Insights

A part time CFO can help an SME test whether a larger contract still makes commercial sense after the concessions needed to win it. The negotiation rarely stops at price. A prospective customer may ask for longer payment terms, faster mobilisation, bespoke reporting or a discount before they sign.

One request may be easy to absorb. Several can change the economics of the deal.

Before you agree the terms, establish which concessions are affordable and which parts of the deal need to be protected.

What should an SME check before agreeing a larger contract?

• Profitability: Check what remains after discounts and the full cost of servicing the customer.
• Payment terms: Work out how much of the delivery cost the business will need to fund before customer cash arrives.
• Mobilisation: Identify any recruitment, equipment, stock or implementation commitments required before normal delivery begins.
• Customer requirements: Price additional reporting, service levels or bespoke work before they become part of the agreed scope.
• Wider business impact: Check whether the contract would create excessive customer dependence or use capacity needed elsewhere.

A part time CFO can bring these considerations into one commercial view before the terms are fixed. Evoke Management's part-time Finance Directors work alongside SME leadership teams to test the financial effect of proposed terms, challenge the assumptions behind the deal and give management a clearer basis for negotiation.

Can a bigger contract be less profitable than it looks?

Yes. A large contract can add significant revenue while contributing less profit than expected or tying up more cash.

A larger contract may require more people and management time, or force earlier spending on contractors, stock and systems. It may also mean funding delivery for weeks or months before customer cash arrives. Revenue growth can therefore look stronger than the underlying return.

The more useful question is not simply, “How much revenue is this contract worth?” Ask what it will contribute once the terms required to win and deliver it are taken into account.

That means looking at expected contribution and the cash needed to support delivery. You also need to know whether the business has enough capacity to take the work on without weakening existing activity.

How much margin can an SME afford to give away to win the deal?

There is no universal percentage an SME can safely concede. The limit depends on what remains after you account for the full incremental cost of winning and servicing the contract.

Start with the true cost to serve. Bespoke reporting or dedicated account management can add to that cost alongside direct labour or materials.

Do not treat a discount as an isolated yes-or-no decision. If the customer wants a lower price, ask what can change elsewhere in the deal. Keeping the service standard or securing committed volume may justify a greater concession.

A part time CFO can model the expected contribution under different combinations of price and scope. The commercial team then has a clearer basis for negotiating rather than relying on the headline value of the contract.

How do longer payment terms affect a large contract?

Longer payment terms can make an otherwise profitable contract harder to fund because the SME may have to cover delivery costs before the customer pays.

Payroll and supplier costs may fall due before the customer’s payment reaches the bank. Some larger customers also have procurement or invoicing processes that can delay approval for payment.

The Office of the Small Business Commissioner advises businesses to negotiate payment terms before agreeing to do the work and to put the terms in writing. The payment timetable is part of the economics of the deal, not an administrative detail to resolve later.

If a customer requests longer terms, calculate how much additional working capital the contract will absorb and for how long. That result may change the price you are prepared to accept. It may also support a discussion about a deposit or staged billing.

A part time CFO can test the proposed payment structure against the company’s wider cash position before you agree the terms.

What mobilisation costs should an SME consider before signing?

Mobilisation costs are the expenditure and commitments the business takes on before customer payments catch up with the cost of delivery.

Depending on the work, mobilisation could include recruitment and onboarding, new equipment, stock, systems configuration or implementation support. These costs do not automatically make the opportunity unattractive, but they need to be visible before the contract is signed.

Separate one-off mobilisation requirements from ongoing delivery costs. Then ask what happens if implementation is delayed and which commitments would be hard to unwind.

Build those assumptions into the deal model before agreeing the timetable. You can then discuss implementation dates or payment structure with a clearer view of the funding required.

Which customer requirements can make a contract less profitable?

Any customer requirement that adds work or cost without a corresponding change in price can reduce the contract’s expected contribution.

Price that effort before it becomes part of the agreed service.

Ask who will do the work and how often. Then consider whether it displaces higher-value activity or requires additional resource.

The commercial team should understand what the customer values. Finance should quantify the extra delivery cost and show whether the business can absorb it without undermining the return. Leadership can then decide whether to include the requirement or price it separately.

How can SMEs protect against scope creep before signing?

Define what is included and how additional work will be approved and priced before the contract is signed.

Agree who can authorise a change and how its commercial impact will be assessed. That gives the team a clear process when a customer asks for something outside the original scope.

Financial analysis does not replace legal advice on the contract wording. A part time CFO can flag changes that would materially alter the financial outcome. That gives the commercial and legal teams a clearer basis for documenting the deal.

Can a large contract create customer concentration risk?

Yes. As one customer accounts for a larger share of revenue, the business becomes more exposed to that customer’s future decisions.

Concentration is only one consideration. A large contract can also absorb people or management attention that would otherwise support existing customers or other opportunities.

Before committing, compare the capacity the contract will consume with what it may displace. Also consider what happens if volumes fall or the customer relationship ends.

If the contract would leave the business materially more dependent on one customer or overstretch delivery capacity, revisit the terms or delivery plan.

How can a part time CFO help during a large contract negotiation?

A part time CFO can pressure-test the deal while there is still time to change the terms.

At Evoke Management, our experienced part-time Finance Directors work alongside SME leadership teams, bringing senior financial analysis into important commercial decisions.

They can test the assumptions behind the deal and show how the proposed terms affect expected contribution and funding needs. If the numbers no longer work, you have a clearer basis for deciding what needs to change before you sign.

If you are close to winning a significant contract but are unsure what the proposed terms mean for the business, speak to us before the deal is finalised. We can help you assess the trade-offs and enter the negotiation with a clearer view of what you can afford to concede and what you need to protect.

Winning a bigger contract matters. Winning it on terms that support profitable, sustainable growth matters more.