Worried about your consulting contracts with your clients?
Applying these 7 answers to your clients' contracts will bulletproof your consultancy business.
Why start with your clients’ contracts?
Your clients are the bloodstream of your wealth and health. If you don’t pay close attention, they can become your Worst Enemies!
Like most consultants, this statement will make you feel quite anxious.
It’s fine. I can hear you!
It had the same effect on me too when I first heard it 20 years ago.
What I’ve learned throughout the years, is that successful consultants share a trait: they prepare their toolbox ahead of time.
Your legal tools are critical. Clients’ Contracts are the most essential of all because they bring cash flow.
Do you have detailed written contracts with all your active consulting clients?
If not, then start with your clients’ contract template. These 7 answers will help you:
1. Do You Need Written Contracts With Clients?
1.1 In most countries, you’re not required to put consultancy contracts in writing. Nevertheless, I strongly recommend that you write all your consultancy contracts. It helps you to safely limit your business risk and secure your transactions.
1.2 Writing your contracts prevents misunderstanding. It makes things clear for your clients and you. It provides proof of what precisely was agreed upon. It provides you with timelines, terms and metrics.
1.3 Written contracts give you security and peace of mind. It makes your clients perceive you as a professional consultant with a working system. It sends this implied message to your client “here are the rules of my game. Are you ready to play?”
2. What’s A Consultancy Contract?
2.1 A consultancy contract is a mutual bilateral agreement between you as the consultant and your client, which can be a person or a business. You act in your capacity as an independent contractor who offers an advisory service to your client. Your client is free to act on your advice or not.
2.2 A consultancy contract is concluded, in most jurisdictions, at the moment your client communicates with you his acceptance of your offer. Not as most people think, at the time you sign the written document. An exception to that is if the written contract expressly states that it constitutes the entire agreement between the parties and supersedes the negotiations that took place before its execution.
2.3 Since it’s hard for you to prove such a verbal agreement. Please include the clause mentioned in the previous paragraph in your contracts. Having a contract with your clients doesn’t guarantee the success of the relationship. It provides a life vest if the relationship sinks.
3. Why Consultancy Contracts Are Critical?
3.1 Don’t burn yourself up with casual gentleman agreements. Nobody remembers it. A consultancy contract is a living document that can survive for many years or decades.
3.2 Having an executed contract confines you and your client to a specific scope of work. Expectations are clear. It sets you up for success. It helps you and your clients to spot issues and align.
3.3 A consultancy contract helps you and your client get on the same page from the get-go. It gives you clarity on your offering. It makes you render a consistent quality of service. It minimizes misunderstandings. It eliminates biases and imaginary assumptions. I have loyal clients that I’ve served for over 20 years now. How on earth would I remember what our contract states if it’s not written?! How long could you keep a verbal agreement in your head?!
4. What To Watch Out For When Drafting?
4.1 A specific scope of work. The project you will be working on. Key tasks. Milestones. Services you will and will not provide. Key deliverables to verify the tasks’ completion. Fees payment. Its terms, currency, time, who will pay you and how you’ll get paid. Expenses. How to track them and who bears it.
4.2 Timing. Your start and finish dates. Indemnity and limiting your liability. After signing the contract, in most cases, you have conflicting interests with your client. As a rule of thumb, you need to limit your liability as much as legally possible under applicable law. Confidentiality and non-disclosure are key. Intellectual property and who has rights for it.
4.3 Expiry. When will the contract expire on its own? How and when either party can terminate it at will? And how this will affect your fees. You have to choose which law, mediation, courts or arbitration centers will govern the contract and any unfortunate conflicts that may arise from it.
5. Consultancy Agreement Checklist
5.1 Everything is negotiable. What you write is what you get. Make sure you don’t miss any conditions you think it makes sense to include. Trust your gut and consult a specialist lawyer. Hiring a good lawyer and CPA is money well spent.
5.2 Download this FREE Non-Exhaustive Checklist. Use it as a guide to building your own checklist to review with your lawyer and CPA. Always use it when drafting your clients’ contracts. This saves the cost of consulting a lawyer and CPA every time you need a contract.
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- Stop worrying about your clients' contracts
- Bulletproof your business and safeguard your clients
- You'll feel secure. At peace. Confident. Diligent. Prepared.
- Powerfully improve your reputation, stature, and status
- Clients will honor your contracts and respect it
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5.3 It’s not possible to cover all legal requirements and jurisdictions in this Checklist. So make sure it complies with the law of your state or country. You can download this rock-solid checklist for FREE HERE. Enter the email where you want to receive it and I’ll send it to you immediately.
6. Consultant Agreement With A Retainer Vs A Success Fee
6.1 Avoid handshake business deals. Don’t underestimate how many details should cover your “fees and payment” section. Be very specific. It’s crucial to distinguish between an ongoing retainer fee that you can get monthly, quarterly or yearly and a one-off upfront lump sum. A contingency or success fee is what you get after a transaction is completed successfully.
6.2 The last place you want to be in is regularly hounding your client for payment. A retainer is commonly executed in two models. Pay-For-Work or Pay-For-Access. The first is when you trade your time for money on specific work and deliverables. The second is when you’re paid for your expertise only when needed. You’re paid so that your client can have access to you.
6.3 I prefer a Pay-For-Access model. However, if you’re just starting out, it makes sense to trade time for money until you’re booked solid for a few months with a few clients.
7. How To Terminate A Consultant Agreement?
7.1 A consultant contract terminates in two ways. It can terminate on a specific expiry date or by either party. The process normally is initiated by sending a termination notice or request.
7.2 The agreement states if there are refunds. What happens to the fees and expenses that are still pending? Be reasonable and fair. Though include mechanisms that are favorable to your business smooth operation.
7.3 You want to have the freedom to bail. Any contract is an ongoing commitment that you should honor as long as it exists. However, you can still give yourself the option to exit.
Now, Craft Your Draft
Keep these tips in mind when drafting your clients’ contracts.
A Contract is not the magic key to solve all problems. It’s a must-have.
People make mistakes.
A written agreement represents reference, evidence, and proof.
It will make you feel secure. At peace. Diligent. Prepared. Confident.
It helps improve your reputation, stature, and status in a very powerful way. Clients will respect you more and be prone to honor your contracts.
Now, it’s your turn to protect yourself. Secure your business and safeguard your clients.
Limit your clients’ risk NOW! Don’t wait for your clients to become your worst enemies. Be proactive. Take a step forward.
Download your consulting contract FREE Checklist NOW! Use it with your existing clients TODAY.
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25.09.2019, Biel/Bienne, Switzerland.