Signing your first official contract for your own business can be both a daunting and exhilarating experience. Imagine that – your own company. You’re finally your own boss, going into business with people you know, and finally making it out there in the world.
Or so it seems.
Before signing that contract, there are a ton of things that should be considered and done. Unless you already have had all the advice, research and planning done way, way before hand, it would be smart if to consider these common contract mistakes before we actually ink our signature on that dotted line!
- Do your research!
Before doing anything, it is absolutely vital that you do your research in everything – business partners, clients, everything. It is critical that you evaluate who you’ll go into business with, their past performance, reputation and their company before signing on anything. This will ensure that you’re working with reputable, honest businessmen who don’t conduct shady business practices which will hurt your reputation.
Of course, Google will be of great help here. That said, don’t rely solely on the internet; if you know people who have worked with them or at least know them as clients or friends, don’t hesitate to ask! Their word could be more valuable than the internet.
The same goes for clients. If you know you’re going into business with a client, make sure his background also checks out – you don’t want to be dealing with someone who has a shady reputation skirting on the criminal would you? This could really hurt your name in the field.
- Don’t start without the contract!
Yes, we understand your enthusiasm to start the work before even signing the contract. However, it would be wise not to start without it. Typically, a contract requires two components: both sides have to agree to obligations, expectations as well as agree to what of value (goods, services, and money) will be exchanged. This is the legal proof of what has to be given in exchange for services rendered, and is of course legally binding.
If you start without the contract, you’re technically not under any legally binding document, which can cause you to lose out somewhat. The client is under no legal obligation to pay you without the contract either, so please take note.
- Learn the jargon of the trade, or get someone who knows.
This is especially true of the technical jargon in business writing. Most of the time, there are quite a few terms most people wouldn’t know about. For example, “All-rights” and “All-rights Contract” mean completely and absolutely different things.
So, if you don’t know the technical jargon of the business world, you would do well to get someone who does. A single word difference in the contract can literally mean profits or losses. Sometimes, it can even spell a jail term that you don’t even know about. It is better to err on the side of caution and get someone who knows their way around the terms to proof-read the contract.
- Ask a ton of questions.
Invariably, there will always be questions that need answering that isn’t addressed in the contract. Sometimes, asking these questions can also mean a difference between protection for you, or a lawsuit. The more questions you can ask, the higher the probability that you can protect yourself against the unknown factors that may work against your favour. Some questions can include:-
- When is the payment due?
- What’s the cancellation fee?
- Who will pay for the reimbursement for the projects?
- What is covered in the payment and what isn’t?
- Terms and conditions for using the media/photograph/etc?
- Set clear guidelines
The best thing to have on your side (especially if you’re freelancing) is a clear guideline on creating the number of revisions, add-ons, modifications and your billable rate. These guidelines can be created up front in the contract as a clause, so that the client cannot refute nor refuse your terms. In a way, this is protecting yourself from damage should the client expect you to do something that you didn’t agree too.
To be honest, there are some clients out there who demand a lot from people. These big companies often have a legal department that will breathe down your neck if these clauses are not in the contract. So, to protect yourself from being wrongfully terminated from the company’s contract, your guidelines MUST be in place. Should the document have these details, the big companies cannot force you to modify without limitations, or keep asking for add-ons for free.
Again, the most important thing is this: if you don’t know about it, get someone who can help you with theses clauses too!
She was nominated and selected for FORTUNE Most Powerful Women conference in 2016 (Asia) and 2015 (San Francisco, Next Gen).
Anna has 10 years of experience in the financial sector and is currently a Director in Tera Capital. Her previous work experience includes positions at Citigroup, United Overseas Bank, a regional role in Business Monitor and a boutique private equity firm based in Shanghai. She graduated from Singapore Management University (Finance and Quantitative Finance).