Failing to sign a client service agreement jeopardizes your efforts to build successful relationships. The American dream is to own a small business. My dad is a perfect example of the American dream. He was born in Sweden and came to the United States at the age of 21 with only an eighth-grade education. He built two successful businesses here in Utah, one as a brick mason and the second a Scandinavian furniture retail store. His dream came true twice, but his success was not based on luck alone, he worked hard to be known as someone worth doing business with. The American dream of owning a successful business is a dream that few people have the courage to make.
Building A Service Company
First, you may start by coming up with a company name and then designing a logo. Next is figuring how you will provide your services. Now you are ready to market. You wrap your car in vinyl to advertise your business. You set up your website and maybe an office or some other brick and mortar location. Your American dream is about to become a reality. All that’s left is to acquire customers who want to pay for your services. This is where reality usually sets in that developing client relationships does not happen overnight. In fact, it could take years to build a loyal customer base. There is one very important item that is easily overlooked, one that could jeopardize all your hard work and dreams. You need a client service agreement tailored specifically to your business to protect those relationships that have taken years to develop.
Here’s a live broadcast about how to avoid misunderstandings with clients. Click here to watch: Practical Legal Insights-#5 Protect Your Client Relationships
Why Do You Need A Client Service Agreement?
A client service agreement is more than just a contract that your client needs to sign before doing business together. This agreement not only creates a legal relationship with your client but will also detail the terms and conditions of your services. The more items you include in your client service agreement, the easier it will be to settle any issues that may arise. Thus, it is imperative that you establish from day one what your clients can expect working with you and what their responsibilities are as well. A client service agreement will show your clients that you really want to do things right and avoid any conflict that could arise
What Kind Of Business Benefits From A Client Service Agreement?
Really any business where services are provided is appropriate. Here’s a list of service companies where a written agreement with clients will avoid a not so happy ending to the relationship:
- Website Developer
- Business Coach
- Fitness Coach
- Tech and Computer Support
- Interior Design
- Home Builder
These represent a few examples. The point is, when you provide a service, you want the experience to be positive all along the way even when there are hiccups. Having the terms in writing will help to minimize the hiccups from turning into an ugly situation.
Avoid Costly Misunderstandings
A common situation we see with business owners happened with a cabinet installation company who recently contacted us. They received a letter from an attorney representing a customer who had cabinets installed in their kitchen. The letter stated that the company owed the customer a refund of $11,000 because the cabinets were not completed on time and they were not to the customer’s satisfaction. Not many new businesses have that kind of money sitting in a bank account to refund a customer. Unfortunately, the contract they had signed with the customer was only one page which means that many terms were missing that could have protected both the installation company and the customer. This company needed a more detailed agreement to avoid this kind of misunderstanding from blowing up into a costly lawsuit. Sometimes business owners learn the hard way. Luckily, they called us to prepare a client service agreement they could use with customers because they did not want to go through this ever again.
You Are A Reputable Company To Do Business With
Creating a client service agreement communicates to your clients that you know what the business entails, what scenarios could arise, and how to reach solutions peacefully. The business world today can be very small with many layers of relationships. Defining those relationships so that all parties understand them is a good thing. It defines the elements of the relationship that will protect you and your clients both mutually. This shows your clients that you want to preserve relationships, build trust, and you are a reputable company that people want to work with.
Get The Agreement In Writing
When you agree to perform services for a client, you are entering into a legal contract where you promise to do the work, and the client promises to pay you for it. We can no longer rely on handshake agreements with clients because if something goes wrong with the deal, it will be difficult to enforce the agreement. You don’t want to end up asking a judge to believe your word against the clients. Fortunately, there’s an easy way to avoid these common issues and that’s to always get your agreements in writing. Using written contracts will help you prevent misunderstandings, clearly define the expectations you and the client have about the job, and prove your case in court, should it come to that.
Make It Easy to Understand
A good agreement needs to be easy for all parties to understand. It’s important for everyone to know exactly what they are agreeing to before signing the contract. Avoid using complicated words and phrasing like legalese. A well-written contract should:
- Define its terms
- Eliminate ambiguities
- Minimize “Legalese”
- Plan for “what if” contingencies
- Use short sentences
- Avoid passive voice
- Address all issues
- Avoid repetition
- Be consistent in form and substance
- Use simple sentence structure
If you don’t understand something then you shouldn’t assume your client or customer will either. The saying, “the devil is in the details” is what makes this agreement so advantageous. The more you spell out, the less ambiguity there is, and less likelihood a court will have to decide what you meant. The bottom line is you are protecting your dream and hard work.
What Should A Client Service Agreement Include?
Your agreement should include the obvious information like the client’s name, a place for both parties to sign, how much they will pay you, and what you will provide in exchange for that payment. Probably the most critical component of your service agreement is the description of the services that your company will provide. Be as specific as you can when defining the scope of work.
Clearly Identify Payment Schedule and Pricing
List exact prices on the contract so both you and the customer have a clear understanding of how much it will cost to have the service completed. This allows you to avoid an unpleasant situation after the project has completed if the customer is unhappy with the amount of money he or she must pay. Also, include a payment schedule detailing the method that the customer will pay for your services. If any discrepancies arise after the work has been completed, you have a signed contract proving the customer has agreed to a specific payment method.
Be Proactive And Include The Following Terms
- The length of the agreement and how to end the agreement if a party wants out.
- Timelines for how long it will take to complete the work and how long the client has to respond.
- Establish ownership of intellectual property
- Include change order forms to be filled out and signed if a customer has additional work for you to do.
- Protect your company from liabilities and risks that lead to a lawsuit.
In the situation of the cabinet company owner, litigation could have been avoided if they had specified what happens if the customer changes their mind on a cabinet color or if there is a delay in manufacturing. Another example, if you are a web designer, how many changes can a client make before additional fees are required to be paid? Think of all the things that could possibly go wrong or become sticky situations and address them in your client service agreement. Be proactive.
The Goal Is To Avoid A Legal Mess
You also want to maintain positive client relationships, which will help you to remain profitable and reputable for many years. Miscommunication can quickly ruin a business and lead to lawsuits. We are humans and we make mistakes. “The truth is, things can (and often do) go wrong in business; mistakes are made, promises may go unfulfilled, and simple misunderstandings can amount to serious disagreements. And when things do go wrong, attempting to enforce the terms and conditions of your agreement becomes very difficult if there is no written document to refer too.”
Do Not Risk Liability With An Online Form
The idea of “one size fits all” does not work for client service agreements. Sure there are lots of free forms to download but your business is not “one size fits all.” Just like your business is unique and fluid, your client service agreement should be, too. Laws are constantly changing. Relationships change. Make sure you review your agreement frequently. Spending a few dollars to have an experienced attorney, like Dana Ball, prepare your client service agreement will protect your bottom line in the event that miscommunication or disaster occurs.