Terms and Conditions: Watch Out for High-Risk Deals

Evaluating deals around your product is tricky business. Overlooking one small detail within a contract can get you into hot waters. You can wind up with tons of inventory that won’t sell quickly, having to operate at an unsustainably low profit margin or have the wrong inventory all together. Yikes!

Unfortunately, it is very common for newer businesses to get super excited & sign any deal that comes their way. I’m mean, after all, it’s pretty exciting when someone wants to buy your products after you work so long & hard on it.

I’ve been that person having to manage their excitement, slow down and think things through. I get it.

AND…. What most people won’t tell you is that deals can start overlapping in catastrophic ways.

So, what can you do to prevent such mishaps? How do you know if an agreement is the right deal for you? How will it measure up for your business?

Before suiting up to negotiate new deals, get clear on your goals. Think long term into the future. Play out the ideal path you want to take. Agreements should support your long term goals.

Ask yourself are you looking for a licensing deal? Are you just focusing on a unique niche or an entire product category? What do you really want out of your product? Having a specific idea of your long term goals will help you see how agreements will serve you.

The greatest challenge in evaluating deals is seeing contract ramifications, especially when there are multiple deals involved. Be sure to look at all the terms and addendum. The following elements in separate contracts may overlap and put a lot of pressure on you.

Listed below are some very important contract clauses that you should never take lightly:

  • Duration — When does the contract come into effect? When does it end?
  • Restrictions/ Exclusivity — are you/they limited to production from one factory? Specific retailers?
  • Market Area — limited to sales in specific geographic location(s) or niche(s)?
  • Price Protections — Will/ should you price your products differently for specific contacts?
  • Liability — if a product fails/ has defects, whose insurance will be the one to compensate?
  • Renewals/ Termination — new dates, quantities, commissions/ grounds for termination; this is your “out.”
  • License/ Intellectual Property Rights — What can they do and what are they planning to do with the product?

If you see something that you do not understand or do not agree with, do not be afraid to ask or negotiate. Remember, this can be a two-way street. You can bring your suggestions to the table.

In case you missed it, here’s the Product Power Coaching audio that talks all about evaluating deals.  Click here to join the product power coaching calls live



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