales contracts the other day when in negotiations with a new supplier that I want to use. I won’t name the company – but let’s assume that I am dealing with your company as I am sure that most companies (including my own) do what this supplier did.
Here’s the scenario:
I want to use your company services and have made a verbal commitment to do so assuming that we agree on price (something that we have pretty much done). The sale is going well from both points of view. I am excited to be using you and you are excited to have me as a customer.
Good so far. In fact, you could say it is going great so far.
We have questions go back and forth, but they are getting answered well, at least from my point of view.
You then try and close the sale – and ask if I am prepared to sign the contract.
I say “Yes, send it over”.
So now, the sale is going really well from your point of view also.
Terms of the contract
Then I start to ask you about the terms of the contract, and that’s where things start to take a bit of a nose dive as I quickly see all the benefit of me signing this contract is for you, and none of it is for me.
Here’s how the rest of the scenario unfolds:
I am a few months away from needing your services. Consequently, whilst I am sure of what services I need now, there could be a few amendments later down the line – I might change exactly which service I use.
You inform me that once I sign the contract, I am obligated to pay 100% of the fee for each service that I sign up for. If I want to change, I still have to pay for the service that I don’t use.
Mmmm. No flexibility from my point of view. I can understand from your point of view why you have this in your contract, it does make sense for you. it just doesn’t make sense for me (yet).
So I start to question some more. Not only do I have to pay 100% for each service that I sign up for, but I have to start paying as soon as the contract is signed.
Mmmm. Not great for my cash flow. Great for yours though. This is another win for you, the supplier, but not a win for me.
The Key Question in the customer’s mind
So, I ask the key question in all of this: what is the benefit to me for signing this contract now?
It is the key question. Yes I want to work with you. I have my mind up on that. So the “what’s in it for me if I sign now” question now becomes my key question.
Your answers:
You get an account manager and technical help when you sign.
Great, but you know and I know that if I call you (the sales guy) and ask a question – you will answer it. And if you don’t know – your technical people will answer it. You still want me as a customer. You are not going to cut me off until I sign the contract. That would be suicide. So this is not a valid reason.
The time slot that you want is all booked in.
If I don’t book them now, will I loose my slot? Is that why I need to sign the contract? Again, no. I find out that if someone else comes along and wants my slot – you’ll call me first. If I don’t sign the contracts at that point, you’ll offer it to the new guys.
So again – no risk to me for not signing the contract.
You run out of answers for me.
The benefit for me?
In fact, the benefit for me is not to sign the contract: I still get the time slots I need (at least first refusal) at the price agreed. I have flexibility if I want to change services, I still get the service I need to go forward from you and cash flow is much better for me. So I don’t sign. At least not yet. I will sign when it suits me, not you (even though I like you).
In case you haven’t guessed already, this made up scenario happened to me a few weeks ago. I want to use the services of a company – but I didn’t want to sign the contract at that point.
The problem was – signing the contract was a win-lose scenario. Not signing the contract is also a win-lose scenario but the other way around. Our contracts should be win-win.
Takeaways
- Ask yourself – what’s the point in my customer signing this contract now? What are the benefits for them?
- What are the benefits for you are your company if they sign?
- Is there at least some sort of balance between the answers to these two questions? If not, what can you do to change that?
- Also look at the is terms and conditions (also know as serious constraints) on you and your customers. Is there balance here too?
- Have you made it really clear what the benefits of signing now are?
- Is it your contract so good that they will happily sign a second time and a third? Or does it put them off?
I know that I will be looking at ours now!
Extra Takeaway: Thinking differently
What I did here was challenge the norm. The norm in that industry is to sign the contract as asked. Everyone does it. It is what is expected. So my extra takeaway for you here is: challenge the boundaries that are in place. Just because that is the way everyone else does it – doesn’t mean that you should do it that way. There could be a better way if you challenge a little.
What’s your experience with sales contracts (others and your own)?