Long-Term Agreements - Improve the Value of Your Company

By Sid Chadwick, Chadwick Consulting, Inc. – 02/05/2026

Published in American Printer :”Sid's article reviews how more companies are locking in long‑term customer agreements, and the financial impact is hard to ignore. The result is steadier revenue, tighter cost control, and stronger valuations. If you’re not exploring these conversations with your top accounts, you may be leaving money on the table.”

“Action is the foundational key to all success.”………………………..Pablo Picasso

INTRODUCTION:

Recently, as we reviewed a Peer Group Conference Call Discussion, one Member, with his company heading toward $30 million in Sales (projected for this year), revealed that – ‘44% of their revenues were anchored in “Long-Term Agreements”….!’

Finally…after two decades of Client Survey Results, we see “The Market” tipping toward “Long-Term Customer Agreements.”

As you look for proof, ask your Banker’s opinion of the effect of such Customer moves on your company’s value.

Better…ask your Top Ten Customers - if they would like to “think about – and discuss” – a “Long-Term Agreement” to “anchor their Consolidation of Suppliers?”

Benefits from Supplier Consolidation – and Long-Term Agreements – for your Customer – can include:

• Elevated consistency of Quality – and Communications – received.

• Improved consistency – and standardization – of Supplier performance.

• Reduced Time invested in Purchasing.

• Improved opportunities to reduce Supplier costs.

• Improved Value as a Customer to your Supplier.

• Improved opportunities to request Education & Training Services.

Benefits from Supplier Consolidation – and Long-Term Agreements – for you – the Successful Supplier, can include:

• More predictable production scheduling – which tends to lead to… lower production costs (e.g., less waste, less spoilage, and less overtime costs).

• Improved understanding of the Customer’s performance expectations.

• Improved leverage for obtaining lower material costs from Suppliers.

• Higher frequency of work for the same customer tends to lead to opportunities for ongoing – improved production times.

• Less time required for quoting, order-entry, and communication errors (No Small Achievement…!).

• Improved predictability of revenues, leading to improved bottom-line performance.

Not all that long ago, we persuaded a Client to allow us to ask a question re. his “Customers’ Interest in a ‘Long-Term Agreement’ for the purpose of reducing purchasing costs, consolidating suppliers, and improving consistency of quality received. “

Eleven Customers responded in the affirmative….Three of the eleven were major accounts….!

SUMMARY:

A few Suggestions and Observations:

• Such discussions and decisions are ultimately decided at your Customer’s Management level, but also require the involvement of Supplier Sr. Management and/or ownership.

• Many Customers avoid the use of the word “Contract.”  “Memo of Understanding,”  however – is usually much more acceptable, for multiple reasons.

• Given the importance of such a change in working relationships, allow for six or more months of discussions - to reach a Final Agreement.

• History shows that if such an Agreement has worked well for the Customer Organization, Renewal of the Agreement after three or more years is nearly automatic.

• Finally, CPI’s for managing price changes do not necessarily work well in periods of dynamic commodity or tariff price changes. But from the Customer’s position, managing price changes from one supplier can more easily be accomplished than from three or more suppliers.

• We strongly recommend Quarterly Reviews – at least in the 1st year of your Agreement – for opportunities to correct and fine-tune both organization’s contributions.

• The success of your 1st Long-Term Agreements – can provide invaluable References – for your next desired Long-Term Customer Agreements.

• Be sure to keep your Banker and key Suppliers – apprised of your Progress – and Lessons Learned…! (They will want to contribute – to your future success.)

“It is no use saying, ‘we are doing our best.’ You have got to succeed in doing what is necessary.”……………………….Winston Churchill