Contract Negotiations — The Details That Matter

Founders often focus their negotiation energy on price and term length, then rapidly accept the boilerplate contract clauses that can cause serious damage later. The clauses worth fighting for: liability cap, IP ownership, exclusivity, auto-renewal terms, termination rights, and payment terms. Liability cap: most enterprise contracts cap the supplier's liability at 'the value of fees paid in the 12 months prior.' This is reasonable. But watch for unlimited liability clauses tied to data breaches, IP infringement, or wilful misconduct — these can expose you to catastrophic risk. Negotiate reciprocal caps where possible. IP ownership: any contract that says 'all work product and improvements created during the engagement are owned by Client' is a dangerous default. If you're building bespoke features for Dormakaba based on your existing IP, you should retain ownership of the core IP and license it — not transfer it. The specific customisations for Dormakaba can be owned by them, but the underlying platform IP must remain yours. Exclusivity: be very careful about exclusivity clauses. 'Exclusive supplier of [category] to Bunnings Australia' sounds great until you realise it prevents you from selling to Mitre 10, Masters (if they return), or online. If you accept exclusivity, it must come with minimum purchase commitments and term limits.

Payment terms are a negotiation most founders treat as non-negotiable when they absolutely are. Large companies default to 60-day or 90-day payment terms — which can destroy the cash flow of a small supplier. Negotiate for 30 days, or ideally 14 days for digital subscription services. For SaaS contracts with enterprises, push for upfront annual payment. This gives you predictable cash flow and eliminates collection risk. Offer a 5–10% discount for annual prepay — it's worth it. The cash flow certainty of annual prepay is worth more than the discount you're giving away. For retail supply to Bunnings: understand their payment terms (typically 30–60 days from invoice, on monthly statement runs). Budget for this in your cash flow. Consider whether invoice financing (using tools like Apropo or Scottish Pacific) makes sense to bridge the gap between delivery and payment. Never enter a large retail relationship without modelling the working capital requirement — the biggest shock new Bunnings suppliers experience is funding 60 days of inventory before a single payment arrives.