Techniques for Negotiating Payment Terms

My actual New Year’s resolution is to put out more informative content. Let’s start with payment terms in a contract: 1) What is Payment Based on? Why are you paying? “Because they are doing work for me.” Sick, great response. I mean specifically, why are you cutting a check at that very moment? What triggered the need to pay (major project item, a time frame passed, job done, etc)? 2) Payment Structure There are many different ways that payment can be structured. Usually it’s dependent on the type of work (maybe someone is building software for you) and relationship of the parties (person or company is working with you on an ongoing basis). 3) Per Milestone/Project A common structure is payment per stage of a project (or just completion). Think construction: x% up front, x% once you hit some critical path item, and then finally x% when the job’s done. If this is what you’re doing, a clearly defined scope and understanding amongst the partiesis key. If the vendor/contractor gets paid after “kitchen repaired” and you thought that included appliance electrical work (and it doesn’t), it’s a payment dispute. 4) Quarterly/Monthly/Weekly Pay You could be paying for ongoing work that may end on a certain date in the future (or not). Think IT support for your company. Generally, you’re going to get an invoice on a certain day and have to pay within x calendar days (called Net X days). Timing of payment is important here. Can you pay within 15 calendar days (Net 15) of the date of an invoice? Maybe your company does check runs twice a month so that’s fine. Maybe that’s too fast for your accounts payable folks (or you). 5) Bespoke Payment Sometimes payment terms are unique and based on the industry/type of service or product. Like paying a base subscription fee (monthly payment) and an amount in additional once a certain amount of data has been used (milestone). 6) General Considerations A) Make sure there is a mechanism in place to handle disputed payments (like the kitchen example) (if you can hold that payment and pay whatever isn’t in dispute). B) If you’re the vendor, collection language is important (interest + fees). C) What happens to payments made upfront? Is it a deposit? If so, what happens to it? (Applied at the beginning? The end? Returned if work isn’t performed?) D) Can you off-set what you owe by how much you paid to fix the work the vendor did? E) What if we terminate the agreement? Consider language that clearly defines exactly what is owed (and what isn’t) when one party terminates the contract. F) Is payment final or just an estimate? Clarify, clarify, clarify. G) Is there a mechanism in place for when the scope/time/contract price changes? Very important and needed by both parties. H) In the same vein as G), are you approving (in writing) changes to the contract? Just a quick, non-exhaustive list of considerations for payment terms. Consult with an attorney.

My #1 tip in negotiation is to make the other person feel like they've won by giving the illusion of choice. I really can't believe how powerful this has been for me personally, professionally & for my sales team. BACKGROUND: I've noticed something over & over again in any negotiation - people feel good when they have control. No one likes to feel out of control or that their fate is not in their own hands. So when I go toe-to-toe with a colleague, a prospect or my mother I think about how I can make them feel like they're in control by letting them choose the outcome. Only the outcomes they're choosing between, are options I presented to them because I'm cool with any of the outcomes. EXAMPLE 1: Here's an example. Let's say I quote the prospect a $20k deal and they push back for $15k. I know I won't go below $17.5k so I say: --- Hey - I've taken this back to my team since I know a more affordable service is important for you given your budget. You're really crushing me on the negotiation so I know I need to meet you halfway. I'm excited to share a few different options we came up with and I need your help deciding which is the best one for you so you can feel really good about this deal: (1) $20k deal with the 13th month free (2) $18k deal where you do a case study with us (3) $17.5k deal but it's a two-year commitment --- Prospect now has the illusion of choice. And always expect a good negotiator to collapse your choices by asking for the cheapest one with no strings attached. I know they're going to counter with $17.5k, one-year deal which I expect and am ok with. EXAMPLE 2: Second example, attached, is me negotiating yesterday with a LinkedIn Social Selling coach I just signed with (I've never tried one but think I could use one). My highest willingness to pay was $10k cash for 3 months. Just like in the first example I gave 3 options for the illusion of choice. They countered, collapsing my options to $10k + the references. Smart move and a tad beyond what I wanted but I signed and we both walk away feeling good. I'm amusing myself writing this because this new coach will both hate & love this post ;) #negotiation #saas #tips

❌ "We don't accept redlines to our terms." ❌ Well, as an in-house attorney, I don't always accept that position. Sure, there are some instances in which I agree that negotiating the terms isn't necessary. For example, if the deal is low risk to us, if the terms offered are well drafted and reasonable, or if my business client needs it signed asap and accepts the risks. But what about all those other times where I don't think it's in my client's best interest to sign the terms as-is? How do I get past this initial NO? My Secret 🤔➡️ With a thoughtful negotiation strategy that requires minimal effort from my counterparty and focuses on impactful yet reasonable asks. Aka I make it really hard for them to keep saying No to me. Here are three things I do - and recently did again - to get past NO during a tough contract negotiation. ✅ Run a gap analysis of the terms and identify my client's three top issues -- Aka I am reasonable because I'm only asking for three changes. ✅ Outline them in an email and explain WHY I am requesting these changes -- Aka I am respectful because I didn't send them my redlines after they told me they don't accept redlines. ✅ Schedule a call to discuss only those three issues and screen share a redlined draft showing my proposed markups -- Aka since we're on the phone already and I did all of the work, how can you say No to me again? I implemented this strategy last week and the counterparty agreed to all three changes. 🤐 This isn't the first time this approach has worked. My Client's Response: "Wow! I can't believe you got them to change their mind! I guess No doesn't always mean No." That's right. No doesn't always mean No. Especially when you use smart redlining and negotiation skills to navigate the situation. ❓Tell me, what are your best methods to get a counterparty to agree to your redlines after they've already said No? #gettingtoyes #negotiationskills #negotiationtips #contractnegotiations #fromnotoyes #corporatecounsel

"Hey! Help me understand how you got to that number?" has been super helpful when doing creator negotiations. It can sometimes be the wild west out there, and you will hear ranges from $1,000 to $10,000 for similar size-, vertical-, engagement-sized creators. Whenever I get to this point, I openly ask them how they got there. This is an opportunity for us to discuss where we may be off. Some key examples I have seen: 1. "This is what brand X just paid me last time." 2. "I am expecting X views." 3. "The industry rate is X." 4. "This is just what I charge." When handling each of these conversations, starting off with empathy to validate, not endorse their feelings is key. For example, "Thank you for sharing, and I can see how you got to that point." This is not agreeing with them, but showing that you are stepping into their perspective, validates their feelings, and helps get on the same level. You have to truly mean that, however, and understand where they come from. Don't just say it. Next, I would handle each scenario with (in the order above): 1. "From time to time, you may have a big one-off spend, which is awesome! Given the historical context of this brand, these types of deliverables, and what we have paid creators similar to your channel, this is rate more in line with what the data has shown". This shows that they may have had luck before, but this shouldn't be their standard. 2. "Taking a look at your channel, I can see that your historical average is X and based on our AI model, we are also forecasting Y. Knowing that sponsored material doesn't do as well, can we align that we will most likely hit Z?". If that doesn't work, you can do "If you are open to a tiered payment structure if you hit X, Y, or Z, we can pay you in these increments." This gives the data as to what you think will happen and also a healthy solution if they do really well. 3. "Based on the historical data of the wide range of creators we have worked with of your similar size, we have historically seen X. We would love to pay you Y, but it may not fit into our budgets right now. Could you make X work?". You are not being dismissive of their ask, kindly educating with the data, and working to find that solution. 4. "For this campaign and budget, we can only offer X. We would love to have you on, but if this doesn't work out, we totally understand." Here you are being real with them and now the ball is in their court. TLDR: Communication is key here, and transparency builds trust and relationships. And, be ok to walk away! There are certainly some very selective, niche, and exclusive creators where you may have to take a risk, but there is a pretty large sea and you may need to cast a larger net. These are not "tactics" to take advantage of creators, but have data-driven conversations and finding an area that is fair for everyone! It's important for both sides to understand each other here. Let me know your thoughts! Am I off? What am I missing here?

I had an interesting coaching call this morning. With a client who's building his first retainer. In 30 minutes, we walked through the pieces 🧩🧩 Anytime you're building out a retainer offer for a new - or existing client - it's important you include these elements in a proposal: 1. Payment terms - I would always push for 'Net 0' - payment is due at the first of the month for the upcoming month (upon invoice receipt) - and not go anything past Net 30 at the most. Net 60 and Net 90(!) are absolute insanity. You run the risk of never being paid at all in those scenarios. 2. Preferred communication methods - Outline how you'd prefer to communicate - email, Slack, etc. - so that it's crystal clear. Be willing to negotiate here so you get aligned with your client. If you don't set this expectation, you'll have to conform to what your client wants, which can lead to frustration from both parties. 3. Review cycles - To ensure there aren't 'too many cooks in the kitchen,' it's essential to establish the number of review cycles you'd prefer and who the reviewers will be for each content piece you develop. 3. 'Out of Scope' rate- You should clearly outline the scope of the retainer—whether that's a set number of hours per month or a specific package of deliverables—and also what's out of scope, not only in terms of the work but also what you charge per hour to do work outside of scope. 4. A 'wind down' clause - This one has bit me in the past, so I recommend that everyone include it. The wind-down clause outlines what you expect should the client choose to end your working relationship. Typically, that would be something like 30 days written notice and a final month's payment, so you have plenty of time to replace the lost income, turn over any remaining items due, etc. Most importantly, provide three pricing options in your proposal: 1. Entry - an entry package at a low price point 2. Standard - the one your client is most likely to pick - your typical service level for the money you'd like to earn on the retainer 3. Premium - a high-end option that secures more of your time and offers more deliverables, more available hours, etc. Ok, there you go. Now go write some retainer proposals and get your long-time transactional clients OFF THE TREADMILL. What else do y'all add to your retainer proposals? Tell me about it in the comments below. --- 👋 Hi y'all, I'm Kris. 🎒 A former startup guy who now runs a successful content studio. 🖋 Building my business has been hard. I want it to be easier for you. 🤝 To learn how I work more closely with clients, check out the links I share in the comments of these posts and the Featured Section of my profile.

Do you have cash flow woes? ✨ Today’s Tuesday Tip: CLEAR PAYMENT TERMS IN CONTRACTS = MORE CASH FLOW. When payment terms are too vague, you leave room for misunderstandings, delayed payments, and unnecessary tension. For example, simply saying “payment due upon receipt” doesn’t set clear expectations. What does “upon receipt” mean—immediately, within 24 hours, or within a week? Instead, opt for clear, specific language: “Payment is due within 7 calendar days of the invoice date.” “A late fee of X% will be applied for payments received after 30 days.” Here’s why this matters: 1️⃣ Protects Your Business: Specific terms create a legally sound foundation, ensuring your rights are clear in case of disputes. 2️⃣ Builds Trust: Setting expectations upfront demonstrates professionalism and makes it easier for clients to plan accordingly. 3️⃣ Streamlines Operations: You can better manage your cash flow and forecast income when payment terms are clear. Clarity in payment terms can make or break your client relationships and your cash flow. If you’re unsure how to draft payment terms that are clear and enforceable, let’s chat! Helping businesses create strong agreements is one of my favorite parts of what I do! 💕 Together, we got this!

One of the biggest mistakes I made while running my studio: proposals. Case in point, how many of us use language like this: "Final 50% invoiced upon project completion." Do NOT write this in your proposals. Ever. Why: this language incentivizes your client to delay, postpone, waffle, hem-and-haw, and say all sorts of nonsense like, "I have a great 11th hour idea!" or "good news! I got us more time!" Ugh. Most clients don't do this consciously (that would be evil) but perhaps subconsciously they know that you respond very well to... pressure. And if final payment is contingent on something as vague as "completion," they will likely exercise their power over you. Instead, write this: "Final 50% to be invoiced upon Deadline." Where "Deadline" is a specific date. That's it. Not a moving goal post. In the studio/prodco side of the industry, I've firsthand seen this best practice accelerate millions of dollars in payments that would otherwise would have been delayed. This is just one move! There are many more. If we work together as a community of creative companies, this rising tide lifts all boats...

Today's contract tip is about how to handle disputed invoice language in your payment provision. Some agreements give buyers the right not to pay if the buyer disputes the fee. This may seem innocuous, but it can have dire consequences for sellers’ cash flow. The dispute language means the buyer is not in breach when it doesn't pay. The buyer has to act in good faith, but that's about it. Here are three techniques sellers can use to limit their risk when they have bargaining power (with no judgment on fairness). 1. No right to withhold and dire consequences for nonpayment. “Seller may immediately suspend its performance if Buyer fails to pay the Fee by the deadline. Failure to pay by the deadline is a material breach.” 2. Require Seller's approval for nonpayment. “Buyer may withhold payment of disputed portions of the Fee for up to 10 days during discussions with Seller but must pay the entire Fee by the end of that period unless Seller approves otherwise.” 3. Narrow the type of dispute for which Buyer can elect not to pay. “Buyer may withhold payment of the disputed portions of the Fee only if Buyer reasonably believes there is a clerical error; provided, however, Buyer must submit the correct accounting prior to the due date.” What other techniques do you use when drafting the disputed payment language? #HowToContract #procurement #contracts #lawyers

🚨 The Hidden Cost of Getting Paid Faster 💰 Cash flow is one of the biggest challenges in manufacturing ⚙️. You need it for materials 🏗️…for labor 👷…overhead...for everything. But your customers? They need it too. They stretch payments 60, 90, even 120 days ⏳💸. So what do many shops do? They give early payment discounts…1%, 1.5%, maybe even 2% to get paid in 10-15 days 💰📅. Seems like a fair trade-off, right? 🚫 Not so fast. If you're offering 1% 10, Net 30, that’s an implied cost of nearly 20% annually 📉❗. 📊 Use this simple formula: Annualized Discount Rate = [Discount % / (100% - Discount %)] × [365 / (Full Payment Days - Discount Days)] Now, compare that to borrowing from your bank 🏦. Even today, a good line of credit might cost you 8%. That’s a huge gap. Why give up 20% when you could finance short-term cash needs for 8%? 🤔 But not ALL terms are bad! Net 60, 1% 15 days is 8.2%...I can work with that! Important thing is to know the math and use it wisely! If you have bad terms, what do you do? Probably dictated by customer anyway. 🤷 🔥 3 Possible Ways to Fix This: ✅ Secure Low-Rate Capital from Your Bank. Need cash faster? A business line of credit at 7-9% is way cheaper than a 20% effective discount rate.💵 ✅ Include Financing Costs in Your Pricing. If customers push payments, bake the cost into your part price so you’re not the one taking the hit.💲 ✅ Negotiate Better Payment Terms. If they insist on Net 60, 90 or worse push back. Explain the cost of that to your business. 🤝 🚀 Bottom Line: Don’t blindly accept early payment discounts without running the numbers. Protect your margins. Protect your cash flow. 💡📈 How do you handle payment terms in your business? Drop a comment below! 👇💬 #BuyTheNumbers #CashFlowMatters #ManufacturingFinance #NumbersMatter #DataDrivenDecisions #GrowingValue #MFGLeader #MakingChips Buy the Numbers# MakingChips MakingSparks Machine Shop Mastery Lights Out Nick Goellner Paul Van Metre Matthew Nix Casey Voelker Jennifer Dubose Kaleb Mertz

Have you ever been trying to close a deal with a new client, and they raised an objection like: 🚫 “Company policy requires that we pay contractors by the hour.” 🚫 “The maximum I can pay out without approval of senior management is $5000.” 🚫 “Our systems don’t support pre-payment for services.” These sorts of objections attempt to force you into unfavorable payment terms. It could be that the contact truly feels hamstrung by rigid policies, or it could be that they are bluffing. My approach in situations like these is to play hardball - politely, of course. Rather than throw up my hands and accept the broken policy, I approach the restriction as a hurdle that my contact and I need to overcome together. For example... Contact: “The maximum I can pay out without approval of senior management is $5000.” Me: “Understood. Well, I know how important this engagement is to your company. Is there some way we could work around this?” Contact: “For instance?” Me: “What if we broke the project into 3 phases, each priced at $5000?” Contact: “That works for me.” Another example... Contact: “Company policy requires that we pay contractors by the hour.” Me: “Hm... is there a maximum hourly rate?” Contact: “I don’t think so.” Me: “How about I invoice for 1 hour at $3,500?” Contact: “Might work. I’ll try it.” Yet another example... Contact: “Our systems don’t support pre-payment for services.” Me: “How about I send you a net-30 invoice today, and we set the project start date for a month from today?” Contact: “That’s fine. Yeah, we can’t get started for two weeks anyway.” ---- Every situation is different, but if we can’t come up with a solution and my only option is to “take it or leave it,” I walk away. PRO TIP: True buyers can usually work around rigid policies. (And if you’re not talking to the true buyer, you’re not going to have much luck overcoming these sorts of objections.) ---- 🚫 Don’t let an algorithm decide what you read! Join 10k+ readers who get my daily email tips ⬆️ Click "Visit my website" under my name to subscribe ♻️ Please repost if this was useful