As a startup, and even as an existing business, it’s becoming seemingly harder to get clients to commit to business for a set duration. However, for some businesses, it might mean the difference between sinking, floating and sailing.
Committing clients to a five year contract for a simple service in this economy is ludicrous. Six-month and twelve-month contracts with three month trials are more favorable, and even then, termination clauses sometimes have to be penalty free from the client-side, which reeks of unfairness on the service provider’s end.
Striking a fair balance is sometimes hard, especially if a young business is providing a service to a company who has been around for some time. Negotiating termination and payment terms seem to be the biggest hurdle, but something to keep in mind is that if the client came to you, or chose you out of a pool of suppliers, you may have more weight than you think. Opening a discussion about changing the standard terms to something more fair is always a good place to start.
Working closer to your ideal arrangement with a client with every contract is also a good method to get what you need from them while providing fair terms. It will give the relationship some time to grow while you establish trust and confidence with your client.
Client contracts are key to the health of a business. Use them with as many clients as you can manage as it helps you to forecast your cash flow and protects you legally if a client does not want to pay. They should be mandatory, at least for new clients, conglomerates, or companies you’re unsure about.
DISCLAIMER: I am not a lawyer, just speaking/writing from personal experience, and there may be important details missing, such as the specific protection a contract can provide.