Good relationships rarely start with long and arduous negotiation periods, and as any salesperson will tell you: the quicker you can get a client the final contract, the more likely the deal will close.
But a typical contracting process is well… a process. In fact, the length of time taken for a contract to be reviewed, negotiated, approved and signed by all parties is usually measured in weeks rather than days.
To put it simply, a slow contracting process (we call this deal velocity) can cost your business millions of dollars each year. For organisations looking to boost their bottom line, this is therefore a metric to be tracked closely.
The longer a contract takes to get signed (lower deal velocity), the less valuable it becomes, but perhaps for more reasons than you think.
We know, of course, that ‘time kills all deals’. The more time that passes, the greater chance priorities will shift, buyers will lose confidence and unforeseen circumstances will arise. Your conversion rate drops the longer you leave it.
But what’s equally important to consider is that sales contracts don’t become revenue-generators until they’re executed.
If you can get a lease signed a week earlier, it’s a week of additional rental income. Same goes for almost any product or service that works on a recurring model.
No doubt many salespeople would love to draft and approve their own contracts. Deal velocity would certainly improve, and no doubt more of your reps would hit budget.
But there’s a reason why Legal insists on stepping in, and typically undertakes 5 – 10 contract revisions prior to approval and execution.
The salesperson wants the best deal (as does the counterparty), while the lawyers on each side are charged with managing risk exposure. There’s no point getting a lucrative deal done if it leads to unacceptable risk exposure — this may cost the business more in the long run.