By Charlie Strickland
You’ve Hit the Jackpot. Now What?
The customer you’ve always wanted finally wants you. It’s exciting, it’s validating, and it could transform your business. But before you celebrate, there’s a critical step: the contract.
Large corporate customers typically operate on standard terms designed to place all project and delivery risks squarely on you, the supplier. These terms are often presented as “non-negotiable.” But here’s the truth: your product or service is likely non-typical. You’ll probably need significant input from the customer to deliver what they need. And despite what they say, the contract is typically negotiable, to a point.
The key is understanding what you’re walking into and how to protect your business whilst closing the deal.
Know Your Position: Two Critical Areas
One: Understand Your Corporate Customer
You’re not just dealing with your main contact. Large corporates involve multiple stakeholders:
- Your primary contact
- The Procurement team
- The Legal team
- The Compliance team
- The HR function
- The Finance team
- Various group teams
Ask yourself:
- Who holds the budget?
- Where is their pressure coming from?
- What are they trying to do that you can do and they can’t?
- What are their timescales?
- Are they internally aligned?
- What risks do you bring to them?
- What are their real red lines (not just their negotiating position)?
Two: Understand Yourself and Your Product
Before you enter negotiations, be crystal clear on:
- What are your risks in supplying this customer?
- Are there integration risks with the customer?
- Are you a critical part of a larger contract they’ve won?
- Are you clear on your offer and dependencies?
- What do you need to ensure you can deliver?
- Where are your points of failure and how do you reduce the risk of these failures?
- Who are you reliant on in supplying them?
- What could possibly go wrong?
Once you’ve answered these questions, you have the building blocks for your next conversation.
What’s Likely in Their Terms and Conditions
Corporate standard terms typically include:
Pricing and Flexibility
- Fixed pricing with no right to change anything;
- Benchmarking clauses and rights to terminate if they find it cheaper down the line;
- Right to delay or cancel for convenience at any time with no comeback. (If you’ve committed to suppliers yourself for a three-year contract, you need these costs covered).
Liability and Warranties
- No caps on your liability, leaving you highly exposed in the event of failure;
- Heavy warranties that may be inappropriate for your offering;
- Long warranty periods.
Design and Delivery
- All design and supply responsibility placed on you, even if they produced the specification;
- Fitness for purpose obligations;
- Unreasonable rights to terminate for minor delays, including “time of the essence” clauses that treat any delay as a critical breach
- Heavy liquidated damages (pre-agreed daily penalties that can quickly exceed your contract value).
Intellectual Property and Confidentiality
- IP transfer provisions that may inadvertently give away your business secrets;
- Often no confidentiality protection from them to you, only vice versa.
Additional Requirements
- Rights to add expensive additional requirements at no cost to them;
- Compliance obligations, audits, spares parts requirements, document retention, backups;
- Corporate Social Responsibility (CSR), Living Wage, Health and Safety requirements;
- No obligation to actually purchase.
Why the Hesitation?
Many SMEs worry about pushing back:
- We don’t want to risk annoying them.
- We might lose the deal.
- Does it really matter?
- Nothing ever goes wrong anyway, does it?
- The sale trumps all else.
- We’ve been after this for years, let’s not ruin it now over some “small print”.
But contracts matter. Understanding and managing your risk matters more.
What to Expect in Negotiations
There’s no single right answer to contract negotiations. Your contact often won’t want to involve their legal team or may have to use an external law firm, which can be time consuming and uncommercial. Whilst not technically your problem, it becomes one because you don’t want to lose the sale.
Be Ready to Be Inventive
Remember: you both want the same outcome. Most companies have some level of reasonableness; you just need to find it. They may accept a mark-up, they may want a schedule of changes, they may have a few key clauses which can be changed. They will have seen all the issues you’re presenting to them before and will know how they were dealt with previously. They may even tell you.
Focus on the Fundamentals
Most contracts come down to three things:
- Price: What is the price?
- Product: What is the product and how is it delivered?
- Payment: When will you get paid?
If you genuinely can’t negotiate their terms, what can you change to reduce your risks?
- Build in order-certainty and forecasting mechanisms.
- Include get-out clauses in your purchase terms so third-party suppliers don’t become your problem if the customer pulls out or changes their requirements.
- Create clarity in your order form with dependencies clearly set out.
- Manage what you can control in your own supply chain.
Key Takeaways
- Understand both sides of the table before entering negotiations.
- Standard terms are often more negotiable than they appear.
- Focus on the fundamentals: Price, Product, Payment.
- If you can’t change the contract, change how you manage your risk.
- Don’t panic. Be inventive. You both want this to work.
How The Legal Director Can Help
Navigating big contracts doesn’t have to be overwhelming. The Legal Director provides fractional legal support to help SMEs like yours assess risk, negotiate effectively, and protect your business interests without losing the deal.
Get in touch to discuss your contract challenges: Charlie Strickland, charlie.strickland@thelegaldirector.co.uk / 0779 913 7180.
