While it’s exciting to have a variety of work, it’s important to manage the contract aspects of the relationship as well.
That means having an effective consulting agreement for each client. While you want to be able to customize agreements for each customer and each consulting job, there are benefits to having consistency in your agreements.
Here are 7 key components of a consulting agreement.
Perhaps you have a close relationship with the client and think you can do work for them based on a handshake. Or maybe you’ve done work in the past and believe you can simply replicate that work.
But an agreement is an essential part of any freelance business, because it provides protection for you and your client.
An agreement forms a contract in which you are exchanging your consulting expertise for money. It doesn’t matter if the job is short or long, and the money exchanged will be small or large. You have to protect yourself with an agreement that ensures you have legal documentation and will get paid.
A solid consulting agreement also outlines the work that will be done, which helps to prevent scope creep. Once you complete the work, you should be paid.
There will be instances when clients will offer their agreement as the basis for work, but try to use your own agreement template whenever possible. This helps ensure you are familiar with the details and your interests will be covered.
If you do have to use the agreement of a client, be sure you understand the entire document. Ask questions if necessary. And be sure the clauses that are important to you are included, such as late payment terms, or sign-off procedures. Offer to send the relevant clauses from your consulting agreement to be added to their document.
The more you understand and are involved with your contracts and accounting procedures, the more you will be able to take on new opportunities and appear as a professional, established business person.
It’s therefore important that you create a template for a consulting agreement, so that you’re prepared to take on work immediately.
If you need to, work through legal and payment clauses with the advice of a lawyer and/or accountant, so that you have those details nailed down and you’re ready to take on clients.
Every consulting agreement should contain basic information, which means you can develop a template.
The information you can build into every consulting agreement includes:
For each consulting agreement, there will be sections specific to the job for which you’ve been contracted.
Details of the work that form the basis of the agreement are usually taken from a proposal, meetings with the client, presentations you’ve made to the client, and/or requests for proposals that the client has prepared.
Depending on the type of consulting work your freelance business is involved in, there can be other legal details that need to be included.
Here are some examples.
By either party, which means the contract ending before the conclusion of the work. Terms usually involve one of the parties providing sufficient notice to the party, details of the length of the notice, and any payment involved for early termination. Often there are also terms related to breach of contract.
in which you agree not to subcontract any of the work; alternatively, if it has been agreed upon, the clause may allow for subcontracting part of the work. If desired, that work can be included as well as the individual or business that will handle it.
In which the you as the consultant agrees to keep the company’s information confidential, and the company agrees to keep any of your proprietary information confidential.
In which you agree that you won’t enter into work with your client’s competition or businesses that are similar to the client’s business. There is usually a term that could be for the length of the agreement or for a set period of time after the conclusion of the agreement.
Clearly defining who owns the work or the rights to the work at the conclusion of the agreement. Usually the client will own the intellectual property, but you may be able to include a clause that allows you to use some of the work as a reference or in your consulting portfolio.
Any consulting agreement needs to have a way to sign off on the agreement itself. That can be done electronically in some instances, or through an in-person meeting in which each party signs the agreement.
There can also be clauses in which the parties sign off at various points in the work, such as significant milestones when you review the work with the client and each of you sign off on the milestone.
A consulting freelance business means you’re usually managing relationships with several clients at once.