11 Sep LEVERAGE your contracts to INCREASE your PROFITS; The importance of Clear Contracts in Business
LEVERAGE your contracts to INCREASE your PROFITS; The importance of Clear Contracts in Business
I was recently a presenter for the July 2014 Institute of Management Consultants (“IMC”) C2M Webinar. As the name states the IMC is primarily made up of consultants, however, we discussed many of the same issues anyone with clients may face.
The title of the webinar was LEVERAGE your contracts to INCREASE your PROFITS.
It should really have been called LEVERAGE your CONTRACTS to IMPROVE your relationships with your clients. As with any relationship, a business relationship is a two-way street, you give more, you get more. This a belief I have always had and know it is the best way to run a business as well.
A contract with your client or independent contractor should not be one-sided, both parties should profit and if both do profit it will be a stable, long-lasting relationship. The contract should be used to memorialize an understanding – WHO is going to do WHAT by WHEN, so that both sides are held accountable in an objective manner.
Better contracts mean better client relationships.
Better contracts mean fewer worries.
Clear communication from the start of the relationship, means fewer misunderstandings later.
Get paid for what you do, memorialize the relationship.
Agreements are often made in consulting, coaching, and any business with clients, landlords, or service providers. They may be verbal, but are stronger if written and signed. Along with the symbolic handshake, be sure to have a written contract that memorializes the agreement being made.
Agreements and Contracts in General–
A contract may be oral and it may be formed via an email chain. One party may think they are just discussing the possibility of working together while the other may be accepting the terms. The best practice is to make sure the agreement is in writing in a concise format that excludes all other conversations, writings, etc. The contract should agree on the specifics that each party is going to handle. It does not only bind you, but the client as well, and clearly defines how the relationship will run. You can use the contract/agreement to manage the relationship and a client’s expectations. It memorializes and documents the relationship and the parties’ agreement. Realize that this not only applies to your clients, but to your vendors, independent contractors, and even employees.
Drafting the scope and preparing the proposal will assist you in figuring out and thinking through WHAT it is you are going to do, HOW you are going to do it, and WHEN you are going to do it by. The proposal can be incorporated by reference into the agreement. Here are some points to consider:
Scope of the Relationship –
What is the goal? How will you know when the task is complete. (Measurable objective)
How will you do it?
What is the expected or necessary time frame? Be honest and realistic about these, so that both you and the client are on the same page. This will also eliminate the stress of trying to achieve the unachievable.
What authority do you have to act on behalf of the client, if any?
Who has authority to change the scope of the contract and how is it done (in writing? signed by whom?)?
What is outside of the scope? Be clear about what you are NOT going to do or what you will ONLY do for an additional fee.
Party Responsibilities –
Which party provides what and when?
Who is your main contact that you can rely on to answer questions and obtain the information that you require to do your job?
What will be exchanged for your work?
How and when will it be exchanged? Lump sum, deposit, retainer, upon completion of phases or stages of the project?
Who is responsible for expenses? Expenses quoted or estimated as of the date of the contract subject to change? If change in expenses, cost to be agreed upon before adding any additional expense, if unable to agree then can terminate contract and be paid for what has been done.
• Confidentiality and Privacy
• Non-compete or non-solicitation
• Service Levels
• Dispute Resolution
• Staffing and Employment Issues
• Asset Transfers – who owns the IP created during the term?
• No Guarantee of Results You may suggest a course of action that the client does not take, no guarantee of results.
A contract illustrates that you are serious about your business. It can, and should, be used to facilitate and maintain a relationship. Contracts with a client, an employee, or a vendor should be a mutually beneficial relationship, not adversarial one. A written contract clearly defines the roles and the expectations of both parties in the relationship. A contract is an objective way to keep both parties accountable for their obligations. A properly drafted and complete contract will not only protect you, but foster communication and strengthen your relationship with the client, and ultimately benefit your business.
If you are looking to leverage your client relationships through contracts, contact the Law Office of Jason H. Rosenblum, PLLC today.