10 Reasons Companies Need Custom Contracts (That Have Nothing to Do with Legal)

Custom contracts aren't just for lawyers. I once had a client who was ecstatic about a 5-year deal, only to discover it was built on shaky ground. The lesson? Contracts are your business's secret weapon, protecting you from unexpected pitfalls and setting the stage for success. If you think they're just about legalese, it's time to rethink that.

Here are ten reasons companies need custom contracts that have nothing to do with lawyers or lawsuits.

It's How You Solve Problems

Every business has encountered that difficult customer who just won't see reason. You've explained your side, but they refuse to budge. When challenges arise, we don't immediately resort to lawsuits, but we do want solutions. Time, money, and headaches are at stake. Contracts are where businesses and customers turn when they want answers and guidance in challenging situations. The contract spells out what is and is not included, or what steps to take to achieve resolution. The right contract will get your business back on track fast, saving you the headache and pain of a disgruntled customer.

It's How You Communicate

You don't have time to talk to every customer about every little thing that could possibly go wrong, especially the challenges that are possible but unlikely to happen:

"Okay, if a blizzard comes through your town in 2 years and you lose power, here's what we're gonna do..." and "Oh yeah, if we have a problem with a supplier like the Microsoft-Crowdstrike situation, here's what we'll do."

If you had to create a list of every possible thing that could go wrong and talk through it before a customer could sign a deal, your entire day would be lost on the little things. We'd never get through our customer conversations and close a deal. But just because something isn't likely to happen doesn't mean it won't. How can you balance being prepared and on the same page while getting a deal closed ASAP? Contracts. A custom contract will reflect your way of doing business, and the foreseeable, yet unlikely, things that could happen will be addressed in it. And because it's in your contract, you'll already have had open communication with the customer without, well, having to talk through it with your customer.

You Set the Standard for How You Do Business

How do you do business? I bet the way your company is set up is different (and dare I say better) than your competitors. You might share your value statement and product features with the customer, but there's more that makes you different - from processes and solutions to timelines and more. The contract is where you get to lay this all out and formally set the standard for how your business operates.

You Look Professional

Remember the early days of the internet when we weren't sure if a webpage belonged to a real company or if we could trust them to process our payment information without stealing it? Now, professionalism is more than a great website and social media presence; it's formalizing things in writing. Customers get written guarantees that you handle confidential information, that you have processes in place, and that you are prepared to solve problems quickly and efficiently when they see you have contract terms. It lets them know you do things the right way and are not just some fly-by-night person they met at a networking event.

It's Easy and Repeatable

Contracts are easily repeatable customer to customer. Once you set it up once, you can send the same one to every potential customer moving forward. You get the benefits of solutions, professionalism, and trust over and over again for no added cost. You set them once, and you can use them over and over again without paying for a new one each time a customer comes along.

It's How You Plan for Your Business

I used to support sales reps for a large company who were so excited they were getting multi-year deals signed. They'd come running, "Customer wants to sign a 5-year deal! They just need some items added," but when I'd look at those items they wanted added in, it was often terms that would allow the customer to terminate the agreement early. The 5-year pricing listed did not mean it was a 5-year contract because if a customer could cancel the contract after 1 year, the revenue in years 2-5 was not guaranteed.

When you have your custom contract in place, you can set the terms - and most importantly, know if and when a customer could and could not get out early. It allows for better budget planning and balancing upfront costs the company may be taking on to onboard a customer, making sure the ROI on the deal was worth it overall for the company. Without the right contract terms, your revenue may not be as secure as you think it is, and you could find yourself in an odd business situation unexpectedly.

Product Changes or Partnership Changes Easily Navigated

A client of mine was looking to expand their footprint in a sub-market and partnered with a company that had about 20% of the market to get their foot in the door. It was amazing... until the biggest player in the industry wanted to partner with them just 1 year later, but only if the bigger company got exclusivity. The client was stuck in an existing contract that made great business sense at the time, but now they had a bigger opportunity if they could find a way to cancel the first one - what could they do to navigate this? The contract with the first partner had terms and timelines for canceling the agreement. My client was able to communicate clearly with all parties without giving too much information about the partnerships because they had contracts in place they could point to when canceling one deal to make the other.

They Get You Funding and Support

When looking for investors and business loans, many financial backers look for well-structured business plans. Business plans can be tedious and overly burdensome for most businesses to make, and thankfully, they aren't the only way to get funding. Contracts work as well, and even faster! Why? Because a contract shows the business deal is already closed and the terms it's bound to. Financial backers can quickly see how guaranteed the revenue is and the rate and timeline for their return. When you can show potential investors that you already have guaranteed business, they are more likely to invest faster than the business plan route.

Your Crystal Ball for Future Challenges You Can't Foresee

No one can see into the future; it's part of being human. For businesses, the future is everything from ups and downs to a little of this and a lot of that. And just like an 18-year-old out of high school, young businesses don't have the foresight of experience yet. They have to take risks and learn things the hard way - unless they gain wisdom from others who have been there before.

When you get custom contracts, you get to speak to advisors who have seen things before. Lawyers often know the business challenges that ended up in court and have experience from other clients. Which means they can draft contract clauses for your business type that will make the pain of business lessons disappear or at least be smaller than they would be if you went through it yourself.

Business challenges aren't always from your mistakes or even either party doing anything wrong - they sometimes happen seemingly for no reason - like an earthquake that takes out your warehouse. These things may break your company unless you have contract terms in place that establish boundaries and procedures on how to navigate them. Many scenarios - from delivery issues and natural disasters to technology bugs and hacks - have already happened and can be accounted for in your contracts. Don't risk everything by going at it alone when there are both experienced advisors out there who also can put buffers and safety nets in your contracts that will keep your business going no matter what comes your way.

It Communicates What IS and IS NOT Included in Your Pricing

I had a client come to me after three months of client updates and requests. "We've delivered everything we said we would, but they keep coming back for stupid little changes. How can we tell them no? We have other projects to work on." The challenge was revisions vs. refinements. As the customer used the deliverables more and more, they kept wanting a new format and a couple of small changes. To the customer, this was reasonable. After all, they told my client what they'd be using the deliverables for. To my client, this was annoying and unnecessary. "They can do this themselves, and we can't let this project last forever," they told me.

Who was right? We turned to the contract. The Statement of Work (SOW) had laid out the main deliverables and offered "support" for the project. Did this constitute "support?" The contract had an acceptance clause that stated when the deliverables were deemed completed and the project scope from my client's perspective was over. Just because the project dragged out on the customer's end did not mean my client was obligated to continue supporting it so long as the contract was clear about that. By looking at the contract, we were able to determine what needed to be done to complete the project agreed to and communicate to the customer that their added requests were outside the scope of what was contracted. Within 2 days, my client was able to go on and support other money-making projects.

Miscommunication and different expectations are very common in customized work - from software and coding to logo design and consulting. The contract is what sets the boundaries and keeps everyone on the same page from beginning to end.

Looking for custom contracts that are business-focused? CEOLegalCoach helps businesses get contracts that support their business goals. Set your free discovery call today.