Contract terms and conditions are a part of business life, a necessary evil, if you will. Many leasing agreements contain boilerplate language and stipulations. That doesn’t mean, however, that the client or prospect will see it that way.
For a vast majority of business deals, the contractual agreement is a matter of course. Unless a client has always paid cash for all of its business technology needs, they’ve been down the leasing/financing road many a time. Still, astute negotiators will seek to ensure the terms and conditions are as favorable as possible.
An indelicate term would be haggling. But we’ll keep our language professional here in this month’s opening State of the Industry report on leasing. Our dealer panel shares its views on how they navigate deals when either the client’s legal department or chief negotiator steps into the fray.
The larger the deal, the greater the likelihood that a client or prospect will request alterations to a standard agreement, notes Tom Ouellette, president of Budget Document Technology in Lewiston, Maine. Medical facilities and the K-12 education space are more likely to engage legal departments.
Obviously, not all requested changes are major, and Ouellette tries to be accommodating as possible. When it does happen, he generally turns to its leasing partner, GreatAmerica, for clarification and insight.
“I let the client know it’s a legal document,” he said. “There are some changes that can be done by a lawyer. I generally pass it on to GreatAmerica. We’ll set up a conference call where I can do the introduction, then let GreatAmerica work it out and see what the client will or won’t accept.”
According to Josh Salkin, a partner with EDGE Business Systems, it’s not so much a matter of expectation-setting as it is striving to ensure an equitable agreement. Striking a balance is the key here.
“We try to work with our leasing partners to address special T&C changes clients want to strike through or modify,” he said. “At the end of the day, it’s about finding a happy medium between reasonable requests and unnecessary demands.”
Accommodating Clients
Doug Pitassi has been in the industry long enough to remember when a handshake deal was all that was necessary. The president of Pacific Office Automation (POA) in Beaverton, Oregon, believes developing trust and earning a client’s respect goes a long way when it comes time to lay out the terms and conditions. It’s a low percentage that seek changes, he notes, and POA seeks to work out as many issues as possible when client legal teams go through the review process.
“Whether it’s questions about indemnification, insurance claim charges, escalation costs—anything that might be part of a contract—we are ready to accommodate our client,” he said. “The copier business has made it really simple. We bundle everything and put it into a monthly payment. We also make it simple for the client; we can always break it out and explain it to them. Building that trust is the key. If you treat them right, most of the time they’ll agree to the terms.”
Legal firm clients are generally the most apt to seek changes on terms and conditions, but they also understand there are limits. Dean Swenson, president of The Swenson Group in Livermore, California, says that while many of the terms are not negotiable, they’ll make as many concessions are possible to make the client feel good about having the most favorable of T&C.
“On occasion, we’ll go to the bank to see if they’ll be flexible to do certain things,” Swenson noted. “But it’s pretty rare. More often than not, the questions are service related in terms of escalation or renewals.”
Keep it Simple
The nature of the lease contract has helped reduce a large degree of red-lining, according to David Carson, president of Plus Inc. in Greenville, South Carolina. In the past, it was the larger clients that would raise questions about terms, regardless of how favorable it was for the buyer. It’s the contract simplification that has made it less of an issue.
“Most of the leases now written are simplified one-page documents,” he said. “There’s not a lot to it. If you go back five years, the lease was two or three pages. There’s just not as many terms and conditions now.”
Dealers such as MTS Office Systems in Greenville, South Carolina, take great pains to ensure sales reps are instructed thoroughly on what items in an agreement can be crossed out or amended. Mason Smith, president and CEO, feels the relationship between the dealer and the client is what matters most. Added enticements can often be the little push a client needs to ink the deal.
“If a client trusts us as a company to put the best terms in place for them, they might have some questions, but usually those are easily answered and overcome,” he said. “In regard to price, we discuss often that once a client is asking for a price concession, they typically have made a decision to come on board with our company. In that scenario, we try to give the client something such as free service, a throw-in printer, first quarter without a service invoice—something that makes them feel good about their decision.”
