You can protect your business by understanding and implementing contracts for your essential business relationships.
If you learn one thing about running your small business, understand that it’s about relationships. You can’t maintain your operation if you don’t figure out how to develop beneficial relationships with customers and business partners.
In the beginning, you may think that once you’ve chosen from among the various kinds of business structures and filed papers with the local and federal government that you’ve done the heavy lifting. However, your journey’s just begun. Now, you must establish the policies and procedures that will dictate how you operate your business.
At this stage, you need to think about contracts. Some transactions imply an agreement and you must document others in writing. While the concept of a contract is straightforward, using them for your business is anything but simple.
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The Contract Before the Contract
In business, some ideas are as good as gold. Resultantly, you should consider establishing a nondisclosure agreement (NDA) before discussing certain things with potential partners to protect your business interests. NDAs are also called Confis. or Confidentiality Agreements.
It’s not prudent to ask a potential business partner to sign a confidentiality agreement at the very beginning of your talks or for small transactions. This demand would send the message that you assume the other party wants to steal your business ideas, intellectual property or employees. Sometimes, however, a nondisclosure agreement is essential.
An NDA is a last resort. In a court of law, it’s difficult to prove that someone’s violating a non-confidentiality agreement. You’re much better off holding back as much sensitive information as possible, rather than revealing too much information and then trying to reinforce your rights with an NDA if something goes wrong.
As for employees, a noncompete agreement can protect you if an employee decides to take what they’ve learned from you and start their own business. You can prevent employees from using your proprietary information for their venture by having a lawyer create a noncompete agreement for your business.
A noncompete agreement can protect your business from financial ruin if an employee decides, for instance, to steal your clients and launch a competing firm. The agreement entitles you to take that individual to court if they violate the terms of the contract.
Shoring up for Battle
Typically, business transactions are cordial and productive. However, don’t make the mistake of letting your guard down at the wrong time. All’s fair in love, war – and business.
Many freelancers, for instance, work without a contract, especially when just beginning to develop their clientele. A contract proves a working business relationship and comes into play when problems such as nonpayment, expectations and other unforeseen contingencies arise.
A contract protects you and your clients. It clearly outlines, for example, the roles and responsibilities of stakeholders, what work is involved and how much money will change hands for deliverables. Furthermore, it details what will happen if you fail to complete a project or your client fails to pay for completed work. A contract will not stop all bad things from happening, but it does make it easier to deal with business problems when they come up.
The Right Way to Draft an Agreement
Understanding and creating contracts is one of the essential skills that you need to learn as an entrepreneur. It’s your first step in solidifying customer and client relationships. They’re not just for when things go wrong; they serve as a guideline that shapes business relationships.
At a minimum, a contract should include your name, phone number, business registration number, email and other essential details. It should also include the same information for your client.
Both parties must sign the contract before it’s legally binding. With the increase in digital transactions, more municipalities accept digital signatures, either by email or through a document management system. The contract should also include as many relevant details as possible about the business relationship between you and your client.
You should have a third-party, preferably a lawyer, review the contract. A lawyer or a trusted, uninvolved third-party can help you catch errors and omissions and give you an idea of what your client will expect based on the document.
For some business owners, it’s also vital to consider scope creep. For instance, writers should limit the number of revisions a client can request as well as additional tasks they can add on to the job. You should consider anything outside the parameters of the contract as additional work and charge accordingly.
You should also include parameters about how you and your client will communicate. For instance, you can treat excessively long phone conversations as a consultation and charge your standard rate for the service. You should also include any expectations for deposits or deliverables, especially for new clients.
Getting Expert Help
Contract issues can become confusing. Make life easier. Think of any advantage that you can use to find assistance or resources to procure legal and binding contracts for your enterprise. For instance, if you’re a United States veteran, you can look for support explicitly designed for former military personnel.
People have said many times that you can do anything if you put your mind to it. Contract drafting and negotiations, however, isn’t where you want to apply this adage.
The best way to protect your company against future legal problems is to hire a small business attorney. A small business attorney is a partner that will help you make informed decisions and protect your enterprise as you navigate your most difficult challenges in commerce.
Every year, United States courts receive over 2 million civil cases, half of which are contract disputes between employees and business owners. Shoring up your business with contracts can save you countless hours of trying to prove your case based on a handshake deal. You’ll have fewer legal problems to worry about, which means more time to focus on growing your business.
It’s important to establish expectations and boundaries so that you can focus on growing your business. Even though you’re a small business owner, contracts are a big deal. A lawyer can help you negotiate favorable contracts that you and your clients can understand.
In the beginning, everybody makes mistakes, and they pay for them. Protect your business interests and your livelihood by establishing contract agreements where appropriate. Contracts and a partnership with the right lawyer will pay for themselves time and again during your entrepreneurial journey.
Read also: 10 Unique Tips For Starting A Small Business