Author: joshbarrett

Get Paid for Using Their Contract

Just like a bank charges a higher interest rate for a riskier loan, its not unreasonable for you to charge more if a client’s form of agreement requires you to take on additional risks and obligations. This post is about putting yourself in the best position to have a meaningful conversation about the real cost of a client insisting on its form of agreement.

The colorful example I like to give goes like this: Suppose your client wants a fancy new website. You do the research and pitch the job – it will be $25,000 under normal conditions. Now suppose that the client wants you to do the same work only this time, the client’s form contract requires that your desk be perched above a pool of sharks…with “lasers”. Even though the deliverables are the same, would you charge the same amount for the job?

Of course not. If you are forced to take on extra risks, you need to be compensated for those risks.

Contracts are just risk allocation tools. But instead of sharks with lasers, the risks have names like indemnity, limitation of liability, and Net 60 (or worse). To set the stage for a conversation about these risks, include something like the following in your draft proposal or fee estimate:

The proposed fee assumes that our form of Master Services Agreement is used as the contract for our relationship. If terms materially different from those presented in our MSA are required by your team, the fee in our proposal will be adjusted accordingly.

Now, when the client’s procurement department (its always the procurement department) insists on certain excessive terms, you are in a position to say:

“We can certainly consider these changes, though as mentioned in our proposal, our proposal assumed use of our standard form of MSA. Your proposed contract requires us to accept additional risks and costs so the proposed fee will increase by X%.”

This isn’t a threat and it isn’t hiding the ball. Quite the opposite. Its being up front about how client demands affect price. And it allows the client to make choices about whether insisting on its form of agreement or crazy contract clause is worth paying the extra money. As an additional benefit, you are having a meaningful conversation with the client about important aspects of the relationship at the best time: before problems arise.

Your Contract is Not Your Contract Process

Lots of clients come to me the same way: “Hey, Josh. We need a new contract.” I ask lots of questions and we get a new contract in place, no problem.

But more often than not, the businesses I see need both

* a better contract, and
* a better contract process.

What’s a contract process you ask? It’s everything from first contact with a prospective client through collecting the last dollar for the last piece of work. Distinguish that from the simple act of contracting: getting the contract in front of your client and signed.

Sure, getting the client signed up is an important piece, but without a good process, the benefits of a “bulletproof” contract may be lost. Or worse, that fancy contract you had your lawyer draft (you had your lawyer draft it, right?), never gets signed in the first place. That’s not the contract’s fault. That’s your contract process at fault.

So what does contract process mean? For me, process touches on issues such as:

* considering a client’s uniquenesses
* how and when fromal contract documents like a proposal, terms and conditions, statement of work, etc. are presented to a client
* distinguishing between your work process and your obligations
* how inbound contracts are handled and negotiated
* communicating with your client about key terms in the contract throughout a relationship
* teaching your client how to be a good client (I hear there is a good book on the subject)
* Dealing with client that breaks a contract (in large and small ways)
* Change order (aka scope creep) management
* Project / phase approval and launch
* Collections

Lots of stuff there, and we’ll tackle those in future posts. But for now, if you are having problems with your contract, consider also whether you might have a breakdown in your contract process.

Bad Contract Writing Can Be Bad for Business

I see lots of contracts and nearly all suffer from the same problem: bad legal writing. You know what I’m talking about, what people call legalese: writing that is cluttered, bloated, technical, passive, often one-sided, and invariably long. You aren’t a lawyer so you take it on faith that this stuff is a necessary evil. That in order to protect you or be enforceable, your contract must be similarly written.

Fortunately, it doesn’t have to be that way. And more importantly, using a contract like this may be costing you business.

Imagine the following scenario: you pick up the phone one day to hear from your dream client. They’ve seen your awesome website, your tailored portfolio, and your tasteful business cards – they like everything about you. Soon you are pitching a sexy deck full of killer ideas and the client loves it. You’ve set the tone for your work and the relationship with everything you’ve put in front of them: your website, your portfolio, your conversations, your pitch. The client is ready to sign up and send over a fat deposit.

Diligently, you send over your bloated contract and everything stops. Inertia can be your ally, and your contract just killed it. Heavy sighs all around. The lead balloon that is your contract is completely at odds with every other aspect of your brand and communications. Days, weeks, or months pass as the contract is negotiated with each turn pushing you and the client farther from the pitch meeting where the client was in love with you and had its checkbook out. As time passes, so increases the likelihood of the client having a change of heart about scope or worse, “backburnering” the project entirely.

I see many creative professionals with contracts that are legally excellent but are written with language that is at odds with the brand and style they want to project. These bloated contracts cost time, money, and client trust – they keep you from getting to the paying work. So this year, take a look at your contract. Is it full of legalese? Are there provisions that constantly raise questions with clients? With you? If so, maybe its time for a rewrite.