Your relationship with your customers should be your top business priority. At the end of the year, you need to review the contracts that govern those relationships to make sure they are still serving the interests of your business.
One trap many growing businesses fall into is continuing to use outdated contracts that do not reflect increased costs of doing business, changes in operational procedures, or that limit the profitability of each customer relationship.
As your business grows, you may outgrow certain types of customers or specific business practices. You want to make sure that your customer contracts are structured so that you can meet your obligations comfortably and earn enough profit to continue to grow the business.
When reviewing customer contracts, you want to evaluate:
- Your performance history
- Customer payment history
- Profitability of each customer
- Quality of the customer relationship
When review customer contracts, businesses are often surprised to find that some customers are not profitable because of outdated contract terms or poor contract performance issues. Terminating or restructuring unprofitable customer relationships will help boost next year’s profits.