There’s a widely undervalued contract that can actually help your business grow. It’s something that entrepreneurs often mistakingly don’t put into play when they’re first starting out. This magic document is a custom client service agreement.
How Does a Client Service Agreement Help Your Business Grow?
First of all, a service contract is much more than a proposal or a statement of work (SOW). When a client sees a well-prepared service contract that also happens to be easy to understand, he knows you have a lawyer and you mean business. This assures your clients that they’re in capable hands when hiring you. It also increases your client retention rate.
How Does a Client Service Agreement Save Your ‘Ass’ets?
If a client refuses to pay, insists that you agreed to perform more or different work, says that you agreed to charge less than your usual rate, tries to take the work you’ve created without paying for it, or otherwise won’t live up to his or her end of the bargain, you’re in a bind. The client services agreement can save you in these situations.
Key provisions that absolutely must be in your service agreement.
1) Scope of Work
Start with outlining the scope of services with all variables in a separate SOW (or if the services are not project-based, in one or more schedules). This allows you to work with one standard service agreement for all of your clients, but tweak the scope and services being provided for each individual client/project in the SOW.
2) Timeline for the Project
State when work will begin, and if there are specific milestones or deadlines over the course of the project. Also include what final delivery/project completion depends on.
3) Who Owns the Work You Create
If you’re creating any intangible work for a client, it’s intellectual property. The ownership and potential licensing of that IP should be addressed in your service agreement.
4) Opt-Out Clauses, i.e. Basis for Early Cancellation
While service agreements help both the service provider and the client create a trusting relationship with a clear understanding of each other’s responsibilities, there are times when a working relationship needs to end early. Your service agreement should establish how and when you and the client can terminate the relationship earlier then planned.
5) Location and Equipment
Include whether the work will be performed on the client’s premises or not, and whether the client will provide specific materials or equipment.
Indicate whether you will be paid per hour, per piece created, a flat rate, or based on the completion of milestones. If applicable, specifically list each date and amount due on those dates.
You should also include a late fee. A late fee will keep your clients focused on staying up-to-date with your reimbursements and payables.
Hint: You might also consider requiring a “kill fee” to guarantee some payment if a project is canceled before completion.
In addition to the terms of payment or fees, your agreement should also state who is responsible for any disbursements, expenses, and other costs incurred in connection with the project. The client can approve these costs in writing in advance of being incurred (these terms should be laid out in the service agreement).
8) Limit Your Liability on Client Losses
This one is really important. The Limitation on Liability clause ensures you’re protected from all losses incurred by your client as a result of your work.
The Bottom Line
When you’re putting so much in growing your business, why wouldn’t you protect your key relationships? At least a couple of times a week we have clients telling us what a difference their service agreements have made in their businesses and how much their revenue has increased since they’ve started using the agreements Gouchev Law has provided. That’s why we stress the importance of hiring our team to draft your service contract.
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