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Upfront Contracts

Thomas Waites

What is an Upfront Contract?

An Upfront Contract is an agreement between a salesperson and a prospect, outlining the expectations of both parties.

Why Use Upfront Contracts?

Upfront Contracts help salespeople avoid ‘mutual mystification’ and maintain control throughout the sales process. I strongly believe that a sale should be a series of Upfront Contracts. Sandler notes that “even small items require an Upfront Contract”.

  • Maintain control over your sale

  • Maintain your leverage

  • Shorten your sales cycle

  • Ensure that the sale actually happens (time kills all deals)

Upfront Contracts are important but challenging to set. They require courage, can feel awkward, and may stir disruptive emotions.

The Four Components of an Upfront Contract

1. Competency

  • The salesperson must have the authority to make and fulfill the offer.

  • The prospect must have the ability to accept and fulfill it.

2. Mutual Consent

  • The salesperson offers to do something.

  • The prospect accepts your offer.

3. Explicitly Communicating the Offer

  • There can be no doubt about what you offered the prospect.

4. When Prospects Breach the Upfront Contract

  • It can be tough to pull back your side of the offer and risk losing the deal.

Important Note: an offer includes both the salesperson and the prospect agreeing to do something.

Effective Use of Upfront Contracts in Negotiations

My team uses Upfront Contracts whenever we negotiate price and terms with a prospect. We typically state that we can provide the discount as long as our Agreement is signed by a specified date. This helps us maintain control over the sale, shorten our sales cycle, and ensure that the sale actually happens (time kills all deals).

We sell an emerging product where our prospects typically lack a planned budget and urgency (see: Thinking vs Feeling). So leveraging Upfront Contracts in negotiations has been incredibly powerful for us.

1. Competency

A common mistake that salespeople make is that they offer discounts with a deadline that the prospect couldn’t possibly meet. You must ensure that your prospect can accept and fulfill the Upfront Contract.

Upfront Contract Example: One of my Account Executives was new to Upfront Contracts and got a lot of quick wins while using them during negotiations. While riding this win streak she got a little too bold (and excited) when a prospect asked for a discount. She said she could provide the requested discount if they signed today. Our prospect ‘agreed’ but said they’d need to connect with their VP. We sell to Enterprise customers. There was about a 0% chance of them being able to sign today. The prospect then went radio silent for a few weeks. They didn’t have competency.

2. Mutual Consent

Ensure that your prospect firmly agrees to your offer. Get a “Yes” or a “No” - not a “Maybe”.

Ensure that you get an explicit “Yes” from your prospect before confirming that you can do something. This ensures that you maintain your leverage.

A common mistake salespeople make with Upfront Contracts is not clarifying the customer's ability to fulfill their side of the agreement first (competency). They immediately offer concessions like discounts and specify terms without ensuring alignment on the customer's commitments (mutual consent).

When salespeople offer concessions prematurely, such as stating a discount amount, they lose valuable leverage in the negotiation process. By not confirming the customer's readiness to commit to the terms (e.g. signing by a specified date), they give up control over the negotiation dynamics.

Upfront Contract Example: If your prospect asks for a discount, always ask one of these two questions before providing the discount:

  • “When is it achievable for you to sign the Agreement?”

    or

  • “Is it achievable for you to sign the Agreement by <specific date>?”

Once they have given you a “Yes”, you can explicitly state that you will provide the discount and specify the terms.

3. Explicitly Communicating the Offer

Oftentimes salespeople aren’t assertive in their offers and asks. They use wishy-washy language that leads to mutual mystification. This can lead to a misalignment, misunderstandings, and differing expectations between the salesperson and their prospect. Your prospect cannot accept your offer if they don’t understand it.

4. When Prospects Breach the Upfront Contract

What do you do when the prospect breaches the Upfront Contract… or tries to breach the Upfront Contract? Prospects will often test you to see if you’ll stand firm. There are situations when I allow the prospect to breach the Upfront Contract. But I almost always choose the stand firm route.

Upfront Contract Example: This is one of my favourite recent sales stories. I provided a 5% discount to a prospect contingent on them signing on June 30th, the last day of Q2. This would be the biggest deal our company had ever closed, even with the discount. And I really needed it to close in Q2- my team was behind on our quota.

June 30th arrived and we still hadn’t closed the deal. I was anxious. I followed up with the prospect. They said they needed a two week extension. Our email exchange…

That’s how we closed the largest deal in company history! And how I saved our Q2… closing our largest deal ever after 5pm on the last day of the quarter. At a company offsite in the Dominican Republic the next week my Co-Founder asked me, “How do you have the guts to say No to them (and the ‘them’ was a very large Enterprise) like that and risk losing the deal? I couldn’t do that.” It’s one of the reasons my default position is to stand firm when an Upfront Contract is breached. I commit and have no other choice.

How to Set An Upfront Contract

Step #1: Prospect Request

  • Prospect Request: “I want a $5,000 discount.”

Step #2: Determine Your Reciprocal Ask

  • Reciprocal Ask: Agreement signed in July

Step #3: State Your Reciprocal Ask

  • Salesperson’s Reciprocal Ask: “Can you sign in July?”

Step #4: Receive a “Yes” on Reciprocal Ask

  • Prospect: “Yes, I can sign in July.”

Step #5: Say “Yes” to Prospect Request

  • Salesperson: “Great. We can provide a $5,000 discount, if the Agreement is signed in July.”

Additional Resources