I got a question today from a participant in my SIGNED program, and I thought it was such an important topic that I wanted to share my response with you.
As a bit of background, in the first SIGNED module we focus on the sales process. From there, we can start to see where prospects get stuck, how to streamline the process, and how to lead the client from first contact to close.
As she was creating her own sales process, one participant asked this question:
Question about contracts – I haven't been doing them for a couple of reasons. One – some companies are paying me a deposit via credit card over the phone and it seems silly to slow down that process. And two – I'm not sure the people who are paying me have the authority to sign contracts. It seems like they have the ability to buy up to a certain level, but throwing in the contract would be another layer. Thoughts?
Here’s how I responded.
This is a really important question. It's great that you've had such good client relationships that there hasn't been a need for a contract! They hire you to do something, you do it, they pay you money.
But, and I don't mean to be Debbie Downer here, without a contract you're putting yourself at a pretty serious risk. If your main contact changed jobs, the initiative was canceled, there was a spending freeze... any number of possibilities... they could simply not pay you and there's nothing you could do.
I think we all believe that this won’t happen to us, and for most projects that’s true. But all it takes is one time for you to potentially lose a lot of money.
It actually happened to me twice in a past company I was running:
It also happened to my client, who was doing a project for a large, very stable tech company. She spent in the hundreds of thousands in upfront work for a project that was halted suddenly. The company refused to pay. (Months of legal work and thousands of dollars later, she finally got paid).
When you weigh a potential delay in the sales process against the potential loss of significant revenue, you realize that the security of a contract is worth it.
It should also be noted that a contract protects your clients too. :)
Your note about what they can pay without involving others - that's important too.
It's totally ok to ask your clients what they can agree to without getting others involved. That's pretty astute questioning during the discovery phase, for two reasons:
Knowing that an agreement still needs to be signed, you can do things to streamline the process.
You can ask if they have a master services agreement or statement of work template that you can use as a starting point - this is a great way to ensure that it's kosher from the get-go. You can use a doc signing program to make it easy to sign on the dotted line.
Or, in your case, if people are paying with a credit card anyway, you can use a payment system that lets them check a box for terms & conditions.
Here’s the bottom line: of course you want to sign a new client, but not by putting yourself at risk. Use a contract, do great discovery to get insight on the process, and get creative about streamlining it. You and your clients will both be glad you did.
If you want to create your own sales process so you can gain insight into where your prospects get stuck and how to un-stick them, the waitlist is open for the next SIGNED course starting in the fall. Head over here to sign up! (wait a few seconds for the popup to appear)
Also, if you want a client agreement that’s watertight and written specifically for entrepreneurs, check out Small Business Bodyguard. SBB was created by Rachel Rodgers as the ultimate legal resource for entrepreneurs. I’ve been a SBB member for years and I use Rachel’s client agreement, policies, disclaimers and other templates. Let me know if you have any questions about it and I’ll be happy to answer them.