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How to present my sales contracts for due diligence

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How to present my sales contracts for due diligence

So you’ve got to the point in due diligence that the investors are looking at your sales contracts for due diligence? Now all that contract organization and negotiation hard work pays off. Or now you’re staring at folders full of poorly named PDFs and wondering what the hell you need to do to present your sales contracts for due diligence. The foundations of preparing sales contracts for due diligence are more often than not completely ignored. Negotiating contracts can be time-consuming, along with challenges in managing legal teams and accessing post-contract information.

Altogether these things mean that you’ve most likely spend your time on something else, such as growing your product or go to market strategy. If you haven’t used a contract management software designed for startups, such as Contract Sent, you probably need to start addressing these challenges directly and now. Let’s have a look into presenting sales contracts for due diligence, and let’s explore strategic approaches to streamline the contract management process.

Understanding the Due Diligence Process:

Due diligence is an in depth examination undertaken by potential investors or partners to assess the risks and opportunities associated with a business. Or, as we like to joke, it’s a cavity search to find any hidden skeletons. When it comes to presenting sales contracts, startups need to offer a transparent and comprehensive view to instill confidence and facilitate a smoother transaction.

What to Expect When Presenting Your Sales Contracts For Due Diligence

Sales contract due diligence for a startup, also known as buyer’s due diligence, is a seemingly never ending process that potential buyers or investors undertake before acquiring or investing in a startup. It’s the time that your head of legal and head of finance show their worth. This process aims to assess the startup’s financial, legal, operational, and strategic aspects to identify any risks or opportunities associated with the acquisition or investment. Here are some key components of sales contract due diligence for a startup:

1. Financial Due Diligence:

  • Review of financial statements, including income statements, balance sheets, and cash flow statements and whether they align to contracts.
  • Analysis of revenue trends, profitability, and historical financial performance based on actual contract data and sales pipeline.
  • Examination of accounts receivable and payment clauses in contracts.
  • Assessment of the startup’s financial projections and assumptions based on current contracts – for example renewal dates and termination for convenience clauses

2. Legal Due Diligence:

  • Examination of corporate structure, including ownership, subsidiaries, and legal entities related to contracts
  • Review of contracts, agreements, and legal obligations, such as leases, licenses, and partnerships.
  • Identification of pending or potential legal disputes, litigation, or regulatory issues with customers.
  • Evaluation of intellectual property rights, patents, trademarks, and copyrights in customer contracts.

3. Operational Due Diligence:

  • Assessment of contracting processes and contract storage processes
  • Examination of the startup’s standard contract templates
  • Analysis of contract key performance indicators (KPIs) and operational efficiency.

4. Strategic Due Diligence:

  • Evaluation of the startup’s strategy towards risk and liability
  • Examination of the startup’s negotiation strategies
  • Assessment of the startup’s sales management team and their track record.
  • Identification of mix of customer size and industry in the sales contracts.

5. Contract Compliance and Regulatory Due Diligence:

  • Confirmation of compliance with industry regulations and standards that are set out in your sales contracts.
  • Assessment of any regulatory approvals, licenses, or permits required for the business.
  • Identification of any non-compliance issues or potential regulatory risks.

6. Employee Access:

  • Review of employment access to customers data.
  • Assessment of the startup’s background checks.
  • Evaluation of any areas that could cause risk, like key person risk on large accounts.

7. Tax and Financial Structure Due Diligence:

  • Examination of the startup’s sales tax records, liabilities, and strategies. Have you been billing and stating tax appropriately for where your customers are.
  • Analysis of the financial structure of your contracts, including tax implications.

The scope and depth of sales contract due diligence may vary depending on the specific circumstances of the acquisition or investment and the preferences of the buyer or investor. It’s crucial for both parties to conduct thorough due diligence to minimize risks and ensure a successful transaction.

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Crafting a Comprehensive Due Diligence Package:

  1. Organize Contracts Systematically:
    • Begin by organizing your contracts systematically. Categorize them based on clients, types, or any relevant criteria. This can be done with a proper contract storage structure.
    • Use Contract Sent’s advanced features, such as a kanban board and tracking for contract versions, to ensure a well-structured presentation.
  2. Create a Detailed Index:
    • Develop a detailed index or table of contents for your due diligence package. Clearly outline what each section entails.
    • Leverage Contract Sent’s dashboard for tracking contract metrics to enhance the comprehensiveness of your presentation.

Incorporating Key Information:

  1. Provide Contextual Overviews:
    • Accompany each contract with a contextual overview. Explain the nature of the business relationship, key terms, and any unique provisions.
    • Use Contract Sent’s dashboard for an overview of contract negotiations to present a snapshot of the negotiation process.
  2. Highlight Crucial Clauses and Obligations:
    • Identify and emphasize crucial clauses and obligations within each contract.
    • Utilize Contract Sent’s tracking of important contract clauses to ensure nothing essential goes unnoticed.

Ensuring Legal Compliance:

  1. Legal Opinions and Compliance:
    • Confirm that all contracts comply with relevant laws and regulations. Address any legal opinions or advice sought during the contractual process.
    • Contract Sent’s advanced contract comparison tool can assist in ensuring legal compliance and consistency across contracts.
  2. Facilitate Q&A Sessions:
    • Be prepared to facilitate Q&A sessions to address any questions or concerns related to the contracts.
    • Utilize Contract Sent’s tasks feature to manage the legal team’s workload and address inquiries promptly.

Technological Solutions for Streamlined Presentation:

  1. Digital Accessibility:
    • Present your contracts in a digital format for easy accessibility. Avoid the challenges of information trapped in lengthy PDFs.
    • Leverage Contract Sent’s user-friendly interface, allowing unlimited users to access and review contracts seamlessly.
  2. Use Technology for Efficiency:
    • Explore technology solutions, such as contract management software, to streamline the due diligence process.
    • Showcase Contract Sent’s capabilities in your presentation to demonstrate a commitment to efficiency and modernization.

Mastering how you navigate though communicating your sales contracts for due diligence will help you to create transparency and trust from your investors. By strategically organizing, highlighting key information, ensuring legal compliance, and leveraging contract management systems like Contract Sent, startups can streamline the due diligence process. Get these practices in place early to not only navigate due diligence efficiently but also to position your startup for success when you start scaling.


Contract Sent is not a law firm, this post and subsequent pages on this website do not constitute or contain legal advice. To understand whether or not the ideas and guidance on the Contract Sent website is applicable to your business, you should consult with a licensed attorney. The use and accessing of any resources contained within the Contract Sent site do not create an attorney-client relationship between the user and Contract Sent.

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