Chip and Gini understand the excitement of closing a deal and the desire that agencies have to just get started with the creative process.
But it’s important to get the contracting process done right, including setting the best terms and having a signature before any work gets going.
In this episode, Chip and Gini talk about some of the common mistakes that they have seen agency owners make with contracts and how to go about it in the best way.
- Chip Griffin: “You have to harness that excitement at the start of the relationship.”
- Gini Dietrich: “A little bit of an investment up front will be worth it in the long run.”
- Chip Griffin: “You are not in a position where your only choice is to sign or not sign the contract.”
- Gini Dietrich: “Not only do we have contracts in place before we do any work, but we require a deposit as well.”
- 6 reasons why your agency needs client contracts
- The basics of agency-client contracts from a business perspective
- Sample Client Contract
The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.
Chip Griffin: Hello and welcome to another episode of the agency leadership podcast. I’m Chip Griffin.
Gini Dietrich: And I’m Gini Dietrich.
Chip Griffin: Gini I think we need to go over the contract that we signed that governs how we conduct this podcast on a weekly basis. Let’s do it. Right after this.
Actually, now that I think of it, kind of like a lot of agencies, we don’t actually have a contract in place for this podcast.
Gini Dietrich: That is correct. So like a lot of agencies, we should probably, we probably don’t need one for this, but you should need one. You do need one for your agency.
Chip Griffin: But the horse has kind of left the barn on this one.
Right. We’re, we’re mere weeks away from the five year anniversary of the show’s first episode, five years. Yeah, that’s crazy. It is. It is crazy. How’s it been five years? Well, because we started in 2018 and now it is 2023. And so carry the… five, that’s crazy. I think the better question is how have we survived five years,
Gini Dietrich: but five years,
Chip Griffin: five years.
Yeah. But something like this, I mean, and actually in reality, when you have a podcast with multiple hosts, you probably should have some kind of paperwork for it, to be honest with you. I mean, it just, you know, probably should have something that just, you know, because if we were to go our own separate ways, who owns the archives and that kind of stuff?
I mean, at the end of the day, this is not like, you know, a hugely profitable podcast or anything like that. So we’re not going to bother having a fight over it, but you never know, right? It could, it could have spun up and become… could still spin up and become one of the top 10 podcasts in the world.
Gini Dietrich: In the world. Wow.
Chip Griffin: I mean, aim high, Gini, aim high.
Gini Dietrich: We might have to start getting celebrities on if that’s the case.
Chip Griffin: More than us? Come on. I mean, we are, we are celebrities. Yeah. In any case, but when you’re doing work for clients, as an agency, there’s really no excuse for not having a contract in place. There are, 100 percent of the time, you should have a contract.
Period. Correct. That was not a good sentence there, but you get the point. Yes. You should always. It’ll look awful in the transcript, transcript, but have a contract, damn it.
Gini Dietrich: Have a contract. Contracts are necessary.
Chip Griffin: Contracts are incredibly necessary. And part of the problem is that, you know, as agency leaders, we get excited because we’re, we’ve had this great conversation with the prospect and we just want to get started.
And so what do we do? We just get started. Not the best idea. Get the paperwork in place before you do even one minute of work.
Gini Dietrich: Yeah. And I have found in all these thousands of years that I’ve been doing this, that clients actually respect you more when you have that process in place because they’re doing business with you.
And when you just sort of fly by the seat of your pants and get started and there’s no contract and there’s no agreement on invoicing and like it’s all loosey goosey, they just don’t respect you as much. They don’t trust you as much. And so having all of that in place sets the foundation, sets the groundwork for being able to say, we’re a serious business, we take this very seriously, we’re going to do great work for you, and here are, here is what we expect in return.
Chip Griffin: Yeah, and if they don’t, if they don’t want to go through that process, that’s a giant red flag.
Gini Dietrich: Giant! It’s red flag.
Chip Griffin: Red flag, flashing lights, sirens going off the whole thing. Because if someone doesn’t want to, to either have any contract at all, or more likely just as we’ll get to it, let’s just get going, you know, you’re going to get paid.
Don’t worry about it. You know, that tends to be an indication that there’s something wrong on their end. Maybe the person you’re dealing with doesn’t have all of the appropriate approvals. Maybe they’ve got a whole bureaucratic process and it’s so difficult to get contracts through, that’s probably going to be the same thing when you send your invoice, right?
So make sure that you are not doing any work at all, none, until you have a contract. And I got to tell you, at least half of the agencies that I talk to frequently, or regularly at least, do work before the contract.
Gini Dietrich: No, no, no, no, no, no, no, no, no.
Chip Griffin: Because we’ve got the agreement, we’ve got an email that says we can do it.
No, no, you’ve got to have a contract in place. Every time without exception. And I can’t think of a single exception in my career where I would have said, yeah, I don’t need any kind of a contract. They can be simple, right? They can be a letter agreement. I mean, there are a lot of different ways that you can go about doing this.
It doesn’t always need to be… I mean, my preferred route, as I think we’ve talked about before, is a master services agreement with a statement of work. So it is, you know. 5, 6, 7 pages long. Yep. Got a lot of legalese in it. It’s my preferred approach. If that’s not your preferred approach and you talk with your counsel and they’re happy with a letter agreement, that’s fine too.
Yep. But you gotta have some kind of paperwork in place that lays out very clearly the important details of the agreement that you have. You can’t just do it based on a, a handshake. I mean, that’s just, that doesn’t make any sense.
Gini Dietrich: And not only does it not make any sense, but it also creates the opportunity for you to get screwed. And it will take one time for that to happen and you will say we’re never doing that again.
I would like to think once to me doing that again. And not only do we have contracts in place, but we require a deposit up front as well. We don’t do anything until those two things are taken care of. Nothing. And the thing about it is clients are hot to trot. They do want to get started. Absolutely.
They’re going to push that through faster now than they will six months from now. So get it done now.
Chip Griffin: Right. I mean, you have to harness that excitement at the start of the relationship. Because in general, it’s never going to get any better than it is when you first get started. That’s right. There’s a good chance it may get worse over time.
Almost never gets better from the start. Right? You are generally starting from your high point in that relationship. It’s when everybody’s feeling great about everything. They haven’t, you know, noticed any, any cracks in the lining or anything like that. It’s just… It’s all, you know, sunshine, rainbows, and unicorns.
And if you don’t deal with the tough issues then, you’re never going to get to them before you have a problem. That’s right. And I think you’ve touched on something important here with mentioning the deposit. I am a big believer in, not only do you get the signed contract, but you also get some kind of upfront payment.
And, and my view is if you are doing monthly retainer work, you should be paid at the start of the month during which those services are rendered. It’s the way that I’ve operated for that the past probably, you know, 15 or 20 years and, and I would encourage you to do the same. Now there are obviously certain cases where you end up having to make exceptions for one reason or another, but it ought to be a conscious decision.
Your default practice should be you get paid up front for just about everything. If it’s project work, you need to at least get a good chunk of it. I would argue for almost any kind of project, you need at least 50 percent up front. Yes, bare minimum. Yes, bare minimum. And so you need to, to be thinking not just about having the contract in place, but what are all the terms that you’re going to have in there?
Because I’ve seen plenty of agencies that say, yes, absolutely. We have a contract. And then I look at the contract and I’m like, it almost would’ve been better if you didn’t have one. Oh, no. Because because agencies have a tendency to agree to all sorts of horrible things in their contract, in part because they wing it.
And so they either agree to or edit contracts without any lawyers involvement, right? They grab some template off the internet and they’re like, Oh, we can just change this. Or they take something that they had from a previous employer and say, yeah, this’ll be fine. But they don’t have any understanding of, of what they’re including in there.
Sometimes what I’ve seen is that, you know, one, you know, you’ve got a base contract, which is good and solid. And then you have someone who asks you for a modification because, you know, different clients will ask depending on how much their lawyer gets involved, they may ask for certain things and you may make a concession for them.
Now, all of a sudden, if you’re not careful and you just copy and paste that contract for the next one, you’ve now included that concession as a default going forward. So always go back to your default, right? Be really careful, understand what you’re agreeing to understand what you’re putting in there and don’t put in things that you don’t want.
Gini Dietrich: And the other thing that I would warn you against is that some clients will say, Oh, we’ll send you our agreement or we’ll send you our contract. No, NO, you’re not going to sign the client’s contract instead of your own. And I’ve had several clients do that and I have always said no we have a contract. We have a master services agreement.
I will send that to you I’m happy to have a conversation with your attorney about any concessions You’d like to have made but we are not doing that. And for the most part they will back down. If they don’t another red flag, but do not sign someone else’s contract to do work for them. That’s not how this works either.
Chip Griffin: Yeah, I mean, and part of this is by being prepared.
Part of this is by having a standard form for your contracts so that you can very quickly and easily, as soon as you get to that point in the conversation where the prospect says, yes, let’s do it, you can very quickly send them a contract over. Because generally speaking, my experience has been that whoever sends the first paper is the one who controls the paper.
And so if, if you send that contract, that’s going to be the one typically that gets edited. It is, it is fairly uncommon for the other party to say, Oh no, we want to use ours instead. Right? So if you can move quickly, and that’s the benefit of my preferred approach of the master services agreement with the statement of work, right?
Because the master services agreement never really needs to be changed at all. And so all you then need to do is update that one page statement of work that goes along with it. That says, here’s the amount. Here are the deadlines and here’s what we’re going to do for that money. And if you do that, you can get it moving much more quickly.
And that’s how you control the process because the process is almost as important in driving the outcome as anything else.
Gini Dietrich: And the other thing I like about the master services agreement is that in ours, at least we have a 12 month rolling timeline on it. So essentially it says we continue working with you until you do the appropriate, I think it’s like, give us 90 days notice. And so at the end of every year, as we’re doing planning and everything, we changed the statement of work and attach it to that agreement, but we don’t have to go through the whole contract again and talk to legal again and do all of that.
We just have the statement of work that usually your direct client can sign. It doesn’t have to go all the way up to the top and, and you can continue working. So that’s another, from my perspective, another benefit of having that larger agreement.
Chip Griffin: Oh, it’s a huge benefit because if you do actual contracts that you have to renew on an annual basis, I guarantee you they will all go through legal, right?
Yes, that’s right. Statements of work, as you say, either, either because their process doesn’t require it or because they’re just… They look at it and they’re, Oh, this doesn’t look legal ish, you know, I’m not going to send this to legal. Right. So it may be that your client contact, you know, inadvertently or intentionally skirts their own internal rules, but either way, you still get that signature that you need to move forward.
As soon as you send a new contract, that’s got, you know, legalese in it and things that your client contact doesn’t understand, they’re sending it off to legal. And I’ll tell you, even if it’s the exact same lawyer and they signed off on the exact same language 12 months earlier.
They will make changes.
Sometimes it’s because they got burned with another vendor on something in the intervening 12 months. Sometimes it’s just because they woke up on a different side of the bed. Yep. You know, there are all sorts of reasons. I mean, I think I’ve said on this podcast before that my own lawyer likes to edit his own stuff, which I think is nuts, right?
Gini Dietrich: You’re like, you wrote this.
Chip Griffin: Stop editing your own stuff. But certainly if they’re going to edit their own stuff, they will edit the stuff that you send them. So if you can avoid having to go through that process and you’ve got that evergreen master services agreement, and it’s only the statement of work that needs to be regularly updated, you will really accelerate the process, not just from a legal standpoint, which we’ve talked about, but also just from a client standpoint, it’s easier for them to understand.
It’s, it’s all right there. It’s simple. And so anytime, and it also means that you’re less likely to suffer from scope creep. Because if all you have to do is do a new statement of work, there’s no reason to just say, Oh, we’ll handle this at the next contract update. You just send them an updated statement of work.
It’s that simple. And it’s a one pager. It really should be one page too, right? It’s one page. We need to talk about what’s included because that’s, it’s not enough that you have the contract. It’s not enough that you’re getting some payment up front. It’s not enough that you have your lawyer actually looking at stuff so you’re not doing crazy things.
But it’s the substance of the statements of work, whether that’s in a master contract, or in the paired agreement, or in a main contract, or wherever it is. material. Agencies put way too much detail into the contract itself. The contract is not a strategy document.
No, it’s not.
If it’s something that you might change based on the results or different things, don’t put in your contract, you know, the specifics of individual reports, what the reports gonna include when it’s going to be, the timing of when it’s going to be Unless those things are truly important, like if that’s what they’re buying, you know, if they’re paying you for a report that’s delivered once a month on this day, okay, sure. Put that in the statement of work or the contract. But if it’s just, you know, you’re including your general reporting requirements, don’t do it that way. Cause I’ve seen those things included in contracts.
And then the agency feels like, well, it’s in the contract. We can’t take it away, even though nobody ever reads this anymore.
Gini Dietrich: And also. If it’s in the contract, clients can say, well, this was in the contract. We haven’t done it yet, even though they’ve changed their mind or they’ve changed strategy or whatever it happens to be, they’re like, Oh, but you said you were going to do this and you’re just like, yes, that was at the beginning of the relationship when we thought we were going to do that and then everything changed. Like do not put, don’t put that kind of risk in your contracts.
Do it in a plan that you’re presenting separately as part of your deliverable versus trying to put it into your contract.
Chip Griffin: Absolutely. And I think if you approach your statement of work and you think about it more in terms of how can I, how can I limit my risk? How can I, how can I put guardrails in to, to prevent overwork? Those are the kinds of things that you need to be really mindful of because those are the protections that you want in there. My experience is almost no agency does too little work for clients. It happens, but it’s incredibly rare. More often you’re over servicing. So think about your statement of work in terms of how can you protect yourself from doing too much.
You need to still include enough promises in there that it makes the client happy and they say, yes, I’ll sign off on it. But don’t get so specific that you’re actually putting yourself on the hook for a lot more work. That’s right. Because you are going to evolve what you do for them. Every agency relationship I’ve ever seen evolves over time.
Yes. Always in the form of the agency doing more work, not less. Yes, always. So protect yourself in that statement of work and you will be in a much better place.
Gini Dietrich: And I think to your point, if you limit it to one page, that makes it a lot easier for you. So you can say, okay, I’m going to limit my risk and it can only be one page that allows you to be really smart about what goes in there because you don’t have any room to put any more, any details that, that would hurt you later, right?
Chip Griffin: And so that means, you know, no, no media lists, no outlet targets. No, I mean, just stop putting all that level. Because I’ve seen all of these things in contracts and I just do not understand it. It keep it simple, keep it simple, but make sure you have it in place. And if you’re going to agree to requested client changes.
Or if you’re going to use theirs, because I agree with you, you should try to never ever use your client’s contract. Yep. There are certain cases where it’s, it’s unavoidable, generally with larger businesses. Yep. Generally when procurement is involved. I would generally tell you if procurement is involved, run.
Go away, go somewhere else. But if you’re going to, if you’re going to play the procurement game, you’re probably going to end up signing their contract, not yours. In that case, you need to understand everything you’re agreeing to, right? Because a lot of times these things have really brutal terms in them.
And I’m not talking, you know, it’s one thing to focus on the money. And it’s one thing to focus on the scope of work, right? Those are the things that both sides typically look at, but the devil is sometimes in the details and things like payment terms. Really, really important. Particularly as we’ve talked about on this show before, more and more large clients looking for really ridiculous payment terms that straight up punish agencies, but particularly small agencies. Yes. And so you need to be aware of what you are agreeing to. And you, you can’t just sign off on it because, well, they sent me this form and it’s, you know, I’m going to sign it anyway. It is what it is. Right. I mean, this is not, this is not like, you know, a home mortgage, right?
I mean, when I, when I have done my home mortgages, the first one I read in its entirety and I’m, and then the second time I’m like, forget about this. There’s not anything I can do about it, right?
Gini Dietrich: Of course you read it.
Chip Griffin: We’re, at this point, we’re committed. I, I mean, I did. I did. And I made the poor loan officers sit there while I read the whole thing, because they don’t give it to you in advance.
Right. And so I’m like, I’m going to read through this whole thing.
At closing, you’re sitting there reading your contract.
And they’re like, they hated me. I’m sure they did. But it’s what I do, or did. And, and then I, the second time around, I’m like, okay, no, this doesn’t really make any sense because you know what?
It really doesn’t matter what I object to in there. It’s their standard agreement, and the bank’s not going to say, Oh, Chip didn’t like that. Yeah, let’s change that, sure. So there are certain circumstances where you don’t, but in an agency client relationship, that’s simply not the case. There’s, you are not in a position where your only choice is to sign or not sign.
So make sure that you’re, you’re actually having a conversation about whatever may be in their agreement or whatever changes they’re asking for. If you don’t understand what you’re agreeing to, talk to a lawyer.
Gini Dietrich: Please talk to a lawyer.
Chip Griffin: Make sure that they are advising you on what you’re risking. I mean, because some of the things that, that a lot of clients will try to tinker with are, you know, indemnification clauses, right?
And warranty clauses and things like that. You need to know what you are agreeing to. And you need to know what your risk is because with any, with any written agreement, any kind of a contract, you need to know what happens in the worst case scenario, because that’s what these documents are for. When everything’s going well, nobody ever looks at the contract, right?
If you and the client are getting along great and everybody loves the results and everybody’s happy with what they’re being paid and the work that’s being done. Nobody ever pulls up the contract. When do you look at a contract? You look at a contract when something is going wrong. Yep. So look at the contract through the lens of, well, what happens if they’re unhappy?
What happens if we’re doing too much work? What’s our recourse, right? Because you know, a lot of times we look at these things in terms of, you know, we want to, we want to keep the client locked in. So we don’t want them to have a cancellation clause. We’re going to require 12 months. Well, remember most of these, that’s a mutual clause.
So if the client can’t fire you, you can’t fire them. That’s right. Do you really want to take that right away from yourself? I don’t know that you do. I certainly would advise against it because it takes away all of your leverage if they’re abusing the relationship
Gini Dietrich: Yeah, it’s really really important to please talk to an attorney and have them review the contract with you. Because I will give you a really good example a client a coaching client of mine sent probably about three weeks ago a clause over from a contract that a client had sent her. And it essentially what it said was anything, any work product that she creates for her agency, for for the agency, for other clients, for them, they own.
And I was like, please send this to Sharon. Please. It’s her attorney. Like, no, no, you can’t. No, she was like, well, and I’m like, no, that means if you decide to do any media training, if, and, and update those materials, if you do any crisis work, if you do any online courses, like anything that you do for yourself or your other clients, They seem to think they’re going to own.
No. So she was really afraid to go back to the client and say, you need to take this out because she was afraid she was going to lose the business. And I, from my perspective, I was like, if they’re willing to walk away from working with you, then that’s going to be better in the long run because they can’t own everything that you’ve created in the time that you work together.
Chip Griffin: Right, right. And, and you really have to be careful about that and make sure that you’ve got those clear provisions in place around intellectual property ownership because these days that, that’s more important than ever. Yes. To understand because, I mean, every, you build a media list, you end up reusing that for other clients.
Right, absolutely. But if you’re not careful, your contract may effectively prohibit you from doing it. Now, the odds that, that A, the client becomes aware of it and B, enforces it relatively low, but still, why would you expose yourself to that risk when it’s so simple just not to have a clause in there that puts you at that risk?
So you know, be really mindful of intellectual property provisions in those agreements, particularly, you know, here in 2023.
Gini Dietrich: Yeah. I mean, talk to an attorney, get your own master agreement, understand how to use scope, scope of work with that, and just cover your bases. It’s a little bit of an investment up front, but it will be worth it in the long run.
Chip Griffin: And, and if you have a good contract, it makes getting out of the relationship so much smoother, whether that’s, whether you’re leaving on friendly terms or not. That’s right. A contract is going to help you get there because every agency client relationship ends at some point. And the, the way that that exit happens is governed entirely by that contract that you’ve signed.
So, make sure you’ve got it, make sure you’re getting paid, and make sure that you’ve got the right terms in there. So, hopefully, hopefully, after, anyone who has listened this far, will never ever do work for a client again without a contract. And will make sure that they’re carefully reviewing what they’re agreeing to. That’s my goal.
Gini Dietrich: Yes, please. Yes, please.
Chip Griffin: With that, that will draw this episode to a close. I’m Chip Griffin.
Gini Dietrich: I’m Gini Dietrich.
Chip Griffin: And it depends.