3 Ways to Kill Your Small Business With Contracts


Lawyers say not to go near a project without one. Many freelancers say they’re not worth the paper they’re written on. Some clients would rather chew tin foil than read one. When it comes to service contracts, it seems that the only thing everyone can agree on is that … no one can agree.

Most entrepreneurs I know genuinely want to play fair in business, and contracts are arguably one way to ensure that happens. Yet how many times have you chafed against templates and legalese that don’t fit the type of business you’re trying to run?

It’s a frustrating situation. Lawyers are expensive. Clients are impatient. And you just want to close deals and do your good work. Is all this contractual maneuvering really necessary?

In my opinion, yes it is. The good news though is that using contracts in your business doesn’t have to be complicated or stressful, for you or your clients.

Disclaimer: I’m not a lawyer, and this blog post is not a substitute for professional legal counsel. Also, in this post I’m talking about contracts in the context of small business entrepreneurs and freelancers who provide services to other businesses and private individuals.

When I started out 6 years ago I thought I was covering my bases by having a lawyer draw up my contracts, contracts I used for years without much question.

But I failed to recognize that contracts are a critical communication tool in business.

Which begs the question: what are your contracts really saying to clients and prospective clients?

My own contracts certainly weren’t sending a message that aligned with my business ethic. And so I had to learn the hard way that contracts–even ones written by lawyers–can actually hurt business. Maybe I can prevent you from making the same mistakes.

Here are 3 ways to kill your small business with contracts:

1) Make them impossible to understand. No matter how smart your clients are, they don’t want to spend their precious time trying to interpret legalese. And if they have to spend inordinate amounts of money on a lawyer to do it for them, even worse. Remember, you’re selling what should be an easily defined package of services, not patenting a cure for cancer. When a contract is too long and complex, it raises red flags about your intent as a service provider. On the other hand, a clear, concise agreement assures clients you are a committed professional.

2) Be vague about time and money. If you don’t define exactly what the client gets–and does not get–for the money and when, you leave the door wide open for stressful misunderstandings and other expensive headaches such as scope creep. For example, my copywriting agreements include 2 rounds of minor revisions but exclude major rewrites which incur an additional fee. Clients must also submit changes within 14 days of receiving a draft. I’m not being tough or difficult by stating these terms. I’m managing projects responsibly.

Quick Heads Up: If you do any kind of creative work (e.g. writing or graphic design), make sure your agreements explicitly address the intellectual property rights of each party. If you’re not sure how to address this in your contracts, seek legal counsel on the matter.

3) Don’t make clients sign them. If you go ahead with any part of a project without a signed agreement, don’t expect to hold the client accountable to the terms outlined therein. If the client is taking too long to return a contract to you, find out what’s going on. The client could have simply forgotten, or s/he could have questions about the terms. Or maybe the client just doesn’t perceive such silly things as contracts to be important. Whatever the case, put yourself in the driver’s seat and get to the bottom of it before you do any billable work.

Sometimes asking clients to sign a contract can feel uncomfortable. We just asked them for money and now we’re asking them to “sign their life away.” However, the opposite should be true. When your contracts are written in clear language (or as clear as legally possible) that define project paramaters in a fair and respectful way, this is a request you should make with pride.

Sloppy or otherwise poorly constructed agreements can kill a deal. But well written ones go a long way toward fostering a climate of mutual respect and dignity in your business. And who doesn’t want that?

I’d love to hear your thoughts–and experiences with–service contracts in the Comments below.


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