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SBC Team

It’s all (re)negotiable!

Posted by SBC Team Sep 20, 2010
Renegotiating your existing business contracts is an excellent way to keep revenue consistent in an economy that can be anything but

By Max Berry

While you may not feel like you have the leverage to redefine the terms of a business agreement, doing so can help keep you in the black during tough economic times and open a mutually beneficial dialogue between you and your partners. And besides, it never hurts to ask.

What can be renegotiated?
The first step toward redefining the terms of your business agreements is determining which of your contracts are ripe for renegotiation. Begin by analyzing all of them and identifying those that may be redefined in a way that benefits you without giving short shrift to the other party. Contracts eligible for renegotiation may include everything from your office equipment leases to your agreements with vendors, suppliers, and outsource workers.

In the instance of a pricing agreement, long-term fixed-rate contracts may have been made in a boom time, prior to a subsequent market drop, rendering your current contract out of sync with the current realities of the market. The same kinds of fixed-sum contracts with customers may also mean you're selling goods at a greatly diminished profit or, even worse, at a loss. Look for market discrepancies like this in your own contracts.

If you operate from a storefront or office, you may also want to renegotiate your lease contract with your landlord. When property values drop, so do rents. Your landlord would likely much prefer to renegotiate with an existing tenant than risk leaving a property vacant.

Renegotiation dos and don'ts
Before you take part in a renegotiation, figure out what you spend each year on the goods or services in question, then determine how much you can afford to spend on them going forward. Give these revised terms to your vendor and ask them to come back with any adjustments of their own. If you pay your bills promptly, you can use that as leverage for renegotiation; your timely payments help your associates with their own cash positions. If you make your case well, are candid about your own financial situation, and have a longstanding relationship with the vendor, there is a good chance the negotiation won't need to go any further than this.

If more negotiation is necessary to reach an agreement, do some research about your vendor: who are their other clients? What are market conditions like in their industry? By learning all you can, you'll reach a better understanding of their needs and how much leeway they can afford to give. As you're negotiating, make it clear that you've done your research; speak in terms of the big picture, not just your own needs.

For a negotiation with a landlord, it is best to begin the process at least six months before the end of your lease. Let your landlord know that you can no longer afford your current rent-or, as the case may be, that you know of a similar property at a better price-and that you are prepared to move your business elsewhere. Most landlords will be accommodating, but bear in mind that they will be much more willing to negotiate if you agree to extend your lease for a year or two at the revised rate.

Hiring a lawyer to help you renegotiate has its benefits; attorneys know how to interpret contracts in ways that are beneficial to their clients. But a lawyer will also cost you as much as you are likely to save on the renegotiation. Also, threatening to sue is hardly the best way to engender sympathy or foster compromise with a business associate.

The "same boat" rule
When renegotiating, remember that your vendors are your partners, not your adversaries. If your reasons for renegotiating are tied to broad economic woes, chances are the party with whom you're negotiating is in the same boat as you, and will be willing to bend a bit to keep your business; losing it would likely cost much more than it would to cut you some slack.

If contract holders are reticent to renegotiate, the best course of action may be complete honesty. Be candid about the economic conditions you're facing. Make it clear that some simple cost cutting could be the difference between staying in business and going under. But don't forget that a win-win scenario is not out of the question. Ask your contract partner what you can give in return for what you hope to get. Ideally, you've established a longtime partnership with your vendors. If you've paid higher rates during good times, it should be natural to pay a bit less in tough times. First and foremost, remember that you both signed a contract with the ultimate goal of helping each other. You're still in this together.
If you find that processing payroll is becoming an increasingly burdensome task, it may be time to turn to one of the many payroll firms eager to do it for you

By Christopher Freeburn

One of the greatest burdens faced by small business owners is dealing with the voluminous amount of paperwork generated by their businesses. Even small businesses with just a handful of employees create enough paperwork to inspire dread in the most ambitious entrepreneurs. One of the most vexing sources of this endless cavalcade of forms, worksheets, timetables, reports, and compliance documents is payroll. The simple act of paying your employees requires completing a complicated thicket of bank, legal, and tax forms, and that's before the checks even get written.

Trying to go it alone
Even though filling out all the payroll paperwork takes many more hours than most small business owners would like, the overwhelming majority continue to handle payroll themselves. The National Federation of Independent Business (NFIB) recently surveyed hundreds of small businesses and discovered that roughly 64 percent performed all payroll functions in house. "The smallest enterprises are the ones most likely to prepare payroll in-house, while the largest small businesses more often send it out," says William Dennis, a senior researcher with NFIB. "Even then, half of the largest small businesses-those employing 20 or more workers-handle payroll themselves." According to the NFIB, in more than half of these small businesses-and in particular, those with fewer than 20 employees-the small business owner completed all payroll paperwork, personally.

Outsourcing the paperwork
If you dread the thought of having to tabulate tax withholdings, filling out tax forms, and writing checks, there is a solution to your conundrum: payroll outsourcing. The payroll preparation industry has expanded dramatically over the past two decades, with dozens of companies offering a myriad of payroll preparation options. The rise of electronic communications-especially the Internet-has greatly increased the ease and economy of such services.

The NFIB survey mentioned above found that most small business owners who did their own payrolls cited cost as a reason for keeping payroll in-house. However, the profusion of payroll preparation firms and the efficiency of Internet-based communication have lowered the cost of such services to the point that almost any sized business can afford them. Using any of the major payroll preparation firms, a small business with between five and ten employees, can expect to pay $100 or less, per pay period, for payroll services, including paychecks, direct deposit payments, employee tax and benefit calculations, and record keeping.

Reaping the benefits
In addition to reducing frustration, outsourcing payroll lets your business take advantage of the payroll firm's expertise in preparing tax documents like 1099 and W2 forms, which can be difficult for small business owners trying to do them on their own. Professional payroll preparation firms hire CPAs and tax experts who keep track of both minute and major changes to local, state, and federal tax and employment laws. Their knowledge of the laws and their experience in preparing and filing the paperwork associated with compliance with the applicable statutes greatly reduce the risk of errors or late filings, both of which can result in significant penalties. Payroll service providers will also complete and submit end-of-year tax documents like W2 and 1099 forms, correctly and on time.

Today's payroll services are also a lot easier to use. Almost all payroll providers allow small business owners to manage their payroll accounts online. This means you can sign up for additional services, add employees, change information, and adjust salaries, benefits, or pay periods, just by logging into your account.


Outsourcing your company's payroll options permits you as a business owner to focus your thinking on running your business and removes one more distraction. "Small business owners have enough to think about without having to ponder the intricacies of the tax code every time they pay their employees," says Dave Bowman of TTG Associates, a Los Angeles-based business-consulting firm.

Choosing an outside payroll firm
When looking for an outside payroll provider, there are a few things you need to keep in mind:


  • Choose an established firm with a good track record. Contact your local better business bureau to see if there have been any complaints made against the company.
  • Make sure the payroll company can handle your company's specific needs. Some payroll companies only handle federal and state taxes, but not city taxes. Other payroll companies will not handle companies with locations in multiple tax jurisdictions or states.
  • Ask how the company receives payroll information. Many large payroll firms now strongly prefer to receive payroll data over the Internet, or by email. But most will accept data via phone call. Make sure the payroll provider uses a means you are comfortable with.
  • What liability will the payroll provider accept? Will the payroll provider accept any tax penalties that arise from its own errors? Not all payroll companies do, and the government will hold your business, not the payroll provider, ultimately responsible for any mistakes, so make sure you know where the payroll firm stands on this.

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