Contracts are a blessing
Contracts are a freelancers best friend and in this post we'll show you how to make the most of the them, as simply as possible.
Contracts are your best friend, because they consistently keep you out of trouble and aligned with your client. The process of writing a contract and agreeing on the contents is essential to get a relationship off to a good start.
Aligning your interests
There's a number of pitfalls when undertaking a new project of any kind that you need to be mindful of. Let's say that your client has a budget of 100k and the resources required for v1 is equal to 100k. Your estimates when starting this project must be more than just estimates, they must be prophecy. Any scope creep, any change in direction and the client is at the end of his budget before the project is completed.
But let's assume you absolutely nail it and land exactly on time and on budget. Who will support the system? Who'll build that 1 feature they forgot about before onboarding the first few users?
All of these challenges are quite easily tackled if confronted ahead of time and this is precisely what a contract negotiation forces you to do.
When you start wording your contract, do so with the end in mind. It's very easy to get bogged down in the details, but by keeping a constant focus on the end-product/delivery you ensure that the entire contract is aimed in the same direction as your client wants.
Putting in safeguards is not optional. If you find yourself losing a ton of money on a client with no solid contract in place, how do you react? Somehow you find a way to mitigate your losses or cut your client right? Your client needs to know where your boundaries are and what happens if they are exceeded. This is all part of your 'standard contract' and usually require no negotiation.
What happens if your client calls you in the evening or on the weekends? You should pick up and check if the house is on fire, and you should charge 200% of your normal rate, right? The clients needs to know this before making that call. I've had many freelance-colleagues complain about late night calls and ruined weekends, without ever having put restraints on the client. This is one thing regular employees do much better than freelancers.
What happens if you've made a perfect estimate of 50 hours but 10 hours in the client has already spent an additional 10 hours on communication, emails, questions, etc? Obviously you bill that overflow at the end of every month/week right?
What happens if you have a delivery that depends on another delivery from the client (graphics, content, etc) and your client suddenly goes quiet for 20 days? You simply bill him or her an additional 3 hours for every week they've been delayed since that's the time you need to refamiliarize yourself with the code/graphics/content etc, that's reasonable right?
All of those contingencies are quite reasonable, but your client will only agree if you've made him sign something to that effect before pushing out the invoice.
Practically speaking, this means that without a solid contract you only have 2 options:
1. Take a loss
2. Upset your client
You all know the first one which is intuitively asked "What are you looking to build?". That's the why, everything else relates to the How and When.
How we reach a certain goal is about everything other than your work. Which requirements do you put on your client? They might need to deliver content, graphics, personal, meeting rooms, transportation, etc.
It also should make you think about which potential obstacles that could complicate/disrupt your delivery. Access to shared data, indecisiveness on certain key points, changes.
Especially 'changes' can shift the scope. People handle this differently and I've found 2 good options.
Firstly, your contract can simply state that any changes are invoiced/estimated separately. This however, can incur big charges. Alternatively, you can allow for 1 iteration on every deliverable.
For instance if you're in the web design business, you complete your full design and then the customer is permitted to send a single email detailing all required changes, which are then implemented without added cost. A few clients object to this approach, in which case you can raise the bar to include 2 changes. This is still a big improvement on what I see some people doing: Endless iterations on a product at no extra cost, effectively tanking your hourly rate.
The sentence "I'm not saying you can only make 1 change, I'm saying put all of your change requests in a single email" goes a long way and such an arrangement is much more manageable.
Keep the reasons for your contract in mind while hammering it out. You want to achieve the following:
- Clear alignment on goals
- Limit liability
- Prevent cost-sinks
- Ensure adherence to scope
- Remove obstacles and make requirements on the client clear
Put some effort into both your standard contract and the customized versions you use with each client. It makes for better projects and safeguards you against costly mistakes.
About the author
Lau B. Jensen is a Danish Freelancer / Tech entrepreneur. He's worked mostly with Software Development and management consulting all across Europe. In 2015 he took a 5 year break from freelancing to be the CEO of a VC funded SaaS start-up.