Partners Must Heed Changes in Contract Negotiation Landscape
If you think your agency contracts are all that they can be, think again. You just might be surprised to learn about the common pitfalls in contracts – or provisions buried in the fine print – that are losing you monthly recurring revenue.
The good news is that you can optimize both new and existing contracts, says Jay Schwartz, chief operating officer and general counsel at StrataCore. In addition to his responsibilities as COO, he negotiates all of the company’s agency transactions and handles other legal matters. StrataCore works as a consulting broker for data center, CDN, security connectivity and cloud services. The company was founded in 2003 and has brokered more than 1,000 contracts.
Channel Partners caught up with Schwartz to discuss his upcoming presentation – Negotiating Agency Contracts: 3 Ways to Ensure Today’s Deal Won’t Be Tomorrow’s Problem — at Channel Partners Evolution, Oct. 9-12, in Philadelphia.
Channel Partners: Has something about negotiating contracts changed recently to drive the need for a session like this one?
Jay Schwartz: There’s nothing new, but the negotiating landscape can be modified depending on the type of agency you are, the timing in which you engage with a service provider, or your reputation [for] bringing high-quality transactions.
Looking at the first one – the type of agency you are – say concentrating in the data-center space or international connectivity, and so forth, then you would be attractive to those sorts of service providers. But that doesn’t mean that you would necessarily get the terms and conditions that you want.
The second point – the timing in which you engage with a service provider – is very important because your moment of peak leverage is when you have an opportunity. If you already have an agreement in place with a service provider that’s … substandard or deficient … and it has a set of terms and conditions that can be improved, then that’s a very ripe time to have that sort of engagement with the service provider so that you can increase your commission percentage or improve the terms and conditions surrounding the commission.
CP: Why should partners attend your upcoming presentation?
JS: Any agent that engages directly with an agency or contemplates signing a master-agent agreement, should ultimately be aware of the terms and conditions surrounding the commissions that either flow through the master-agency agreement or flow directly pursuant to an agency agreement that they negotiated directly with the applicable service provider.
So in short, every penny in revenue that comes into their company is somehow connected to the sorts of terms and conditions that we’ll be discussing [at the education session] — 100 percent.
CP: Are there common pitfalls that agents make when negotiating contracts?
JS: Yes, there are many.
For example, upon termination, there may be a very short tail after which your commissions don’t continue; however, if you enter into an agreement where a service provider terminates the commissions associated with the transactions or an account that you brought to them, then the value is diminished for you because what you deliver to a service provider is potential energy — because it’s up to us, the agent or service provider, to realize the full potential of that client.
Terminating commissions based on a variety of circumstances, which will be discussed at the education session, diminishes the value of that potential such that it encourages the agent to engage with a different service provider.
CP: What can attendees at this session expect to take away?
JS: What attendees will take away is a list of five or six things that must be addressed in a direct agency agreement with a service provider or that should have been addressed in an indirect agency agreement that flows through a master agent.
The bottom line is that this will improve their bottom line or improve the quality of their bottom line because any agency is valued 100 percent by the quality of the revenue stream that they have. Anything that impairs that revenue stream in some way can impair the value of their company.