Author: Aneta Daněk
Landing your first major enterprise customer is a big deal (pun intended) for any startup. Along with the revenue, it can bring a valuable reference, can help build momentum with other customers, and can show that your product can succeed in the enterprise market. Then the contract arrives, and it may come with requirements that are disproportionate to your startup’s size and capabilities.
Before you sign, it’s worth understanding the risks you’re taking on and whether your business can actually deliver what the contract requires. Your biggest customer should help accelerate your growth, not become your biggest liability.
Enterprise contracts can expose startups to financial and operational risks they may not be equipped to manage. The key is to understand what you’re agreeing to, what your potential financial exposure is, and whether those commitments work for your business in practice.
Before signing an enterprise contract, look at the potential financial exposure your startup is accepting. In particular, understand where liability is capped and where the contract could leave you with uncapped liability.
Indemnities can create significant additional financial exposure, particularly where they are unreasonably broad. Look at them as part of the wider picture of how risk is allocated between your startup and the customer. The key is to understand what you are agreeing to cover and how much exposure it could create.
Check what insurance the contract requires and whether your existing insurance covers the risks you’re accepting. A contractual commitment and your actual insurance coverage need to make sense together.
The practical question is: What could this mean financially if something goes seriously wrong, and does your insurance provide sufficient cover for that exposure?
The contract itself is only a part of the picture. Your internal processes, technology, insurance, suppliers, and subprocessors all need to support the commitments you’re making. Otherwise, the contract can create obligations that your business simply isn’t equipped to fulfill.
Check whether your technology and internal processes can support the cybersecurity and security commitments you’re making to the customer.
Check what service-level agreements (SLAs) and other service commitments you’re accepting.
Check whether your suppliers and subprocessors support the obligations you’re taking on.
What’s written in the contract needs to match what your business and its wider set up can actually deliver.
So don’t just ask: “Can we sign this?” Ask: “Can we actually do what we’re promising?”
Negotiating with a large customer doesn’t mean saying no to every requirement. Save your pushback for the risks that could materially affect your business, and focus on identifying where the allocation of risk is disproportionate. The point is to understand what you’re accepting and what those commitments could mean for your business in practice.
Before you sign, ask:
If you can answer these questions clearly, you’ll have a much better picture of the risks that come with the deal, not just the revenue.
Landing a major enterprise customer should accelerate your startup’s growth. The contract behind that win shouldn’t create a liability that grows faster than your revenue. Before you sign, understand your exposure, make sure that your business can deliver on its commitments, and focus your negotiations on the risks that matter the most.