News & Events

Good contracts help you close sales faster

16/02/2022

Wait, what? Yes, you heard right, legal can be a sales-enabler! You might find this hard to believe, but the right setup of your contractual framework can help you close deals faster and more efficiently. When Legal and Sales work together, everyone benefits.

Whether you’re a CEO, Head of Sales, or inhouse counsel striving to optimize your processes: the way you set up and manage your service agreements, order forms, and terms & conditions play a vital role in onboarding new customers fast and efficiently. Here’s what you need:

1. Reasonable contract terms

Everyone knows it: you want to use a service and need to accept the terms. In front of you are several pages in small print, and even if you try to read it, it’s hard to understand without a law degree. The truth is, no one likes to read legalese, not even lawyers. Too much legal language in your sales contracts scares your customers: If they don’t understand what they are reading, they are more likely to involve their legal counsels, which delays your sales process.

But it doesn’t stop there: Your customer’s legal counsel might feel challenged by the heavy legal language in your contracts, and often rightfully so. This often leads to hard pushback from your customer’s side, resulting in a vicious circle of redlining. And suddenly, even though you agree on all commercial details, the execution of the contract is delayed for weeks.

It does not have to be this way:

  • aim for lean contracts

Contracts do not have to be complicated to be valid. In fact, too complicated contracts often increase legal risks since complexity often creates ambiguity. If you do not understand why a particular clause is in your contract, ask your lawyer to explain why you need it, chances are it’s redundant. Also, don’t be too afraid of not regulating something in the contract: Most jurisdictions have general fallback rules in case something is not explicitly set out in a written agreement. More often than not, those fallback rules are pretty reasonable.

  • separate commercial from legal terms

Avoid mixing up commercial details in legal texts. If you want to have the deal closed quickly, put all the commercial details of the contract at the beginning or in a separate order form. That way, your customer sees at first glance what’s important. Also, your sales team can easily rephrase the commercial terms without the risk of altering any important legal phrases.

  • easy language

Legal terms are not meant to be riddles to test your ability to understand complex phrases. Contracts set out the rules of the relationship between two parties – this implies that the parties should be able to understand what they are agreeing on. If you think your contracts are too complex, talk to your lawyer.

  • most important: keep things fair!

If your contracts are unbalanced and too much in your favor, you cannot blame your customers for pushing back. Enable your customers to understand what they are reading, and they might not even need to involve their legal team. With fair terms, you can focus the sales negotiations on commercial details and avoid unnecessary back and forth.

See your contract as part of the sales process

The first line of contact for new customers is usually your sales team. By knowing their way around your contractual framework, your salespeople can already take care of many customer requests before lawyers need to get involved on either side. There are several ways to improve your sales team’s contract knowhow; ideally, you can combine them:

  • involve Sales early on

The next time you redraft your contractual framework, involve your sales team. They usually know better than your lawyer what your company sells, what’s important, and where your customers usually ask the inconvenient questions. They are the ones who work on a day-to-day basis with your contracts. Having Sales involved in the drafting process will lead not only to them better understanding the contracts but also to better contracts.

  • get a contract playbook

Set up a document explaining your contractual clauses – this can serve as a cheat sheet for Sales if customers question certain provisions and outline which terms your company is willing to renegotiate if necessary and which clauses are set in stone. Ideally, you include instructions and fallback clauses, so Sales can independently renegotiate specific terms (e.g., higher liability caps or customer-friendlier payment terms). This reduces costs for external counsel and speeds up the whole sales process.

  •  invest in training

Having your legal counsel train your sales team will reduce your legal costs over time by avoiding the need for legal counsel to take on tasks that a trained salesperson could easily do. Improve your sales team’s know-how on the company’s legal terms through regular training. This way, you enable them to handle easy requests themselves and free up the much-needed capacity of your in-house legal team.

Summary

With lean, understandable and easy terms, you reduce friction in the sales process. By additionally enabling your sales team to identify and handle simple contractual differences with customers themselves, your company can close deals faster and reduce legal costs.

This also reduces your legal risks: complex contracts bring potential for conflict, plus oftentimes create ambiguity. Last but not least, by wasting less time on discussions with your customers’ lawyers on contract clauses and redlining, your legal team can actually work on more important things like improving your organization’s legal compliance.

By Thomas Kuster

Head of IP & Legal Counsel

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