Exit terms: what to check long before you leave a supplier
The best time to understand how you would leave a supplier is while the relationship is still working well.
Most organisations look at their exit terms only when they want to leave. By then the relationship may be strained, time is short and the supplier knows it. The best time to understand your exit is while things are going well.
Why exits go wrong
Exits tend to go wrong for the same few reasons. The right to leave is narrower than people assume. Costs are not clear. And some services turn out to depend on the outgoing supplier in ways nobody had mapped, so they are left without an owner when the contract ends.
What to check
Your right to leave
- Can you end the contract for convenience, or only if the supplier fails?
- What notice do you need to give, and is there a minimum term?
- Can you end part of the service, or only the whole contract?
The cost of leaving
- Are there termination fees, and how are they calculated?
- Who pays for exit support, and at what rates?
- Are there assets, licences or leases you would need to buy or transfer?
Support during the exit
- Does the contract require an exit plan, and is it kept up to date?
- Must the supplier keep the service running and share knowledge during the handover?
- How and when will your data be returned, and in what format?
Services that could be left stranded
- Which services or tools does the supplier provide that are not obvious in the contract?
- Which of the supplier's own subcontractors would you need to replace?
- Which of your other suppliers rely on this one?
When to look
At signature, make sure exit terms are clear and fair. Each year, check the exit plan is current. Around 18 months before the end of the contract, review the terms in detail and decide whether you want to renew, re-tender or leave.
What good looks like. A current exit plan, a clear right to leave with reasonable notice, known costs, and a map of every service and dependency that would need a new owner.