What contracts do I need to start a business?
I get that question a lot. The truth is that’s too broad a question to answer. You may need contracts for customers, vendors, employees, contractors, investors, users, subscribers, and even your fans.
Every business is different and you want to be thoughtful about what contracts you use to build your business. If you have too many contracts, it will be hard for you to manage and maintain them. And, more importantly, it will be annoying for your customers or other people you do business with to have to read through long or unwieldy documentation.
The answer is to simplify. Think about your key business relationships one at a time and be thoughtful about what’s most important in establishing, building and maintaining each relationship.
So, how do you create contracts that are “thoughtful”?
Hmm…. let me think about that…
For example, let’s suppose you are a web developer and you want to build strong relationships with your customers. You build websites for a living. You generate revenues by helping business owners to create a virtual storefront.
What’s most important?
1. Expectations. It’s important to make your customers happy. Perhaps you need to set expectations up front about what you do, and what you don’t do. In your contract, you might want to include a description of your services, what’s included and what’s not. You can do that directly in the customer agreement or by including a link to a page on your website. This is called “disclosure” – it informs the customer of what’s important upfront before they hire you.
2. Disclaimer. What are the potential risks or hazards in your business? What should customers know in advance that might harm them if proper care is not taken. Think about those things clients need to assume responsibility for, and if they don’t, you need to disclaim in order to prevent potential law suits from arising later. For our web developer, it may be important to let customers know that they cannot use images they download randomly from the Internet and post them on their website. And, if they do, then the web developer is not responsible.
3. Preparation. Often, you can’t do your best work without cooperation from your customers. What information or materials does the customer need to provide you before you start work? What happens if the customer fails to cooperate in a timely manner? A web developer can’t build a website without their customer’s input. How long should it take for the customer to approve the “wire frames” or accept the finished product? What content does the customer need to provide and when? Consider the right to substitute content if the customer does not provide it in a timely way.
4. Specifications. How do you know whether you have done a great job? What would be objective measures of performance? A web developer may deliver a completed, functional website. But how good is it, if it takes 20 seconds to load each page? What if the client wants every page to load in less than 1 second? How do you determine when the website is good enough? Determine the standards of performance, delivery times, and objective standards and put them in a specifications document that in attached to the contract.
5. Best Practices. Your contract reflects your business. What are your policies? How do you do business? Do you have standard pricing and terms for doing business with your customers? Ideally, you want to build “best practices” into your contracts. This is what makes customers happy and keeps them coming back. Think about what terms you want to set in terms of pricing, guarantees, quality of service, how to contact you, and how you work.
6. Customer First. It’s all well and good to create a contract that serves you well. But what serves your customer best? If you don’t put your customers first, they won’t come back. After you have covered all the bases for what you want to include in your contract, then look at it from your customer’s perspective. What does the contract say about you or your firm? What is the customer’s experience upon reading the contract? Take time to “test drive” your new contract by giving it to some of your best customers and ask for their thoughts or comments. Get the contract right and you will get the customer relationship right from the start.
Forms are great, but they are just tools. It’s your business. It’s up to you to design it, whether it is your website or your legal agreements. They should evolve with your business and, ideally, be designed to strengthen your relationships. What do you think is most important to include in a customer agreement?
Roger Glovsky is a business lawyer who believes legal documents should be accessible, affordable and comprehensible. As author of ContractsGuru.com, Roger coaches business owners how to draft and negotiate their own contracts through workshops, teleseminars and online programs. As founder of LEXpertise.com, he plans to make it easier for business owners to find the right legal documents when they need them. Originally from Massachusetts, he now lives in Boulder, Colorado.