Contracts How and Where Do You Use Them
September 12, 2023
Welcome back to Business Unfiltered with Mercer and Jeff Sauer today's topic is Contracts How and Where Do You Use Them
0:00: What is a contract and why is it important? Jeff defines a contract as a formal agreement between two entities, people, companies or whatever you want to call it.
1:56: Using contracts as a sales tool. A contract is useful in the beginning, because when things go poorly, emotions creep in and the contract is written at a different time when everybody is in a different emotional state. A course has terms and conditions and terms of sale, which are how they expect to use it. The difference between a proposal and a contract, and why a contract should not be mixed in with marketing, because marketing is in sales and always sells it short. How a contract is formalizing all the things that are discussed in the intro.
6:15: The difference between a pitch proposal and a contract proposal. The first step to onboarding as an actual client is the contracts, where you see more of that legal side of the proposal. A master services agreement is an agreement between two companies. It's more work upfront, but easier to do because it's never boilerplate. The master services agreement is an add-on to the existing relationship between the two companies. It allows you to get your next contract approved sooner. Using the master service agreement with exhibits can be a strategy for stickiness with the clients.
10:00: How often an attorney would be involved in creating contracts, and whether or not to use an attorney. The risk of using a template for free from the internet, and the bigger implications and challenges that come along with it. It is almost always money well spent. It's almost always what should be done because you can reuse them, that's the idea. Jeff has never litigated a client, or even gotten close to that. He has never had to enforce anything, regardless of the client. Risk vs reward. Litigation is expensive, and lawsuits usually have to go to court based on spite or a lot to lose. Pricing mistakes are almost always because of the rose colored glasses, and that's why he had to develop his own method for pricing.
16:07: How do you use google analytics prior to litigation? The importance of having a spidey sense of who the best clients are to take, and how to fix things when things start to go weird with a client. How to use contracts as a tool prior to litigation, barring the litigation. If the contract was written wrong, shame on you. Don't let it happen again. For any one service that you sell, you can break it down into anywhere between four and 10 sub services that go into it, based on the roughly on one page.
20:30: The problem with auditing goals. Jeff had to do a bunch of implementation work that he thought he was going to get paid extra to do because of the way he wrote the contract. Jeff is grateful for the first customer, and thinks that it is important to give a minimum, but right away you go that's a mistake. The statement of work is a little more nebulous, because they're saying they're going to regard it as an implementation. The retention model is almost a built-in sound, so if it's a little bit too nebulous and they're asking for things that are slightly outside of scope, they're okay with it.
25:15: How to use contracts better. Most contracts are basic and have very little changes. There are only a few minor changes that are seen in the back and forth. The biggest problem for Jeff is not being able to get paid when he thinks he did the work. A lot of it is just in the services provided and who he chooses to work with.
28:59: The importance of contracts. There is no way around the fact that the contract is legal, but it is also a boilerplate template. It looks like every other contract that everyone else has already seen. The worst thing is when the client comes to you and asks what is in the contract. Jeff shares his thoughts on contracts and how they can be used for business valuation. Jeff shares that the more that he teaches someone else, the more people are learning about contracts and what they can learn from him and the podcast.
Topics Covered In This Episode
- Definition and Importance of Contracts: A contract is a formal agreement between two parties. It's essential as it offers clarity and protection, especially during disagreements when emotions might run high.
- Contract vs. Proposal: A contract formalizes all initial discussions while differentiating itself from marketing proposals. A pitch proposal is distinct from a contract proposal, with contracts signifying the onset of a more legal relationship.
- Master Services Agreement: This is an agreement between two companies, acting as an addendum to their existing relationship. Using it with exhibits can improve client retention.
- Involving Attorneys in Contract Creation: It's advised to involve legal professionals rather than using free internet templates. Though lawsuits can be costly, having a robust contract minimizes risks.
- Contracts Prior to Litigation: Contracts can serve as tools before any legal actions. For any service, the specifics can be detailed into several sub-services, aiding clarity. Incorrectly written contracts can lead to unintended extra work.
- Improving Contract Use: While most contracts undergo minimal changes, ensuring payment for completed tasks remains a challenge. Successful contract negotiations usually mean a sealed deal. The educational aspect of contracts is invaluable, as understanding them can lead to better business evaluations.