Many of us gloss over legal considerations as we drive a deal forward; but being aware of them needn’t get us bogged down. In fact, it can lower your cost of sale, stop things going wrong and increase your profit.
Here are three basic steps to negotiating a profitable deal.
Financial health check. Don’t be complacent about the financial strength of your business partners. Carrying out – and repeating – financial checks before and during a contract doesn’t just avoid legal problems; it’s good common sense. So don’t forget to bear the following in mind:
- Company accounts
- References and third party guarantees
- Credit ratings
- Industry rumours
And have a back-up plan: insolvencies in your supply chain can lead to breaches of your contractual obligations.
Keep track of your negotiations. Avoid surprises – which can lead to delays and the risk of a deal falling through – by using a Heads of Terms agreement to record the key features of the deal and ensure everyone remains on the same page. You can find out more about Heads of Terms, and draft your own Heads of Terms agreement using our free drafting tool.
Confidentiality. You’ll probably need to give the other party some insight into what you do and how you do it in order to get them interested. But make sure you protect the confidentiality of your information. Some is implicitly or explicitly protected by law, but to be safe you should use a non-disclosure agreement (NDA). This will help deter others from using that information to create value for themselves, and provide you with a means of compensation should they exploit it without permission. Use our tool to quickly draft an NDA for free.
Remember, though, that a good deal is not just about How and What. It’s just as much about Who. You need to make sure that someone has the responsibility for making it happen. Read our guidance for the key questions you should ask yourself to take the luck out of turning a profit