Change is the only constant in this world, therefore, it is not a surprise for any business to end contracts with other businesses if they have come to a point where they need to do that. There are many possible reasons for these unideal circumstances, but this doesn’t mean that relationships between the two partners should be severed. It is a vital part of contract management.
However, there are many ways to end contracts smoothly while maintaining business relations. Let’s learn the same from business owners/leaders.
1. Two Key Solutions
Some insights on how to end contracts without ending business relationships:
Listen: The words you use matter in any business negotiation, but even more important is listening to what the other person has to say. When you listen, you pick up on the things that are most important to the person you are doing business with. When it comes time to end a contract, be as calm, direct, and as possible while listening for cues from the other party so you can dialogue according to how they are feeling. Be empathetic, so they know you hear and understand them, so they feel good about working with you, even if you have to end the contract.
Show respect: When you show respect for the person you are doing business with, you can end a contract, while saving the relationship. Most people do business with people they like and respect, so even if you aren’t willing or able to keep the contract open, you can leave open the possibility of working together in the future, and keeping your relationship going.
2. Build a Strong Relationship During the Partnership
The key to ending contracts without ending business relationships is taking the time during the partnership to build a strong relationship with the business partner.
Ending a contract is difficult. It can happen for various reasons. It’s never easy news to deliver that your organization is no longer interested in working with a business partner. This is especially the case if it’s a partner you’ve been working with for a while, and a relationship you want to maintain.
In my experience, the best way to end contacts without hurting the business relationship is to have spent time during the contract, actually building a strong relationship. If you have a strong relationship in place, it’s much easier to honestly and directly inform the partner that you no longer want to work together. If it’s a relationship you want to maintain, it’s likely that the partner did good work for your organization. You can let your primary contact know that you appreciate the valuable work that they’ve done, and have enjoyed working with them, but the timing is no longer right. If the relationship is built on a solid foundation, it will be much easier for the partner to understand.
You can also let them know that if specific circumstances change, you’ll be interested in partnering with them in the future. Finally, be sure to tell the contractor that you would happily be a reference and will recommend their services to other companies that ask for your recommendation.
If you wait until the end of the partnership to establish a strong relationship, it’s already too late.
3. Three ways to avoid Breaking Business Relations
Use narrow language in the contract and add termination clause: First, companies should use narrow language at the time of contracts along with adding the termination clause. “Qualitative work” is not the precise term; instead, a business must state what qualitative work means to them. Just in case the criteria would not be met, then contract termination could happen. By doing so, all terms and conditions would be clear, and no ambiguities termination would not be taken as end the business relationship.
State the facts in a report: If you are interested in terminating the contract, then state reasons instead of saying it vaguely. Make a proper report highlighting all the issues you have faced because of the other party’s non-qualitative products or services. Likewise, not just mention the cause but also the adverse effects that your business had to suffer because of it. By doing so, you give another person the sense that you are not terminating it happily; instead, you have the proper reasons to do so. If you do not want to end the relationship, give a kind note at the end, providing soft signals. For example, we are changing our partner for now, but we hope to work with you on the upcoming projects shortly.
Shorten the length of the contract: If your company wants to terminate the contract because it is likely not to fulfill the terms and conditions, then go for negotiation. You can shorten the limit of agreement in a manner mutually beneficial to both parties. The remaining contract would be terminated nicely, and the relationship would be maintained as well.
4. Try to Keep in Touch
There is no single protocol on how to end a business contract correctly. Every particular situation depends on the nature of the agreement, circumstances, further actions, and more. What’s common in almost every case when terminating a contract, though, is the desire to save the business relationship itself. Efficient communication can be a savior in the process of ending a contract, but it’s even better if it was applied prior to such an event. If both parties were transparent while interacting, it’s highly likely that they will understand if one chooses to end their current collaboration.
Moreover, when a contract is ended due to specific reasons, the terminating party should provide the other party with a detailed explanation of their decision. This will prove the legitimacy of such a choice. If some work still has to be done before the termination, discuss the conditions right away to avoid misunderstandings.
Finally, ending an agreement doesn’t mean that you and the company you’ve cooperated with having to stop all communication. Actually, it should be the other way around — try to keep in touch. When you are ready to work together again, reach out to find out if the organization in question is willing to start doing business with you again.
5. Keep it as Professional as Possible
As with any agency, it is natural for us to enter into new contracts as we bring on fresh clients, while also ending them with others. Whether the decision to wind-up the contract was the client’s, ours, or a mutual one, this does not mean that the relationship has to finish on a sour note or that all communication should be immediately cut off.
Keeping a friendly connection going with previous clients can often benefit you and open up more opportunities in the future. Some may look to get back into business with you, or they may recommend you to another company; from experience, we know that you can end up with some fantastic partners after having been recommended to them.
To ensure a smooth conclusion to our time with a client, we will try to make the process as professional as possible. If we have decided not to renew the contract, we would start by highlighting the positives of having worked with them, before simply stating the details of why we believe this is the best decision for both parties. The reason for terminating a contract can be a number of things, from disagreements on fees to feeling like you have different visions going forward.
Even if your working relationship with a client was a difficult one, you should avoid becoming overly-emotional or placing the blame with them. Similarly, continuing to complete work to a high standard until the contract ends is another way of ensuring you don’t part ways with negative feelings.
6. Do the Best for Your Business
I think, in most cases, it is fairly easy to maintain business relationships after a contract ends, even if it ends because you have moved to one of their competitors.
The reality is that business needs change on a regular basis and business offerings change as well. If the vendor no longer has the offerings you need for your business, there is no reason that they should continue to be your vendor. At the same time, that does not mean that your business relationship should end with that contract.
After the contract ends, it is perfectly ok to continue to communicate with your previous vendors to keep them up to date on current and future needs so that they can adapt their business, where possible, to help you meet your business goals. If you are a supplier/vendor, your job is to maintain communication with lost business to ensure that you are working toward developing or implementing the services or products that your previous client needs so that you can eventually win that business back.
At the end of the day, we are all running our own businesses, and even though emotions can run high sometimes when it comes to money, I believe that most people understand that we all have a responsibility to ourselves and our businesses to do what is best. If we all can keep that in mind, then continued relationships would be easy. Sometimes that will not happen, and you will lose some business relationships over this, but it should be pretty easy to maintain most of them.
7. Ensure Three Essential Things
Terminating a contract shouldn’t be the same as burning the bridges, even though in some cases the situation might get heated and both parties might feel tempted to turn on each other. Building a solid network of the present, future, and former business partners is always a plus because we never know where our next business endeavors might end up. To end a contract without ruining their business relationship; entrepreneurs should make sure they:
- Don’t point fingers at each other. Even though the situation might be heated, there’s no use in pointing fingers. Stating that business partners did something wrong without backing it up will not only end the contract in bad terms but might be the cause of the lawsuit as well. Instead, when ending a contract, entrepreneurs should stick to the facts without coming across as accusatory or too personal.
- Be fair until the end. When we know our contract is about to end, we might get tempted to do a sloppy job in the end. To ensure our business relationships will stay on good terms, we should make sure to keep our work quality at high levels until the end.
- Be polite. Professional doesn’t mean impolite. When ending a contract, we should make sure to be respectful and friendly. Compliment the opposing side to show we want to be on good terms even after a contract ends is always a plus. By doing this, entrepreneurs will be able to preserve business relationships and hope for new opportunities in the future.
8. Business isn’t Personal
Business is a focused effort on growing your company, and sometimes contracts need to be ended for that very reason. When you explain your reasoning for doing so in a genuine and sympathetic manner, the conversation often goes smoother. Also, if you have economic or third-party motivations that are forcing your hand, this can help in reasoning why you’re ending the contract too.
Now, if you think for a second that the business relationship won’t be damaged in the slightest when you pull the work, you got another thing coming. The point is it will be damaged, though, with the right effort and communication, it can recover over time. Assuming you view relationships with a long-term perspective, there’s a natural up and down anyways. When you end the contract, it’s up to you to put in extra effort to repair the relationship and get it back on an upswing. Check in with them, see what they need help with, and offer solutions. Or send a gift to their office or tickets to a fun event.
This small act of kindness does wonders for the soul. Plus, bringing value to their life in a different way is the key to continuing the relationship. Otherwise, they may naturally think what good is there for keeping you as a friend.
9. The Key is to Lead with Value
Even in business, all good things must come to an end – including contracts. Though many attribute the end of a contract to a negative aspect of a business, the growing pains in my own company have led me to believe otherwise. There is substantial growth when these contracts come to an end.
The key to maintaining relationships beyond the contract is leading with value. As the CEO of an advertising agency, we’re experiencing this shift in the midst of changing conditions over this year. As a result, the scope required for us to deliver what once was promised MUST adapt.
This happens when we focus on genuinely doing what is best for clients, vendors, and customers. When we’ve let contracts go, we’ve ensured that each began with an intention)al conversation about world events results delivered up to this point, but changes that must happen for us to serve our clients well.
These conversations have led to genuine and intentional opportunities to connect to partners on a deeper level than before. As we’ve transitioned, we’ve ensured we have trusted referrals in place that we’ve pre-vetted, which have gone a long way. Overall, approaching these conversations with grace and humility allows for them to flourish into even better relationships than ever before.
10. Foster a Clear Understanding
Business relationships should not be founded on contracts. This is a mistake that many leaders fall victim to. Business relationships are cultivated over time through authentic interaction, collaboration, service, and respect. The relationship may, in turn, produce contracts, but those will come and go. Remember, there may still be the potential to work together in the future.
Communication is key. Like any relationship, communication is an integral component of the success of that relationship, especially when tough decisions need to be made. Thoroughly consider the overall delivery in which you communicate your contract termination. Aspects such as timing and method of your communication should also be considered.
Use your emotional intelligence. Behind the contract is a business, behind the business are individuals, within an individual are emotions. The ideology of “business is business” does not always nurture positivity within a business relationship.
The reason behind the termination. Not all contracts require justification for ending the contract, but if you want to maintain business relationships, consider explaining your reason behind terminating the contract. For the most part, contracts are terminated for a number of valid reasons, when communicating those reasons, you are taking an extra step toward fostering a clearer understanding and ultimately showing respect to the other party.
11. No Hard Feelings, It’s Just Business
Ending a contract is always tricky, because at the end of the day, it’s delivering a rejection, and in a potentially impactful way. It’s hard not to take it personally or damage the business relationship. However, I do believe it can be done, but it is contingent on both parties having the understanding that this happens in business all the time.
My advice is to focus on the reason for ending the contract. For example, the product you were sourcing from them wasn’t performing. That is a solid, objective reason that does not leave much room for disagreement, the numbers speak for themselves. Frame it as an objective business decision strictly based on the direction your company is going and how you want it to perform.
Plus, this leaves room for a new contract in the future, either on a completely different project or on a different iteration of your current one. You want to make it clear that you enjoyed your collaboration and that you are looking forward to working as a business partner again in the future. No hard feelings.
12. Two Effective Tips
I had a supplier once and needed to terminate our contract, later that year, we sealed another deal. Fortunately, we never lost contact and did these 2 tips when we were terminating our previous contract:
If there is a dispute, give a reasonable time for the other party to think of remedies. This is not the time to be aggressive and let your emotions take the worst out of you because it will never end well. Take into consideration the trust that you have built and give them the chance to make amends or think of something to resolve the issue. If they still cannot give you a remedy after the deadline, then you can both agree to a decision without negativity.
Properly and clearly discuss the reasons for termination and complete all obligations. It is best that both parties have the proper understanding of what has caused the termination of the contract. This is also to make sure that all pending obligations will be met, and there will be no liability that they will be held responsible in the future.
To preserve the relationship between two parties is to keep things civil and professional, without any grudges getting in the way. It is never good to blame others for what has happened; instead, make sure that both parties agree with the arrangement. Just because you have ended the contract doesn’t mean that you will also end the relationship because you don’t know if such a deal will start again soon.
It is better to maintain the cordial relationship between both parties as the change in situation is inevitable. Always remember that relationships are not between two companies; instead, it is all about between people. If you have been unable to manage your contracts appropriately, you may get help from Cogneesol.
We provide up to the mark contract management services – review and drafting. While growing in this business line since 2008, we have maintained healthy relationships with hundreds of our satisfied clients. Get in touch with us to know more about how we can help you manage business contracts. Call us today to get a free trial. Call us at +1 646-688-2821 or email at firstname.lastname@example.org.
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