1. Contracts with Larger Companies
2. Contracts with the Government
3. Have a Plan

Contract advice is important when operating your small business. When operating any business, you will constantly enter into contracts with others, whether your business is a lender, supplier, vendor, or other. But before entering into such contracts, the parties usually enter a negotiation phase, at which point they meet to go over the details of the agreement and what is expected from both parties. Other items of discussion will include the following:

  • What is being sold or serviced to the other business
  • Price of the goods or service
  • Repayment schedule

Contracts with Larger Companies

If you own and operate a small business, dealing with contracts might be especially difficult, particularly when you enter into contracts with larger, more established businesses. Large companies might have the upper hand when entering into contractual agreements with small businesses.

Most large businesses, when entering into contracts with small businesses, will throw boilerplate language, along with other confusing language, at the other party and expect them to sign the contract as-is. Even if you ask for changes, you might have to meet with the larger companies and their team of lawyers, at which point you might not feel comfortable asking for updates. The larger business might even indicate that, if you fail to agree to all of their terms and provisions, the deal is off. When faced with such issues, your best option is to accept the terms, but ensure that you are receiving a high price for doing business with them. An example of this would be asking for changes in the payment terms. Specifically, if the large business wants 120 days to pay off the invoice, allow only 60 days, and indicate that any outstanding funds owed between day 61 and 120 will have an interest charge of 5%.

Additionally, keep in touch with your contacts at the larger companies, as they are usually not the ones involved in the actual contract negotiations. If your contract doesn’t go through, then your personal contacts might be willing to help move it forward.

Regardless of who are working with, be sure to keep copies of all contracts, writing, and other drafts that are introduced during the negotiation stage, to fully understand what is being altered before the final contract is signed.

Contracts with the Government

Generally, government agencies like to use small businesses as suppliers, and even have goals for how many small businesses they use. In fact, if you own a small business and you initiate a relationship with a government agency, you should maintain that relationship and continue getting business from them. However, keep in mind that government contracts provide for very little negotiation room on your end. It’s usually the government’s way or no way at all. Government agencies enter into unilateral contracts with small businesses, meaning that the contract is one-sided, ultimately favoring the government, as opposed to bilateral, a contract that favors both parties.

If you are interested in pursuing a government contract, you can visit the Small Business Administration website. It will provide you with resources that explain how to register your business and have your company listed on the appropriate supplier list. You can even sign up to take courses in the Government Contracting Classroom, as this will increase your chances of entering into a contract with a government agency.

Have a Plan

Keep in mind that there are roughly 18,000 businesses operating in the U.S. with greater than 500 employees. Such large companies generate approximately 60% of all revenue produced by American companies. For any small business, working with such large companies can be intimidating and confusing. Therefore, it is important for small businesses to have a concrete plan for doing business with these larger corporations. Come up with a solid marketing plan to gain the trust and confidence of others. You might not be successful the first few times, but eventually you’ll find yourself negotiating with larger companies, which can provide you with knowledge that leads to additional contracts with other larger businesses.

If you need help with contract advice for your small business, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.