Preparing a sales contract is one of the most important steps in the sales process. It involves making sure that you clearly define the customer needs, agree on a solution, establish terms, and address any outstanding issues. Doing this effectively makes all the difference in closing the deal and building a successful customer relationship.
1. Clarify Customer Needs
A sales contract is an agreement between two parties—you and your customer—about providing a product or service. That means it’s important to be sure you clarify exactly what your customer needs before creating a sales contract. This usually happens during the sales process, but you shouldn’t try to prepare a formal agreement without having done the work ahead of time to determine exactly what your customer needs.
Before preparing the sales contract, be sure you have the answer to the following questions:
- What is the biggest need your customer faces right now?
- What is your customer’s budget?
- Have the key decision-makers expressed any concerns?
- Do the customer’s needs and challenges align with the products you offer?
2. Agree on a Solution
As a salesperson, your job is to offer solutions that help alleviate your customer’s pain point. Once you’ve heard their needs, you should agree with them on the best option that fits their specific circumstances. That means aligning the products and services your company offers with your customer’s best interests. The best solutions are the ones that directly address the needs of your customer, as opposed to simply trying to make a sale.
In fact, it’s worth taking the time to be sure both you and your customer, in fact, agree. While it may seem counterintuitive to point out a negative, this is actually where you should also be sure that the customer is aware of any drawbacks or obligations that the solutions will have for them. This can save a lot of time and frustration later when these things inevitably come up anyway.
3. Establish Terms
Now that you and your customer have agreed on the solution that makes the most sense for their needs, there are a few important details that need to be established. In fact, these are probably the most important details since they define how you will work to deliver the solution you promised. This stage is primarily about creating and managing expectations. Specifically, you want to establish exactly what you’ll provide, what the customer pays, and on what timeline.
The three most important terms in a sales contract include:
Deliverables are the specific items you will provide for your customer. This could include products, like a new HVAC system, or it could include services, like a new website. Often it will include a combination of both. For example, if you are installing a new HVAC system, the components of that system are deliverables, but so is the labor involved in the installation.
Establishing exactly what will be delivered is especially important if you are a service-based business. If you are working on helping a small business create a marketing campaign, for example, it’s critical to lay out in clear terms exactly what you’ll be doing and what the finished results will be. This will eliminate confusion and reduce the likelihood you’ll have problems later due to a misunderstanding.
Not only should you establish the amount a customer will pay you under a sales contract, but it’s also important to lay out the details. For example, will they pay you upfront in full, or will they pay a deposit and then the balance over time? How you decide to accept payment can vary based on a number of factors, but the important thing is to put it in writing and agree with your customer on the terms.
Sometimes a timeline is as simple as identifying the date you will deliver a product. For other types of sales, there may be steps involved throughout the process. You and your customer should talk through these steps and together establish a mutually beneficial timeline. For example, if you’re building a website, you might establish milestones where you review progress and gain sign-off from your customer.
4. Provide a Proposal for Review
I recommend incorporating the terms and solutions you have discussed into a sales proposal before you submit a formal contract or sales agreement. This gives both parties the opportunity to make sure that they have a clear understanding of the expectations, deliverables, timeline, and costs associated with the sale. The other advantage of a sales proposal is that because it isn’t intended to be a legal document, it is less expensive to make changes at this stage.
This is especially true if you sell complex products or long-term, service-based projects. For example, if you are a marketing agency and you are working on a contract for monthly marketing services, a proposal can help you define the details before involving an attorney who can help you capture those details in a contract.
5. Allow Time for Revisions
Once you’ve prepared the proposal for your customer, establish a timeline for them to review it to be sure it reflects their needs and your agreed-upon solutions. By defining this review period upfront, you can make a point to follow up and make sure there are no issues that have come up so that you can be sure the process continues to move forward. The most important factor here is to be clear upfront about when you anticipate moving to the next step in the process.
6. Use a Sales Contract Template
Since a sales contract is a legal document, your best bet is to use a pre-created template that you can simply fill in with the important details. Even complicated real estate deals are mostly form contracts since the legal language doesn’t usually change—just the specific details. Using a template means you can simply fill in the details that apply to your customer.
We’ve included a template here for you to get started. This sales contract template provides the sections you should be sure to include, but is not meant to be a substitute for a legal document. Once you’ve completed this template for your own use, be sure to ask your attorney to review it for your business.
This template is not meant to be legal advice and we are not providing it as an attorney. Fit Small Business makes no warranty regarding the use of this template.
7. Submit Contract for Electronic Signatures
While there may be some times when a paper copy of a contract is more appropriate, most of the time it makes more sense to use an electronic contract and capture digital signatures. There is a range of benefits to this—mostly that it makes it easier to submit contracts to customers who aren’t close by—and it’s far quicker than sending contracts back and forth. Digital contracts are fully enforceable and have become much easier to store and manage than paper.
Pro tip: Using an electronic signature software tool like DocuSign makes it easy to submit a contract for signatures, and then manage and store them. DocuSign is also free to use for signers, meaning you can use it even with customers who aren’t already signed up. Paid plans start at $10 per month. Visit DocuSign for more information.
Additional Things to Consider
In addition to the steps to prepare a sales contract, there are a few best practices you should also consider. These will help you make sure that every sales contract you sign is legally enforceable and meets both the needs of your business and your customer. They also help make the process easier and more manageable as your business grows over time.
Here are three best practices to consider when preparing a sales contract:
It would be hard to overstate the importance of having a professional look at any sales contract you intend to use with customers. Having an attorney review your contract first can save you major headaches later. While that means an additional expense, paying for legal counsel upfront is far better than having to pay someone to help you enforce a contract later, or defend you in the event something goes wrong.
Pro tip: While every business should have a relationship with an attorney who specializes in small business issues, before you send your next sales contract, you should at least check out a service like RocketLawyer. With RocketLawyer, you can create a sales contract that has been approved by an actual attorney. Visit RocketLawyer for more information.
Save Time by Agreeing Upfront
While getting a contract signed is probably the most exciting part of a salesperson’s job, you shouldn’t be in a rush. Take time to do the hard work upfront, so that when you get to the point of placing a contract in front of a customer, you’re confident that it meets his or her needs. Also, while it’s not uncommon with large contracts to have some negotiations back and forth over the finer points, you should have already agreed on the big-picture details.
Document Management System
Once you’ve signed a contract, you’ll want to be sure you have a system in place to keep track of important documents. This is especially true when you have more than one sales contract in progress at a time. If you ever need to review a contract or enforce it, it’s helpful to have them all in one place. For example, if you use hardcopy contracts, you’ll want to have a filing system that keeps the important paperwork together and easy to find.
If you are using electronic contracts, on the other hand, using a service like DocuSign makes it easy to find and review your current and past contracts. DocuSign lets you upload documents and submit them for signature; it also allows both parties to download a copy and it stores your contracts in the cloud. DocuSign starts at $10 per month. Visit their website for more information.
Frequently Asked Questions (FAQs)
What is the difference between a sales contract & a sales agreement?
For the most part, they are the same. A contract is simply a written agreement between two parties that details the product or work to be provided by one party, and the price paid by the other party. Often the terms are used interchangeably since “agreement” sounds less formal.
Who should sign a sales contract?
In most cases, only someone who is authorized to enter into a legal agreement on behalf of a business should sign a sales contract. Often the decision-maker is authorized to sign, but in the event that they aren’t, be sure to account for the time involved in getting a contract signed into your process.
Do I really need an attorney for a sales contract?
Yes. If your business is just getting started, you might be tempted to avoid the expense of an attorney by doing it yourself. While that sounds good in the short term, it doesn’t take long to find yourself with much bigger problems if your sales contract is poorly written or challenged in court. Even if your business doesn’t have an attorney on retainer, at least consider a service like RocketLawyer.
Preparing a sales contract might seem overwhelming at first, but these seven steps will help you and your customer agree on the important details. We’ve also provided a sales contract template you can use to get started in developing a form that works for your business and your customers.
Moving your customers through the process of signing a sales contract doesn’t have to be complicated. Using a customer relationship management (CRM) tool like Salesforce Essentials can help you track your deal through each stage while also managing the important documents like proposals and contracts. Salesforce Essentials is $25 per user, per month, and you can sign up for a 30-day free trial.