Founders can ramp up the speed of their revenue
As the second attorney hired at Google, Miriam found the length of new business contracts was slowing down the pace of business just as the search firm was moving at rocket speed. Google’s ad contracts were initially 8 pages long. She slimmed the contract down to 1 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 in 5 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. A short form contract is 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 complex, likely to be controversial or take a lot of time to negotiate 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 necessary to make good risk-reward trade-offs. If you can come up with a 1-page, “sign as is” contract, the process will go more smoothly.
To get more cashflow, determine how much legal intervention you can remove from the process as well as how quickly you close deals. Measure how initiating short form contracts changes the workload for the folks directly involved. Assess the time spent from when the deal comes in, when the contract is assigned, and the deal closed. f 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 start working together.