REVIEWING AND STRENGTHENING OUR CONTRACTS - Ellen McIlhenny

Ellen McIlhenny - "Future Financial Confidence"

Introduction
I’m Ellen Mcilhenny, the host of Future Financial Confidence, at 4:00PM EST every Monday afternoon. We will be talking about “Everything Financial” for a stage five company. A Stage V company is one that has just gone through a tremendous amount of revenue growth and is ready to clean things up and maximize value for either a sale or reinvention. The company will never be worth as much as it does right now. 

Here we are halfway through October and very close to a consequential election. There is still a lot of uncertainty due to COVID-19 and what the plans are for future help to small businesses and more importantly, when will businesses be allowed to fully open. Restaurants are still getting hit hard because of restrictions on capacity. I’ve seen so many posts from friends throughout the country about institutional places closing after decades. I fear that once this is over we will be unable to recognize our country.

With that said, now more than ever we small business owners need a community to depend on for help with challenges as well as some camaraderie in these tough times.  Please join our Community of Commerce to find those answers.

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Show Objectives
Solid contracts are necessary for the Stage V company.  Prior to this you may not have spent a lot of time thinking about your agreements with both your suppliers and your customers. However, potential buyers and needed investors for a pivot will want to know that promises made to you from both groups will be enforceable if not delivered upon. This becomes especially vital if you are dependent on one supplier or if much of your revenue is recurring.  This could have a major impact on the value of your business.


Key Issues - ​Owner Perspective:

1. All of those informal arrangements made in the past need to be looked at and formalized through a written and signed contract.
2. Contracts now should be ones written with your best interest in mind.
3. Take a hard look at where you may be at risk and be sure contracts address that risk.

What You Need to Know

• Review and be sure all past instances of bad outcomes due to poor contract coverage is documented.
• Engage an attorney on risk assessment and policies that need to be implemented to avoid future problems.

What You Need to Do - Looking at everything that might be in a contract

1. Is pricing sufficient to cover costs and expected margin?
2. Are your promises for delivery doable every time?
3. Minimize guarantee unless you are sure you can deliver every time.
4. Payment Terms and conditions.  This is one of the most neglected areas. Specify what will happen if payment is late.
5. Make sure everyone is clear on their responsibilities.
6. Is proprietary information to your company and the customer made clear? This is so important. What can be shared and what cannot.
7. Insurance certificates. Make sure you are covered especially if a vendor will be onsite.(ie maintenance) and if you are required to be onsite at a customer’s office.
8. Make sure it is clear how either party can terminate the deal to include time frames and penalties.
9. Be clear how disputes are resolved. Arbitration?
10. Be sure all contracts are signed.

Shows

• Next time we will be talking about Performance Feedback to Improve Future Performance

 
Ellen McIlhenny - CEO - CFO Plus Services - ellen@cfoplusservices.com
www.cfoplusservices.com

Please email me or go to our website to schedule a free assessment of your financial statements.  “Let us help you increase the value of your business.”
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