Jimbo Fisher's Masterclass in Contract Negotiation
Recently, Texas A&M University fired their head football coach, Jimbo Fisher. When Jimbo signed with Texas A&M, according to his original contract, he was guaranteed $95 million over 10 years. He got fired halfway into a new contract, which required a $77.5 million buyout. Great for Jimbo, not so great for the party sitting on the other side of the contract. This is a great lesson in negotiating business contracts – make sure to protect against non-performance and ensure there is a clear exit path that does not damage your business if a change must be made.
Service Level Agreements (SLAs) - How much of an impact would slow service or excessive downtime have? What is the monetary cost to the business? Every good contract has some form of SLAs which guarantee a time frame for an issue to be addressed, or how much downtime is allowed. Proper SLAs will have a financial penalty to the provider, and repeated failure of SLAs must allow for termination of the contract. Watch out for contracts that allow repeated breach of SLAs and remediation with no consequences. This can result in consistently poor service if the provider fixes it in the short term.
Termination for Cause – no one signs a contract expecting to terminate it, but contingencies must be planned for. Ensure there is specific language that allows termination of the contract when one party fails to meet the requirements. This is critical for SLAs and other aspects such as keeping up robust cybersecurity and confidentiality.
Autorenewals and Price Increases – an autorenewal may be acceptable to both parties, and price increases are understandable, but neither should not be unreasonable. CGP has seen legal software providers impose very large (40%+) price increases on their customers, last minute before a 60-day autorenewal occurs. This not only minimizes the amount of decision-making time a business has, but migrating something as complex as accounting software typically cannot be done in a short time frame. Watch out for narrow autorenewal windows (such as “at least 60-days before the expiration date but no sooner than 90-days” - a mere 30-day window.) One other tactic includes autorenewing into different terms, such as an initial one-year term that autorenews into three years.
These key points will help bring predictability and stability to your contracts. Remember a contract is a two way street, and demand the terms you need for the benefit of your business. Be Jimbo in your contract negotiations, don’t let a vendor take advantage of you!
Need assistance navigating contracts? CGP handles vendor evaluation, contract negotiation and management, and other technology related services. Our years of experience across hundreds of contracts ensure your business is protected and at an advantage. Talk to a partner today!