Services Agreements: Can’t Do Business Without Them

Let’s get in the weeds about contracts, particularly service agreements. As an expert, these are arguably the most important documents in your business.

Start the Relationship Right With a Contract

At the beginning of a business relationship, it’s tempting to focus on moving forward on the project as soon as possible. No argument there. The problem comes if the contract (and the lawyers) is considered a hindrance instead of a helper. The truth is, when working with a new client or on a new project, both parties make assumptions. It’s dangerous to hope that these are compatible without being explicit.

… And Put it in Writing.

A contract can be made orally or with a handshake, but I recommend against it. The best way to ensure everyone is on the same page is to spell it out, literally. After all, discussions and negotiations may not cover every aspect of a relationship, and the one issue that no one thought to discuss might be the one that will go off the rails in the future. In addition, some legal rights can’t be agreed to orally – they have to be in writing to be enforceable. Rather than leave critical issues open, it’s worth putting them down on paper and getting both parties to sign off on the terms of the relationship.

Learning to Love Contracts

Speaking of relationships, let’s put the legal definition of a contract aside in favor of the plain English definition of “agreement”. Agreement means “harmony in opinion or feeling.” Are you getting warm and fuzzy?

Salespeople sometimes live in fear of anything that will trigger involvement of “legal”, worried that lawyers swooping in at the last minute will kill their deal with a contract or comments that will displease or even scare off the client.

But in a world where intellectual property is king, a “no contracts” or a “no negotiation” attitude is not only outdated but ultimately counterproductive to building a sustainable, scalable and saleable business.

Instead see contracts for what they really are – the primary driver of, yes, revenue, but also profit.

Contracts are necessary for any business to operate smoothly and profitably.

Here are seven reasons to love your contracts:

1. A contract helps to build trust and give peace of mind

2. A contract allows you to manage expectations

3. A contract helps you to get paid

4. A contract helps to minimize disputes or problems

5. A contract limits liability

6. A contract protects confidential information.

Last but certainly not least:

7. A contract protects your intellectual property

Intellectual Property rights are the most important term to clarify in the contract.

Intellectual property ownership can be confusing. Clients believe they have full ownership a deliverable because they paid for it. Likewise, what rights do you have in your subcontractors’ work?

In the absence of a signed contract, you might be unpleasantly surprised by the default ownership rules under intellectual property laws.

The Vital Role of Service Agreements

If you’ve worked with corporations for as long as I have, you too have had a front row seat to the growth in the use of complex master services agreements and NDAs.

There is a particular B2B professional services company that I have worked with since 2014. At that time, the vast majority of their clients simply signed the quote! The good old days. 😅 Today, the vast majority of clients require signature of their long-form master services agreement.

What is behind the rise of the 100 page MSA and the ubiquitous NDA? As of 2020, 90% of all assets in the S&P 500 are now intangible. They know that services agreements and NDAs are essential tools for maximizing and protecting that value.

With respect to your most valuable assets, sticking your head in the sand about contracts is no longer an option.

The care and feeding of your expertise and proprietary ideas--aka intellectual property—through knowledgeable use of contracts will be the difference between a business that is a short term income generator and one that is a sustainable, scalable and, hopefully someday, saleable.