By Jay Schwartz, COO and General Counsel, StrataCore
Taking calculated risks is part of any business. Executives must be able to gauge the potential reward against the downside and exposure should things go awry. Typically, taking a leap of faith pans out — at least for a while. However, agents can avoid a lot of pain by taking a few disciplined steps when negotiating their provider agreements.
1. Use your own paper. Agreements are like puzzles. There are many pieces that must work together, and a contract that you’ve developed after trial and error will mesh very well with your requirements. Although working from a provider’s form can be viable – and is at times unavoidable – the fit will never be as tight.
2. Include a clear definitions section. The language of technology and business is changing at a fast pace, and not everyone agrees on the meaning of terms, including acronyms. Definitions specify the key terms that flow through an entire contract and will vary depending on the type of service. Having a section dedicated to defining exactly what is meant by all terms that could possibly generate confusion or disagreement does two things: First, it avoids having to define terms within the agreement, and second, it offers a single, easy-to-find destination so all parties can review exactly what each term means.
3. Agree on key commercial points. This is a biggie! You probably have limited time to negotiate contracts, and wasting that time is non-productive and expensive. It is vitally important that an agent gain conceptual agreement on the key commercial points below prior to starting a negotiation. If you cannot arrive at conceptual common ground, walk away and find other options. We have also found that there is a high correlation between the negotiating experience agents and clients each have with providers and the success of customer outcomes — and we are quite vocal about sharing this outlook.
Simply, the commercial points that are of the utmost importance to agents are: