One of the most frustrating obstacles that snow contractors are forced to overcome is working with client contracts. Understanding the consequences of contracts is a task that generally re-quires an attorney’s expertise. Once translated, accepting contracts often assigns so much risk to the contractor that it becomes a question of how much the contract is actually worth.
As frustrating as reviewing contracts can be, nothing compares to the agony of trying to negotiate contract terms with clients. There is enough rejection in sales just to get to the contract re-view in the first place! Yet some methods can occasionally modify terms so that snow contractors are not absorbing excessive risk. Here is a step-by-step guide to navigating contract negotiations.
Before a contract review even begins, snow contractors must find a qualified team to assist. At a minimum, include an experienced attorney and insurance agent representative. Invest the time and money to ensure these advisors understand the business, including the operating model and risk tolerance.
Snow contractors should not rely on their own interpretations of contracts unless they are qualified to do so based on previous education and experience. The penalty for blindly signing agreements without performing a risk-reward analysis can be far more substantial than anticipated from even a single, seemingly minor, incident.
Finally, eliminate any notion that negotiating contacts is impossible, a waste of time or not worth the effort. While some contacts will end up being a true “take it or leave it’’ situation, many companies will allow some modification if the negotiation is handled properly (see steps 3 and 4).
Don’t panic! Receiving a contract is great news and means that a sale is almost finalized. To ensure that nothing falls apart, the team should work quickly and concisely to communicate issues. Review the contract terms collaboratively and group the issues into three segments: items that must be added or removed, items that must be slightly modified and items that would be nice to have changed but can be managed if they weren’t.
Designate someone to handle the negotiation of terms. This person should thoroughly under-stand the issues, the importance of each issue and a series of alternatives that may reduce the burden on the contractor. For instance, it is highly unlikely that a hold harmless and indemnification clause will ever be eliminated, but it is very possible that changing only a few key words like “related to” to “arising from” may significantly change the liability for the contractor.
Have a conversation with the prospect about the fact that there are contractual concerns and how to resolve them. The goal is to soften the blow of a red-lined agreement and ensure that the conversation is happening in the proper channels. Generally speaking, there is a legal department or representative for the client who handles such matters. It is critical that the prospect facilitates the communication flow so they are not making unilateral decisions to not negotiate the terms or mistakenly misrepresenting the situation.
Prospects are typically not qualified to discuss contract language, so it is helpful to have a single example of something that needs to be changed. The example should be presented in the simplest form possible and preferably should be something that sounds unreasonable. This will help challenge the assumption that the legal department is always right in their contracts and create an ally to help in the negotiation.
Following the prospect’s direction, have the company representative describe the issues and possible resolutions. Whether directed to have the conversation face to face, over the phone or via e-mail, it is important to not show any defensiveness toward the language and to succinctly present the issues. Usually this negotiation is happening with legal representatives who have a sole interest in protecting their company and are very accustomed to not changing any terms. Therefore, the process needs to be as accommodating as possible toward these people.
It is much easier to have a change approved to make a contract mutually agreeable than to add or remove language. Further, all modifications are best done with as few words as possible. As a result, the best attorneys are experts at proposing subtle changes to contracts to mitigate large amounts of risk. Being prepared with alternatives during this step will help make the process faster and easier since the client is not required to do any work except simply approve changes or not.
By this stage, most of the concerns with the original contract language should have been mitigated in some fashion. Either way, it is time to decide - is this contract worth the risk? If not, there will be other opportunities. If so, congratulations! Sign on the line and start planning for winter, resting with the knowledge that the business is protected.
Neal Glatt, CSP, ASM, is account executive for Case Snow Management in North Attleboro, MA. Contact him at email@example.com.