As a small business owner, you’re bound to provide products and services to paying customers. But, that’s only a very small part of things. When it comes to building a successful, scaling business, it’s actually the relationships with others that you need to pay close attention to. Those relationships, which are usually determined by contracts, are what keeps your business running smoothly.
Contracts are there to ensure things are clear, to set expectations and to keep your business safe if something goes wrong. They’re not just legal requirements or ‘nice to have’ documents, they’re tools that help with necessary stability, growth and professionalism. Every small business is different – depending on the customers, employees, suppliers and partners you work with – but there are a few basic contracts that are equally important across the board.
The Most Important Contracts Every Small Business Needs
Employment Contracts
If you hire people, you need to give them written employment contracts. These contracts usually have information relating to job titles, duties, pay, bonuses, employee benefits, working hours, place of work, annual leave, sick leave, parental leave, notice periods, discipline and complaints procedures.
Clear employment contracts are there to protect both you and your employees, by making sure everyone knows what to expect from the start. They help to keep disagreements about pay, duties and dismissal to a minimum, and they give you a clear way to deal with any issues if they do arise.
Client Contracts
If your business offers services – such as consulting, marketing, design, coaching or professional advice – you need a written service agreement, which is made between you and your clients. A service agreement clearly sets out the work that needs to be done, what needs to be delivered, project timelines, pricing, payment dates, how to request changes, and terms for cancellation or termination.
If there isn’t a written agreement, there’s nothing for either party to refer to if something goes wrong. For example, a client might think that certain work is included, when it’s not. By clearly stating what is and isn’t included in your offerings, a service agreement protects your time, money and reputation.
Terms and Conditions
Any business that sells products or services, especially if you’re selling online, should have written terms and conditions. These rules apply to all transactions and make it easier to deal with customers from a legal standpoint. Terms and conditions usually include terms relating to payment and prices, plans for delivery, return and refund policies, warranties, limited liability information, how to make a complaint and customer duties.
Terms and conditions make it clear what customers can expect, as well as what you are and aren’t responsible for. Without them, general legal rules may be used to resolve disputes, instead of the specific terms you want.
Non-Disclosure Agreements (NDAs)
A non-disclosure agreement, or NDA, keeps information that’s shared with employees, contractors, collaborators or possible partners safe. This could include business plans, client lists, financial information, product designs, trade secrets and marketing strategies. If you don’t want certain information shared outside of your business, you need to have an NDA. Small businesses rely a lot on information and if you don’t have legal protection, other people can share, copy or use that information without you being able to stop them.
Supplier and Vendor Agreements
Supplier or vendor agreements make sure that third parties – the people who provide your business with materials, stock or services – are reliable, responsible and provide the service you’re paying them for. These contracts usually set out prices and terms of payment, minimum order quantities, delivery times, quality standards, service expectations, who’s responsible for delays, and details of how to end the relationship.
As a small business, it’s hard to meet customer expectations if your suppliers let you down. You’re relying on them to hold up their end of the deal, so you can hold up yours. If you don’t have a contract with a supplier or vendor, delays, price changes or quality issues can cause problems that you’re unable to do anything about.
Privacy and Data Protection Policies
Most businesses, regardless of size, gather or use personal information. This includes customer contact information, employee records and marketing data. Personal data needs to be handled in a responsible and transparent way, and that’s where privacy and data agreements come in. Even small businesses need to have privacy policies, cookie policies and data sharing agreements. Customers expect their data to be handled in a responsible way, and failing to do so can result in fines and reputational damage.
Freelancer and Contractor Agreements
A lot of small businesses hire independent contractors instead of employees, as it tends to be a more affordable, flexible and scalable way to increase a workforce. Freelancer and contractor agreements ensure the relationship is clear to both parties by detailing terms of payment, due dates, responsibilities, confidentiality rules and intellectual property. These agreements are also key when it comes to proving that the individual is a self-employed worker, and not a full-time employee of the business.
Intellectual Property (IP) Agreements
Intellectual property (IP) agreements are particularly important if your business makes original content, products or inventions. IP agreements are there to clarify ownership, copyright permissions and licensing, trademark and branding rules. If there are no clear terms for IP ownership, the person who carried out the work could own it legally, even if you paid for it. That’s likely to cause problems when you try to grow, sell or license your business.
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As a small business owner, you’re bound to provide products and services to paying customers. But, that’s only a very small part of things. When it comes to building a successful, scaling business, it’s actually the relationships with others that you need to pay close attention to. Those relationships, which are usually determined by contracts, are what keeps your business running smoothly.
Contracts are there to ensure things are clear, to set expectations and to keep your business safe if something goes wrong. They’re not just legal requirements or ‘nice to have’ documents, they’re tools that help with necessary stability, growth and professionalism. Every small business is different – depending on the customers, employees, suppliers and partners you work with – but there are a few basic contracts that are equally important across the board.
