Lessons: 3 Aug 2021

Contractual Certainty to Validate Numbers

Problem

Today, I drafted a legal clause to solidify pricing and LTV calculations for a new payments processor we are onboarding. The purpose of said clause: hold processor accountable for agreed methodology of calculating transaction pricing so we can realise the LTV upside we have modelled.

Solution

Agreeing and including the calculation methodology in our legal agreement means that we can reliably predict the positive LTV outcome we expect from working with the new processor. As the predictions are granular (through agreed methodology), we can test and verify upside against our predictions as we use the processor over the coming months.

Lesson

Often, in earlier stage companies, it is difficult to gain mathematical comfort in decision making. However, in certain situations, using explanatory contractual clauses helps in mitigating some of the uncertainty by (i) fostering agreement on key implementation details and methodology (ii) laying out a framework for calculating relevant metrics to track.