Founders can ramp up the speed of their revenue
As an early attorney at Google, I found the length of new business contracts was slowing down the pace of business just as the search firm was moving at rocket speed. Our contracts were initially eight pages long. I slimmed the contract down to one page and dubbed the process of getting customers signed on quickly as “revenue velocity”. While shorter contracts are only a part of increasing “speed-to-do-business,” this simple innovation helped drive revenue up at Google from $85 million to $10 billion during those early years. There are a number of reasons to shorten startup contracts and relatively easy ways to do it.
Make Contracts Quickly Consumable
In the early days, founders need to get revenue in the door quickly to make payroll. By making a short form contract, it becomes something that’s quickly and easily consumable by the customer. The desired outcome is for the contract to be returned as soon as possible with a signature, accompanied by a check. When you send a potential customer a 20-page contract, it’s no surprise when four months later you still haven’t heard anything.
Long Contract Equals Longer Negotiations
Eliminating items that are likely to be controversial and/or could take a lot of time is crucial to closing deals efficiently. Don’t feel you have to negotiate every detail. You want to get your revenue deals signed quickly, with as little legal intervention as possible. If you can come up with a one-page, “sign as is” contract, the process will go much smoother. With less chance of legal intervention, you increase the likelihood the customer will sign “as is”.
Measure the Metrics
Monitor how much legal intervention you can remove from the process as well as how quickly you can close deals. Measure how initiating short form contracts changes the workload for the folks directly involved. Monitor the time spent from when the deal comes in, when the contract is sent and the deal closed. Shortening the contract can make a huge difference in staff time, energy and money.
If you have relatively simple, balanced and short contracts, you are much more likely to close efficiently and be able to collect that check from your customer and actually start working together. That’s where the fun begins!
Hear more about revenue velocity here
Miriam Rivera is a Managing Director at Ulu Ventures and a former VP and deputy general counsel at Google.
Ulu Ventures is a seed stage venture firm investing primarily in enterprise IT. Ulu focuses on the market opportunity created by the Stanford and Silicon Valley communities and uses data-driven portfolio construction, explicit measurement of risk, and principled, repeatable decision making. Decision analysis also reduces cognitive bias and has made Ulu’s portfolio quite diverse by industry standards. 33% of Ulu’s CEOs are women. This makes Ulu conventional in the world of institutional investors but contrarian as compared to other VCs.