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Most Common Mistakes Partners Make When Signing Contracts

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Contract

… continue paying commissions to subagents. Call One recommends to subagents that they establish relationships with master agents … for protection from that. A subagent can thrive in an ecosystem with a major agent that shares their mutual goal for success.

CP: What issues do you generally have to fix for partners to ensure contracts protect the end-user organization?

BB: Remedies for chronic outages and installation delays are critical. Also make sure to address early termination fees, business downturns, unexpected events.

CP: In general, what are some of the red flags partners should watch for when reviewing any contract with a supplier or agency?

BB: Whether the contract provides for “true” evergreen. Are the covenants mutual or one-sided? Is there sufficient opportunity to cure a breach? Do you have the right to service your customers’ needs?

CP: What anecdote can you share about being burned by a contract (speaking to the session description) and how it can help channel partners avoid a similar experience?

GP: We fortunately haven’t been ‘”burned” but have had to deal with several providers filing bankruptcy. That’s a situation where your contracts are trumped by the bankruptcy laws. One anecdote would be around the common contract provision for disputing commissions. The common provision limits disputes to a fixed period — for example, 180 days. However, the channel partner relies on the provider to share the billing information that dictates commissions. If the provider fails to provide accurate billing/commission info, you should not be limited to disputing commissions.

PlanetOne's Ted Schuman

PlanetOne’s Ted Schuman

TS: Frankly, we’ve done an amazing job of avoiding disasters. Provider bankruptcy is the one that creates the most stress.

CP: As a provider reselling services, how would you advise partners to avoid being burned?

CS: A subagent with a small base of business with a single, particular carrier needs to be careful. If that carrier gets acquired or ends up in bankruptcy, it can become really difficult and often costly for that subagent to fight for commissions. Subagents who are part of a master system have a better chance of avoiding this.

CP: What advice would you impart to partners about their contracts? What do you want to ensure partners take away from the panel?

BB: Never forget — sales are great but there’s no legal obligation to compensate you for those sales unless the contract says so.

GP: Don’t try to negotiate agreements yourself if you’re not a qualified attorney. Spend the money to get the best attorney you can find who thoroughly understands this niche business and will be respected by the providers. Don’t be shortsighted. We’re in an incredible business with massive opportunity. We live off of residual payments over a very long period of time. Protect your business.

CallOne's Chris Surdenik

CallOne’s Chris Surdenik

TS: Spend money to review all contracts. Sadly, most master agents do a poor job of this process and I hear it all the time from our providers that we are the toughest to get through the contract negotiation. Protect your asset! Cash flow is our only asset and most partners do an abysmal job of locking it down.

CS: Always review any contract you’re given and have a lawyer look it over. When we provide an agent with a contract, we look at that as an opportunity to discuss what will make our relationship a mutual success. Approach your contract negotiation as an opportunity to define what mutual success for you, your partner and your carrier looks like.  If expectations are clearly defined and parties agree, there’s nothing left but a solid foundation for success. We need to be partners in this deal — contracts should not be viewed as a bi-directional, win-or-lose situation. What makes our partners and their agents successful, makes us successful.

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