Aside from my usual training/consulting business at that time, I also had a business in what was called “premiums or “custom publishing”. You have likely gotten a mailing from a magazine, offering you a subscription with a free gift – a gadget, a diary, or a book of tips or ideas.
I’d come up with an idea for one of the magazines in the Time-Life group. First, they would test it by send out a mailing offering my idea as well as two other ideas to a test audience. Whichever of the 3 ideas got more responses was the winner, and that idea was then “rolled out” for a much larger project, sometimes to a million or more potential customers. Usually, they got about 5,000 affirmative responses.
What this meant, to a small vendor like me, was that I’d have to create the actual 5,000 booklets (at enormous cost, usually a loss) to fulfill the first 5,000 customers.
However, if my idea won, then they would order about 200,000 copies from me.
So, at the outset, I drafted a contract agreement, a “contingency” (an “if then” contract). It stated that I would sell them the first 5,000 for a certain amount (say $2.00 each) but that if they decided to roll out to the larger audience, they were obligated to purchase the 200,000 from me, of course at a quantity discount price, say .70 each).
Months went by (these tests take a long time to yield results). I called to follow up on the progress; finally about 7 months later, it turned out that Barry (who had been the manager in charge) had been transferred. His boss, Michele, the Vice President of the whole division, told me that the test had been very successful, but they had decided to “produce it internally”.
I invited her to lunch for later that week. We had a lovely lunch, talked about all sorts of topics. Then, after we ordered coffee, I excused myself to go to the rest room. From my thin briefcase, I took one small piece of paper and slid it over to her place. Of course it was the “contingency contract” signed by her employee months earlier, of which I am certain she had no awareness.
We never said a word about this topic. I paid the check, she thanked me for lunch, and when I walked into my office I had an email with the purchase order for the rollout order.
Yes!
Now how do you think this story would have turned out had I not had a contract? Barry didn’t want to sign the contingency agreement, but he was eager to get the project started. If I had not had the contract, they would likely have said it was just a verbal agreement and I would have had to accept their decision, and lost money on the deal. With a contract, which they had to honor, I moved ahead, did an excellent job, and made a considerable profit.
An important lesson for us consultants: remember, you’re in business! In the rush and excitement of a new project, we often begin the work and don’t think through (and most important, make the client think with you) all the possible scenarios. And the beginning is the time when you have the most leverage, the most influence. They’re eager to get started. So go for it.
Get it in Writing! And you’ll sleep like a baby.
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