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The basics of agency-client contracts from a business perspective

This SAGA Member Webinar is available only to individuals with active memberships. Login or join to gain access.
Webinar presented live on May 16, 2023

After all of the effort it takes to close a sale with a new client, agencies often want to just get the contract done as quickly and easily as possible.

In this webinar, Chip Griffin shares with you how he has approached contracts with clients and how he prefers to structure them – as well as pitfalls you want to avoid.

This isn’t a discussion of legal nuances since Chip is not a lawyer, but rather a business perspective on the entire process, including how to get started, managing the negotiations, and working through the important details without getting hung up on senseless minutiae.


The following is a computer-generated transcript. Please listen to the audio to confirm accuracy.

Hello and welcome to today’s webinar on the basics of agency client contracts from a business perspective. I’m your host, Chip Griffin, the founder of SAGA, the Small Agency Growth Alliance, and today we’re going to have, well, I won’t say an exciting discussion because I know that legal topics are probably not the most exciting of things to think about, but they are important and hopefully I will demystify some of the contract process for you as well as explain some of my best advice as a non-lawyer on how to go about handling your contracts.

So before we jump into the topic at hand, I do want to do the housekeeping that I always do at the top of these webinars. First of all, the full webinar replay will be available for SAGA Pro members on the Saga website, probably within the next day or two. If you are attending live, I’ll be happy to take your questions.

Just use the q and a function at the bottom of your screen, and I will take all of those at the end of the main presentation. If you’re watching this on replay, you will not have the q and a section, but you will have the opportunity to email me at chip@smallagencygrowth.com to ask any questions that you have.

You can also hop into the SAGA community on Slack and ask questions there where I can jump in as well as other experts and agency owners. If you are attending live and have a question you’d like to ask but maybe don’t wanna share with the group, feel free to just email that to me as well. If you’re on social media and want to talk about this webinar, I’d encourage you to use the hashtag agencyleadership to make it easy to discover.

And finally, if you want to check out any of the resources that I have or any of the episodes, articles, or other things that I may reference in the course of today’s webinar, just go to smallagency growth.com. Alright, so with that, let’s go ahead and outline the agenda so you know what to expect. I’ll start with a giant disclaimer.

But then we’ll work on the basic purpose of a contract. Why do we even bother having them? We’ll talk about using your contract versus using the client’s contract and the pros and cons of each. We’ll talk about what you need to consider when you’re using someone else’s contract, the language that they and their lawyers have put together.

We’ll talk about how you should structure your own agreement and some of the things to think about there. I’ll talk about some of the common contract elements that you’ll want to be thinking about, and finally, I’ll talk a little bit about negotiating with the client at the end of the day, because not every contract, in fact, most contracts don’t end up being signed exactly as they are when it comes to agency client relationships.

So, Let’s start with that giant disclaimer that I talked about and I’m gonna do it just like a lawyer. I’m putting it in all caps and I don’t know why lawyers do this. I’ve asked them and they basically say, cuz it helps to emphasize the point or something. But in any contract you’ll often see a a paragraph, usually a warranty section or something like that where it’s an all caps.

So I’m putting this disclaimer in all caps so everybody understands. And I do this anytime I talk about legal topics. I’m not a lawyer. This is not legal advice and you should talk to your own lawyer if it’s something legal before you actually take any action. So we’ll be looking at this really from a business considerations standpoint, and your own needs from a legal standpoint may vary based on where you live, the laws and regulations that apply to you, and frankly, the perspective that your own legal counsel may have. So, alright, disclaimer out of the way, let’s jump into more interesting things, and that’s the basic purpose of the agency client contract. Why do you even bother with it? And there are really two key things that a contract does. And even though it tends to be many pages long and has all sorts of provisions in there, some of which may be easier to understand as a layperson than others, the key things that you want to be thinking about from a business perspective.

Is that the contract sets the expectations, it sets the expectations with the client for what you’ll be delivering, and it sets your expectations for what you’ll be receiving. And it explains all of the things around that in terms of when payments are due and those kinds of things. So it really is an expectation setter first and foremost, but the second reason a contract exists, and it’s frankly the reason for the vast majority of legal documents.

It’s to help you to figure out what happens when things go wrong. Almost nobody goes back to a contract and looks at it. If the relationship is going well and wants to continue and everybody wants to keep paying the same amount and keep doing the same work. It only pops up, the only time you pull it out is when something is amiss.

It’s because you don’t feel like you’re being paid on time. The client doesn’t feel like they’re getting the deliverables they want. The client wants to cancel the agreement. You’ve got some sort of dispute that’s going on. Maybe someone’s been sued or someone’s gotten a cease and desist letter. These are all times that you might go back and take a look at the contract.

So really that’s the lens that you wanna look through. When you’re thinking about your contracts, what are the expectations that it sets? And how does it help you navigate? What kind of process does it put in place for you to resolve any problems, disputes, or other things that may go wrong? So with that, we should talk about the, the big, big question that a lot of agencies have.

Should I use my contract or should I use the client’s contract? And it is not uncommon for clients to insist that their contract is the one that is used. And typically this happens most often with large brands, large agencies who are subcontracting. Oftentimes they will have a legal document that they have prepared and they will say here, Let’s use this.

What I would encourage you to do is to have a standard contract template that you have in place and something that you can easily modify so that you can get it out the door very quickly to a prospective client as soon as you’ve reached agreement on the basic business terms of the deal. And that does a couple of things.

First of all, it helps you to look particularly professional in the eyes of the client. It looks like you have your stuff together, as it were. But it also means whoever is sharing paper first is the one who is more likely to be the the contract document that is used as the starting point. Now, that’s not true with the largest brands.

If you go to the largest brands and send ’em your contract, they’ll probably say, eh, forget about it. We’re not using this one. But if it’s a mid-sized organization, and sometimes they use their contract, sometimes they use the agency or vendor contract. You can often get out ahead of it by getting that document to them first.

So I would encourage you to have yours, make it easy to fill in the blanks, easy to get over to the prospective client to drive the conversation, because if at all possible, it’s better to use your document because you know what’s in it. You know it’s been vetted by your attorney. You know, it doesn’t need a whole lot of work to get you across the finish line in a place where you are happy that all of the bases are covered.

But of course, That’s not always possible. Sometimes you end up having to use the client’s contract and when you have to use their terms, the things that their lawyers have put together, there are some things that you want to look out for, and in particular, you want to look for one-sided terms in the agreement.

And I’ve noted a few of the ones here that I’ve most commonly seen when you’re using the client’s contract or paper, as I will sometimes refer to it as it is. These are the terms that they will typically write in a one-sided fashion. For example, they will give themselves the right to terminate the agreement with little or no notice, and they may not give you that same right.

You want to make sure that that’s matched up. If they have 30 day cancellation, you should have 30 day cancellation. It shouldn’t be a one-way street. Same thing for renewal terms. This should not be that they get to decide to renew at the then current rate or the rate in the document or whatever. You need to be able to have a voice in that as well.

It needs to be a mutual decision to continue the relationship at the expiration of the current term. Indemnification. This is one that’s almost always written as one-sided. You should always look for. Mutual indemnification. Same for confidentiality. These are just basic things that you wanna make sure that everybody’s on a level playing field.

There’s really no reason for either party to have an advantage in these kinds of things. Non-solicitation or anti-poaching. This is the kind of thing that. That agencies are often worried about, particularly on the poaching side. Clients will often put in terms that you can’t take their employees and hire them to work for your agency, but you need to make sure that it is the other way around as well.

And non-solicitation can be if you’re working for someone this comes mostly into play when you’re a subcontractor for another agency, just to make sure that you don’t end run that primary agency’s relationship with the client. So the, these are common things. Again, you just need to make sure that it is a two-way street.

And the, the final one that I would highlight is intellectual property, and we’ll talk more about this later because I think this is one that a lot of agencies overlook and it’s a potential risk area to consider. You want to make sure that from an intellectual property standpoint, you have equal rights to the content to the, the strategies and ideas that you’re creating, not necessarily the content.

The content you can assign and provide the, the ownership as work for hire to the client. But you’re gonna develop intellectual property in the course of working for a client. Ideas, know-how media list, those kinds of things. And to the extent that you are coming up with those basic fundamental building blocks, you wanna make sure that the contract, whether it’s the clients or yours, gives you the opportunity to continue to use that and to continue to develop and not have it viewed by the contract as if it is solely owned by the client.

Now, I will say that I’ve, I have not really seen this. As a kind of thing where clients go overboard in trying to enforce it. But it is something, particularly with the increased focus on intellectual property law and intellectual property rights, and as we look at artificial intelligence and what all that means for IP, it is an area that I would encourage you to pay attention to and not let’s slip on by particularly if you’re using the client’s document.

You also need to be re aware if you’re signing the client’s contract of any requirements that they have. And there are three particular ones that are very commonly seen in my experience, in those client drafted contracts. The first is they almost all have a requirement for insurance coverage.

Just make sure that whatever they’re requiring matches up with what you already have. Or that you’re prepared to secure the necessary insurance in order to move forward. If you’re doing government contracting, higher education, contracting, these kinds of things, you’re almost certainly going to need them.

We have an episode of the Agency Leadership Podcast, I believe, where we talk about the different kinds of insurance that you should be thinking about as an agency. And I would encourage you to go listen to that if you want to dive deeper into that topic. Some contracts though also require you to have certain internal policies.

And again, this is very common in government contracting. It can be everything from your employment practices to your security policies, to confidentiality agreements. There can be all sorts of requirements in there for you to have specific policies and sometimes for the client to, to have the right to review or even audit those policies.

So make sure that you understand those. This is particularly something that you’ll see in defense contracting as well. So if you’re working for a company that does defense contracting, either as a primary or subcontractor, they will often have standard terms in there. And, and one of the things that you will find as you look at more and more of these client generated contracts is that they are often not written with an agency in mind.

So there tend to be requirements in there from an insurance perspective and a policy perspective and other things that just simply don’t apply to you. But make sure that you’re reviewing it and you either get those removed or you understand and you have an an understanding with the client that it, it simply does not apply to you.

So just be aware of those kinds of things. The final one to pay attention to is that many of these client drafted contracts have prohibitions or other restrictions on the use of subcontractors. And with so many agencies today, working in a hybrid mode where you have employees and freelancers and all of that.

Just make sure that whatever requirements they have in place match up with what you plan to do and how you operate as an agency. And if they don’t, you need to either get those terms changed or potentially you may need to walk away. One thing in particular to pay attention to here if you’re using overseas labor is again, a lot of government contracts and defense contractors and those kinds of things will prohibit you from using any overseas employees or contractors.

And so you need to make sure that you are in compliance with those requirements upfront. Or again, find out if there is flexibility on them. And I will tell you that that is an area that I’ve come across a number of times in the past and have frankly had to walk away from business that just didn’t fit with the way that my agency worked at the time because it, it wouldn’t have made sense for me to restructure the whole thing simply to take on a particular deal.

So just be aware of all of those requirements as you’re moving forward. So let’s talk and you know, we’ve talked now about how you might deal with a client generated contract, but my preferred method, and the one that I would suggest you should prefer is to structure your own contract. And so when you’re thinking about putting together an agreement for your client, there are really three different primary models that agencies use that I’ve seen.

The first is a simple letter agreement, and this is, it’s typically Maybe a two or three page, exactly what it says, letter that outlines the terms of the arrangement. It’s super simple. It gets the basic terms in place, and so I would suggest that that is the bare minimum that you should make sure that you do, even if you’re working with someone that you have a good relationship with, a long standing relationship with.

I would not suggest moving forward with an agency-client relationship. Solely based on a handshake. Much better to get it in writing in some form, and a letter agreement can be a good starting point. But then as you look at more detailed legal documents, you would look at either an integrated contract, in other words, a single contract that covers everything from the terms and conditions to the scope of work altogether.

One document. And that’s probably, I would say the, at least from what I’ve seen, the most common approach that agencies take in working with clients. But then we have the, the third way, which is again, my preferred way of doing things, and this is something that an increasing number of agencies do, and that is to create a master services agreement.

That’s a document that contains all of the basic legal terms and payment structures and term and termination and cancellation renewals. Indemnification, confidentiality, all those kinds of things. We’ll talk more about some of those provisions in a bit, but it puts that all in one document called a master services agreement.

But then you have a separate statement of work that you put together for the retainer work or the project work that you’re doing, and that document outlines what’s the specific scope of work that you’re agreeing to and what is the payment amount and frequency that is associated with it. The beauty of this approach is that it allows you to have a single legal document that governs the entirety of your relationship with that client. But then you use statements of work for all of the individual projects that you may work on or that you use when you change the scope of your retainer or any of those kinds of things. And what it tends to do is it tends to take the lawyers out of the process of the statement of work.

And so their lawyers may spend a lot of time reviewing the MSA upfront. But once you have those terms nailed down, It’s less likely that the client will submit the statement of work to their lawyers, or that there will be as much time spent working out the details of those. So it gives you a lot more flexibility to continue to adapt the relationship as you go forward.

It simplifies renewals, for example, or extensions of agreements. And so I would encourage you to, to think about this model versus the integrated contract where you put it all into one, because then what you’re effectively doing is when it comes time to revise any portion of the scope of work, it’s now inviting the client or their lawyers to take a look at the rest of the terms and say, well, you know, now that I think about it, I, I’m not really comfortable with the confidentiality provision or the, the cancellation provision. So rather than giving someone an opportunity to open up a whole new discussion, a whole new negotiation work with this dual document approach, which I think you’ll find to be a lot simpler, cleaner, and easier.

So let’s talk about now the common contract elements that you will want to make sure that you’re covering in your contract, no matter whether it’s a letter of agreement, an integrated contract, or the MSA SOW approach that I recommend.

First of all, you do need, in whatever case it is to have the scope of work. If there’s not agreement in that legal document on what work you’re actually performing. Then you really have no point of having the contract. So start there. Start with understanding what that scope of work is, and presumably you’ve already agreed upon that before you even get to the contract stage.

Similarly, fees should already be agreed upon at this point. Typically, you’re not negotiating them as part of the contract unless you get sucked into our procurement discussion. But, We’ll have a separate webinar, maybe somewhere down the road talking about procurement. So get that scope of work, get the fees in there, get your payment terms in there.

In other words, if it’s project work or is it being paid in installments? Is it monthly retainer work? Is the payment due at the beginning of the month, the end of the month, 30 days after the end of the month? Make sure that those basic payment terms, Are all outlined in there. And this is an area where you need to pay particular attention on payment terms because it’s a lot of larger clients and even mid-size clients are now trying to get longer payment terms. And we’ve seen the standard for many years was 15 to 30 days, and then we started to see it creep up over the last, you know, 10 or 15 years to 60 days, 90 days. And then I saw 180 days and, and earlier this year, or maybe it was the end of last year, we saw one client that got a lot of attention because they were insisting on 365 day one year terms from their agencies.

And that’s just bonkers. So make sure that you are clear on what those payment terms are. In the contract, and so you should specify in your agreement what you want. I would suggest very strongly that if you’re doing retainer work, it should be that the fee is due on the first day of the month during which you will provide those services.

So if it’s for service in May, you should have that payment by May 1st. At the very latest, it should be 30 days after the end of the month. Anything more than that, and you need to be able to, to really understand why you’re taking on that additional risk of those longer payment terms. And you need to be clear that the client is good for it. And you also need to understand perhaps that as part of the negotiation, you need to get something for giving up those longer payment terms. And so there are all sorts of different ways that you can negotiate concessions and, and we’re not gonna focus a lot on negotiation today, but just make sure that if you’re agreeing to some less than favorable payment terms, there’s a good reason for it and you understand the risk that you’re taking on.

The contract should also cover the term and termination. And in other words, should this be a one year contract, a two year contract, should it be month to month? And my personal preference that I’ve used with virtually all of my agencies and other businesses over the years, including SAGA, when I do work, I typically prefer to have it as an open-ended month-to-month agreement.

That’s not necessarily the most popular in the agency world. A lot of folks like to do one year contracts, six month deals perhaps to get started, those kinds of things. Me personally, I like the open-ended agreement. I’ve found that they work well for me. I personally don’t want clients to stick around if they’re not finding the work that I am doing is helping to advance their goals and meeting their needs. And so because of that, I am willing to take on that risk of not having a longer term agreement. And I think one of the things that agency owners have realized, Particularly in the last few years is that contracts aren’t necessarily as ironclad as they look.

And so even if I’ve got a one year deal that has no early termination opportunity for the client, if they call you up and say, simply, we’re done at the end of the month and we’re not paying after that, your only option really is to go and sue them. And that’s not something that most agencies are inclined to do, nor in most cases does it make financial sense to do so.

So make sure that you’re thinking very carefully about what terms you want. Make sure that you’re thinking about how to set up renewals so they’re as easy as possible. If it is not an open-ended agreement, if it is one in which the, there are specific renewal dates in there, make sure that you’re thinking about those.

One area I would encourage you to be careful of here is don’t set up all of your contracts to expire for all of your clients at the same time. Some agencies like to have the end of the calendar year be the renewal date for contracts, and I’ve worked with some rather large agencies that have that approach, and it can make the fourth quarter a real nightmare, both in terms of the time that is needed to, to spend with clients to try to get those renewals to happen, as well as the uncertainty for Q1 revenue. Because if you’ve got all of your clients coming due at once, it makes it very difficult to predict what your revenue is going to look like. So I would encourage you to have a more staggered approach if you’re going to go the annual route and not go the route of having open-ended agreements.

Again, this is an area where MSAs and SOWs can be really helpful because if you go with that dual approach, it can really simplify the renewal. So even if your statement of work does have a one year term and you do need to do an actual renewal, you’re only really focused on that one or two page statement of work document that needs to be part of the renewal process and not the rest of it, which can really save a lot of time on both sides. So I would encourage you to, to think about that, particularly if you are going through an active renewal process with your clients.

You need to be. Thinking about the limitation of liability. So there’s a lot of focus typically in these documents on indemnification, but I think more important than that is a limitation of your liability.

Typically, my contracts have always said that my liability is limited to the total amount of fees actually paid by the client in the preceding 12 months. And so then I have a, a reasonable idea of what my exposure is. Obviously, some clients will push back on that, but many won’t. And so if you can have something in that document that limits the liability that you have, if there is some sort of a dispute that can be really helpful primarily in giving you leverage in dealing with things. And this is one of the things to think about generally with contracts, is it’s all about providing you with the roadmap and with the leverage to resolve the situation. It is rare that you actually end up in court over an agency-client contract. In fact, I’ve, I’ve never worked with anybody who has ever gotten that far in any kind of a dispute with a client that it has come down to what are the specific legal terms and having a judge rule on what they mean.

So I would encourage you to think about it more in terms of of that process roadmap it gives you, as well as the leverage it gives you in order to try to reach a fair conclusion to whatever the dispute may be. One area where I would encourage you to, to focus in an area that a lot of agency client contracts that I have seen fall short on is the assignment clause.

And I know you’re probably sitting there saying the assignment clause I, that’s part of the legal gobbledy book at the end with severability and you know, all that kind of stuff that I never pay any attention to. And I understand that. But the assignment clause is actually one of the most important ones to think about, particularly if you have even the possibility of selling your agency in the back of your mind. Because what the assignment clause is, is it allows you to assign the contract to someone else in the event of the sale of your agency. And typically most standard contracts will have a nonassignment clause. It will say that you cannot assign the agreement without the permission of the other party.

You don’t want that. You want to make sure that in the event that. You have sold the agency or sold all or substantially all of the assets of your agency, that you have the ability to reassign the contract to the acquirer. And the reason that you want to do that is because otherwise, if you were to sell the business, you would then trigger that Nonassignment clause that’s standard in many contracts, and it would then require you to go and get permission of all of your clients at the time of the sale of the business to make sure they were okay with it.

And I can tell you from experience on both sides of the equation here, that that presents risks. Because it is an opportunity for the client to understand that they have leverage and they have an opportunity to revisit the terms of whatever deal they have because they know that there is a time crunch, and they know that the agency or business that’s being sold, really wants to get it done.

And I can tell you, and I’m not ashamed of it, that when I have had the, that leverage in a situation where my contract’s, the provider, the owner of that contract was being sold, I have used that as an opportunity to fix things in the relationship that I thought needed fixing because I knew that we could get it done more quickly and I knew that I had leverage.

So be aware of that assignment clause. And don’t just skip over it as just yet more gobbledy go that you’re not interested in reading about. So if I had to tell you anything at all in this webinar that most people overlook, that is probably the number one thing.

Beyond that, you need to be thinking about the confidentiality clauses in the contract.

You need to be proactive in putting that in your document because you want to make sure that the client understands that whatever they’re providing you, you will hold In safety that it will be kept confidential and that they will in turn do the same with any information that you share. I’ll be honest with you, this is one where you’re more protecting their confidential information.

It’s rare that most agencies provide that much confidential information to their clients, so unless you are doing something where you truly are sharing a lot of confidential information, In that direction, and it’s possible. There are so many different agency structures out there and approaches. It is possible.

But in general, this is really more to protect the client and to make sure that you can say to them honestly in a conversation, if they’re hesitant to share information, you can say, look, we’re covered by a confidentiality agreement. Let me know. I particularly, if you’re doing anything in the, the PR space communications, generally you need to know more from the client and you don’t want them to hesitate because there is no confidentiality agreement in place.

And finally, I, I alluded to this earlier, but IP reuse, you really need to make sure that your contract has a provision so that any innovations, developments, ideas that you come out, come up with in the course of the work, you’re certainly licensing all of that to the client, but you also retain the ability to use that in the future.

So if you figure out, you know, how to work effectively with a media outlet, or you come up with a, a new tool to make it easier for you to, to distribute press releases, you own that. That’s not been created for that client. They don’t own it. They can’t tell you what you can or can’t do with it. You’re absolutely licensing it to them so that they can get the benefits of it.

But you, at the end of the day, Are holding onto it and keeping control yourself so that you can use it in the future. So don’t overlook that possibility as well, particularly with the rising interest in intellectual property generally and, and people being more focused on it. It’s an area that you need to make sure your contract, your standard template covers.

Some things that you should not have in your contract, and these are almost as important as the things that you should put in there. The first is never promise results. So, you know, and, and we talk about this a lot just in terms of, of general business. You certainly don’t want to enshrine it in a legal document, but you also want to make sure that you’re not just promising it generally, because no agency can truly promise results.

Agencies can promise to do certain work. They can promise to put it in a certain amount of time. They cannot promise the results that will occur from you. You cannot promise sales. You cannot promise media hits or anything like that, and so you need to make sure that you’re not making that promise, particularly in a legal document. So talk about the scope of the work, the inputs that you’re going to do, but don’t talk about those results because that is something that can get you into trouble because you cannot predict exactly what’s going to happen.

You also need to be thinking about project details that may change.

And I would not put those into any legal document. So putting the general framework of the kind of work that you’re doing, but don’t get down into to nitty gritties about, you know, we’re gonna pr, we’re gonna have these calls at this time and, and some of the levels of detail, and I’ve seen some agency contracts that have an incredible level of detail included in them.

You wanna make sure there’s enough detail so that there’s an understanding of the expectations from both parties, but not so much detail that it puts you in a box and it makes it hard to adapt and to change as your relationship with the client does as well. Because we all know that any agency client relationship on day 90, 180, 360 and beyond is not the same as it was on day one. There’s always an evolution that happens.

And that brings me to the final thing that shouldn’t be in the contract. Don’t name any individual employees in a legal document. There’s no reason to be saying that your account lead will be this person, or certain people will spend certain amounts of time on, on a project or anything like that.

To the extent that you’re, you’re doing anything, always do it by position title, even then, I would try to avoid something with that level of specificity, unless it’s absolutely required. But when you start putting names in there, it starts to put you in a box if an employee leaves, or even if a partner in your agency leaves.

So be very careful about getting into too much detail in your contract. Just enough for expectations, not so much that you put yourself in that box.

So the last thing I wanna talk about is you’ve got all these terms. You’ve got, you know, their document, your document, whoever, doc, doesn’t matter whose document is, there’s gonna be a negotiation.

In most cases, someone will either ask questions or push back. It could be on the business terms, part of it, it could be on the legal terms, part of it. And so let’s think about how we negotiate with the client. And again, this is not a full-blown session on how to run a successful negotiation, but this should be enough for you to be thinking about it in terms of the contract document itself.

What should you be focused on? And I would tell you that you need to choose your battles, particularly if your client has handed the document off to their lawyers and they’ve gone and done what lawyers do and marked it up and added comments and track changes and all that kind of stuff, and they send back this giant red mess of stuff and, and a lot of lawyers do that.

I’ve seen so many of these over the years. I, I would go blind probably if I had to read them all at once. They are lawyers like to, to make sure that the client understands that they’re looking out for them. And so they will often highlight many issues that are not real issues, that are not all that important to either the client or to you.

And so one of the things that you need to do is to ask yourself a few questions about any change request that your client or their lawyers may have. And the first is, what’s the worst outcome that could happen if you accept the client’s change? In other words, if they ask you they wanna have a seven day termination notice.

Okay, well what does that mean for you? And you need to understand what are the risks to you? What are the cash flow risks to you? What are the fundamental business risks? How big a deal is this? You know, if it’s a hundred dollars a month, a hundred dollars a month project, it’s going to be a lot different than if it’s a hundred thousand dollars a month.

So you need to understand what’s the worst possible thing that could happen if you said yes Now, That’s not the only thing you need to think about. You also need to think about what’s the likelihood of that outcome, because there are some things where the worst possible outcome is pretty bad, but the odds of it happening are also very low,. And so you need to weigh the likelihood of it happening versus the end result that could occur, and that goes into your consideration for whether or not you are inclined to accept the change.

But beyond that, this is not merely a question of, of what risk you should take or what kind of of changes you should accept to the document. You still need to be looking at this through a business lens, and you need to consider who the, the source of that requested change is. In other words, is that something that the lawyer is asking for or is that something that the client contact, the decision maker is asking for because they are different. And it it, I’ve worked with many agency owners who have had situations where their main client contact is fine with the terms as they’re laid out, but the lawyer may not be. And so understanding the different perspectives who’s making the request, and sometimes you need to go to your client contact and try to get them to reign in the lawyer that they have operating on their side. And, and depending on how the organization is structured and the cloud of your client contact and all of these things, it can make a difference in the eventual outcome. But understand who is asking for it, because it’s very different when it’s the client contact versus when it is the lawyer.

And so that can help you to understand how you evaluate that requested change. But the last thing I would say when you’re, you’re trying to figure out how to get through this negotiation successfully, is you need to think about not just the legal side, but also the business side. And that is, let’s say it is your client contract contact who has requested a change to the contract. If that’s the case, look at it and say, why are they asking for this? Is it because they are concerned about our ability to deliver on time or to provide the expected results? Or does it perhaps create some sort of other red flag? And sometimes in these negotiations, you can stumble across information that that’s helpful to you in evaluating the future of that relationship before it’s even gotten started.

So if someone is in there and asking for unlimited revisions. For example, let’s say you’re doing either written product or web development or something like that where revisions are normal and perhaps your agreement has a limitation on those revisions, whether that’s in terms of hours or the number of revis revisions or something like that.

If they want to take that cap off, what does that mean? Are, what are you really exposing yourself to? And I’m, and I’m not talking about in legal terms, but I mean, is that because they have a habit of going through revision after revision, after revision? And I’ve seen clients like this over the years.

I’ve seen ones who just never really ever finish a project. They’re always wanting to continue to, to change it to the point where sometimes they never even end up getting it out the door. They just spend lots of time building and building and building it and never actually doing. And so you need to understand those things and evaluate the requests that you’re getting as part of the contract process and make you think about whether this should change your approach to the overall relationship and ask frankly, maybe, are you even interested in continuing with this work? Or do you need to build in additional protections if that is their approach? And I would have no problem with you going to the client and saying, look, I wanna understand why you’re asking for this. What is it that you’re worried about?

And talk, talk it through with them. And if that can be resolved based on that conversation, great. If it still leaves it open-ended, you may say, well, you know, if you’re looking for that many revisions, or if you’re looking for this kind of protection, maybe we need to change the scope of work. And so therefore, maybe also the price in order to make sure that we’re providing you with what you need and meeting your expectations while still treating us fairly in the process.

So, As you’re doing the negotiating, don’t just think about it in legalistic terms. By all means, do not just allow your lawyer if you’re involving them in the process to drive it, because the worst outcome is when you’ve got the lawyers talking to the lawyers and everybody’s kind of fighting it out over pointless things.

So be really thoughtful about this whole exchange and the negotiation and, and how you can use that to learn more and make sure that you truly are setting this relationship up for success.

So with that, that sort of ties it all up in a bow and, and I know again, legal topics not the most interesting thing in the world, but I think that it, it is very important because it is that first real substantive interaction that we’re having with the client after we’ve gone through the excitement of agreeing that, yes, we should work together and we’ve got the, these great ideas and, and we want to charge ahead. This is that first reality check in the relationship. It’s that first opportunity for both sides to figure out how do you work through even modest amounts of conflict. How do you, how do you judge each other from a trust standpoint, a risk standpoint? And so you want to be thoughtful about how you’re going forward with your contracts process, and you wanna make sure that you’re setting yourself up for success, both in terms of the expectations that I mentioned, as well as for creating that roadmap for how to handle any difficulties that may arise down the road.

And hopefully you never go back to that contract after it’s signed. Hopefully at that point it’s all, everybody’s happy it, it all goes smoothly and you ride off into the sunset together. So, With that that will now conclude the prepared portion of today’s webinar for live attendees. We will move into the q and a session as soon as I grab a sip of water here.

And if you are watching this on replay, this is where it will conclude. You can send me an email at chip@smallagencygrowth.com with any questions that you may have, or as I mentioned, you can jump into the SAGA community on Slack. It’s free to join and a great place to get feedback from me and other agency owners and experts.

So thank you all for joining and we’ll move to q and a in just a moment.

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