New business owners often use basic contracts, with some lifting them from online sources or copying them from another business owner. It may have worked while your company was a startup, but now that your company is growing, some parts of your contract may not work the same as before.
It happens more often than you think for small business owners—contractors, clinic owners and others. What worked in the beginning will not always work as you scale your business and start anticipating bigger risks. Under Minnesota law, contracts are enforceable as written, even if the terms no longer make sense for your business. This means you need to update your agreements to better match your current needs.
Signs your contract is now too small for your business
The smaller risk of a smaller business makes some business owners complacent when it comes to their business contracts. Do not make this same mistake. If you are starting to notice any of these, it may be time to look for a lawyer to help you update your contracts:
- Ambiguous language: Vague words that seemed harmless before can now create potential disputes worth thousands.
- One-size-fits-all terms: Generic templates also provide generic protection for the company.
- No escape plan: Smaller businesses often do not include clear termination or renewal clauses because services rarely extend for years.
- Outdated risk allocation: As your operations grow, so should the liability, insurance coverage and indemnification clauses.
You need to make sure that your contracts are now ready to cater to your growing business needs.
Why is this important?
Your contract is the foundation of your business relationships. If you do not create appropriate terms, you may risk losing revenue because of disputes. Worse, you may have to spend a lot of money on court or attorney fees, money you could have just spent on growing your business further.
How to move forward
As your business expands, there is no need to throw away your old contract. But you must update it to protect your business. Consult a lawyer to review what you already have and modify the parts that no longer apply. Your new contract should match the realities of your business today. And when that changes again, your legal agreements should change with you.