February 28, 2016

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Agency/client contracts: signing on the dotted line

Getting your client to sign a contract for services is the shangri-la of all agency/client relationships, but is often difficult to secure.

A contractual agreement can help define how you'll manage the agency/client relationship and expectations, and will help both parties understand and protect their legal rights and responsibilities. So, what are these contracts, and why isn't everyone using them?

 

What is an agency/client contract?

Contracts take on many forms. The most common contracts between an agency and their client can include:

  • Emails. Yes, indeed, in some states and countries, emails are considered to be enforceable, binding contracts. It is best to avoid casually negotiating the terms of proposed agreements via email. However, if you do use email for negotiating, then you should explicitly include a statement such as the following (e.g. as a small-print footer):
    • This email is not an offer capable of acceptance, does not evidence an intention to enter into an agreement, has no operative effect until a definitive agreement is signed in writing by both parties, and that no party should act in reliance on the email or any representations of the sender until a definitive agreement is signed in writing by both parties. 
  • Quotes and proposals. We generate quotes and proposals all the time, but how many of you ever get your client to sign and return them? For jobs where the dollar value is high (such as web development) or where there needs to be an understanding of what both parties will contribute to the project, then a signed proposal could prove to be your agency's "bacon-saver".
  • Preferred supplier agreement. A PSA is usually offered by large companies, corporations and government departments. It can be highly beneficial for an agency to seek this type of contractual arrangement. However, before your agency signs any "preferred supplier agreement", the definition of the phrase should be clearly outlined. For instance, which of the following will apply?
    • During the contract period your agency will be given the first opportunity to supply services in preference to all other suppliers, and that your client will not obtain services from any other agency without giving you a reasonable opportunity to carry out the work first.
      OR
    • During your contract period your agency will not be given any priority or be preferred over and above other agencies, you will merely be an approved supplier of agency services - one of a number of agencies on the preferred supplier list.
  • Agency Agreement. Having your client sign an Agency Agreement shows your relationship has just entered "grown up" territory. It's ideal to have an Agency Agreement in place right at the start of your dealings, but can be entered into at any stage. The agreement should clearly outline the start and finish dates, what products/services will be included and excluded, and whether the business will be conducted on an exclusive or non-exclusive basis.
  • Retainer. If there's one contract you should be gunning for, it's this one. A retainer contract is one where your client agrees to pay your agency a set fee for services rendered. This can be either a one-off payment in advance or a recurring payment (e.g. monthly). The fee is most commonly paid on a fixed (pre-negotiated) rate, or on a variable hourly rate. The purpose of a retainer fee is to ensure payment for future services, and can be a much-needed solution for agency cashflow.

 

Why is getting your client to sign a contract so difficult to achieve?

  • You have been too afraid to ask. Never venture, never gain. Your client can either say "yes" or "no", so think about the opportunities that could arise if they actually said "yes"!
  • You never thought to ask. Maybe you are so comfortable doing regular projects for your client that you haven't even thought to talk about contracts or retainers.
  • You don't have a copy of a contract (and don't want to pay a lawyer to supply one). Given the (often free) knowledge and resources that you can get via the internet, this one is no longer a valid excuse!
  • Client loyalty may be low. The concept of a client remaining loyal to one agency is changing. When previously all work may have flowed through one single agency, some clients are now selecting agencies on a project-by-project basis. Therefore long-term contracts become unwanted and unnecessary.
  • The work is too sporadic. If it is not possible to forecast a certain quantity of work within a time period (e.g. one year) then a client may perceive the risk of locking themselves into a retainer contract may be too great.
  • Your agency/client relationship is not proven. It may be that your relationship has not yet matured to the point where your client will trust that your agency can consistently produce work on time, on budget and to a high standard.

 

Going forward

When you are doing your next round of account planning, take a good look at the state and stage of your agency/client relationships. Is there anything more you could do to get your client onto an Agency Agreement or retainer? Perhaps you need to tighten up your email or quoting policies. Maybe you could look at the language you use with your clients and see how you could encourage a tighter (contractual) relationship going forward.

Moving your clients to a higher level of commitment is mutually beneficial, and is one of the best ways to help with agency budgeting and cashflow. If your agency has any concerns in this area (and most do), then being brave enough to have adult conversations around contracts is a necessity. Happy negotiating!

 

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Sarah Ritchie
Sarah Ritchie

Author

Sarah Ritchie is the founder of AM-Insider - a website bursting with tips, tricks and resources to create account management superstars in the advertising, design, PR, experiential and print industries. Sarah has been involved in account management for 25 years and has a passion for encouraging, mentoring and helping others succeed.



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