Introduction

Your contracts aren’t just boring pieces of paper that help reduce risk. Instead, think of your business contracts as tools in your profit-boosting toolkit. Just like you'd sharpen a blade or oil a machine, tweaking your contracts can rev up your revenue engine. Adjusting these agreements can make them not just reflect your current business strategy but actively drive it forward.

Here’s a short guide on how to polish those agreements to make sure they’re working hard to fatten up your bottom line.

Read: Does a contract have to be in writing?

Optimize payment terms

Getting your cash flow right is crucial, especially for small businesses where every penny counts. Tweaking the payment terms in your contracts can make a big difference:

• Shorten payment cycles: If you’re waiting 60 days to get paid, try trimming that down to 30 days. Faster payments mean better cash flow.

• Early payment incentives: A little discount can encourage quicker payments. Offer a small percentage off the total bill if clients pay within a week of invoicing.

• Late payment penalties: Sometimes, you need a stick as well as a carrot. Adding fees for late payments can prod slower clients into paying on time, ensuring you’re not left waiting.

Focus on high-margin services

Your services or products evolve, and so should your contracts. Regularly evaluate which ones are padding your profits the most and spotlight them in your contracts:

• Drop low performers: If some services aren’t pulling their weight profit-wise, it might be time to let them go.

• Highlight premium services: Adjust your contracts to push more profitable or premium options. Bundling services can also create higher-value packages that appeal more to clients.

Enable upselling and cross-selling

Every client interaction is an opportunity to boost sales. Make your contracts flexible to allow room for adding services or products that complement what the client already buys:

• Flexible service clauses: These allow you to suggest and add services or products as the client’s needs evolve.

• Tiered pricing: Encourage clients to go for higher tiers or additional features at reduced rates, increasing the deal's overall value.

Read: When should I hire a lawyer for my contract?

Automate contract renewals

Streamlining the renewal process can save you time and lock in continuous business:

• Automatic renewal clauses: These clauses can automatically renew contracts at the end of a term, saving you the hassle of renegotiating every time a contract expires.

• Clear notification guidelines: Set up reminders to alert clients about upcoming renewals and any pending conditions or changes. This keeps everyone in the loop and helps avoid last-minute scrambles.

Regular updates and reviews

The only constant in business is change. Keeping your contracts up-to-date with regular reviews ensures they stay relevant and aligned with your business needs and the wider market.

Plan to review your contracts periodically (like annually) to adapt to new laws, market conditions, or changes in your business strategy.

Read: Why you need clear payment terms in your contracts

Conclusion

Your business contracts aren’t just paperwork; they’re your partners in profit. Keep them sharp, and watch your business grow. By proactively managing your contracts, you're setting up your business for smoother operations and more robust growth.

How Cobrief can help with contract review

Reading your business contracts can feel overwhelming as an owner-manager of a small to medium-sized business. That’s where Cobrief comes in. Cobrief helps business owners and operators review their business-to-business contracts for legal risks.

Upload your contract to Cobrief's AI contract review software, click review and you’ll get a list of all the risks, in plain English. This helps you decide whether to sign, negotiate or reject the terms of your contract, or hire a lawyer. Think of it as a heat map for your contracts.

Get started here.