How To Create A Client Contract That Produces Higher Enterprise Value

Friday, December 08, 2023

Do you want to increase your company’s valuation?

If you’re a B2B founder or executive, you'll find this video really helpful. I'm going to show you how making some tweaks to your client contracts can help increase your valuation and give you more leverage if you decide to sell your company.

Let's dive into how you can improve your client contracts.

I learned this lesson the hard way with my company, Order Solutions. Initially, I overlooked the importance of contracts in boosting our valuation and competitive edge. My company, a call center catering to the restaurant industry to streamline phone orders for large chains, grew rapidly. Over time, I honed our terms with clients to enhance our margins and valuation.

Here's what you should consider to drive higher enterprise value:

Exclusivity: This is vital. Including exclusivity clauses builds a moat around your clients by stipulating that during the contract term, they can't use or test other providers' products or services.

Longer Out Clause: Instead of a 30-day out, aim for 90 or 120 days. It can make a substantial difference.

Weekly Payment Terms: This can drastically improve your cash flow, which is crucial if you're bootstrapping.

Minimums: Especially with a consumption-based pricing model, minimums protect your revenue and margins by ensuring you bill for a base volume, regardless of actual usage.

Pilot Agreements That Roll Into Paid Agreements: Craft a pilot section in your statement of work to lower resistance and ease the transition to a paid annual contract.

Tiered Pricing: Implementing tiered pricing incentivizes clients to expand their use of your services.

Auto-renewals: Auto-renewals are vital for protecting recurring revenue in B2B sales.

And one last pro tip: utilize DocuSign. It reduces friction and streamlines the contract execution process.

I hope you find these insights valuable. Even applying just one of these tactics could make a significant difference for your business. If you found this helpful, please like and share.

And if you want a more in-depth guidance on crafting contracts that can boost your valuation and margins, check out my new book, 'The Art of The Enterprise Sale.' You can get free instant access by clicking the link below or the one in my bio."

Get The Art of The Enterprise Sale Book

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