Navigating Client Relationships: The Importance of Contracts in Creative Services

[Music] you guys hear me okay all

right who who thanks for coming who in this room is now or has at some time been in Creative Services raise your

hand H I'm old I can't see great who here has at some time had trouble getting paid by a client for work they

were doing all right raise your hand if any of these

are familiar to you we ended up not using the work all right it's really not what we

wanted after all all right who's familiar with Good Fellas all right we got got somebody

internal to do it instead [ __ ] you pay [Music]

me we cancelled the project [ __ ] you pay me we actually didn't get the money that

we the funding that we thought we were going to get Fu you there we go we think we've already paid you

enough you me it's really not what we were hoping for [ __ ] you thank you that's the title of our talk today [ __ ]

you [Applause] P so my name is Mike Montero um some of

you may know me from Twitter as Mike for the win uh so the profanity shouldn't be a

surprise U when I when Erica Hall who's sitting supportively over there and I started mule 10 10 years ago

now we uh wanted to run our own Design shop because we wanted to pick and choose the clients

that we were going to work with and we wanted to be responsible ultimately for what we were putting out in the

world and um we had worked together at a couple places and we were um naive enough to think that we could run a

business better than the people who we were working for

uh we didn't we were so excited about working together that it didn't occur to either of us or maybe we each thought

that the other one had it but neither of us really had enough business experience to be running a

company because of that we ended up leaving a lot of money on the table we ended up

not negotiating contracts properly we ended up not renegotiating contracts when we should have renegotiated

them but since we're still here and we're doing pretty well I think we've learned we've actually learned a little

bit about how to run a design business and if you're running a design business this stuff is part of the job as well as

the creative work because this is a business and you got to keep the lights on you got to pay

people you got to meet payroll and most importantly you got to get clients we love our clients at

mule they are people who have for the most part worked their butts off to get a budget

enough to hire a design team to do the work and of all the choices they could have gone with they went with us

so we want to do really great work for them and most well I all clients I think start the business relationship with the

best of intentions and things go wrong things that you weren't expecting uh you know

the market changes or you know the person who hired you leaves or you know somebody has a bad mood day but things

change and when those things change you need to make sure that the relationship between you and the client client it's

set in place in something like a contract we recently came across this on quora which is apparently a site for

posting questions to show how smart you are so what is good advice for how to deal with a client who refuses to pay

for design work because of obviously false irrational reasons let's leave off the obviously false irrational reasons

because we're not doing therapy today um but the the answer that we found

under this question was you could try a heart-wrenching

letter I'm going to go get some water thank you you could try a heart-wrenching

letter and you could lose all credibility that you have with that client because the minute that you write

a heart-wrenching letter the minute you appeal to their emotions you have given up any bit of Leverage that you had in

that relationship you have shown them your belly you have shown them that you don't think you have a leg to stand on

other than playing upon guilt you have become a bottom in that relationship it's good right

and more than anything I would like designers to stop being bottoms and realize the amount of power

that they actually have in a relationship I guarantee that this person did not have a contract in place

because this is a sort of thing that a contract irons out immediately what happens in a situation like

this and if this person had a lawyer well actually if my lawyer were here actually my lawyer is

here hi everyone I'm going to sit on what's been called the lawyer perch so um Gabe

LaVine everybody this guy's been keeping me out of jail for about six years I I don't know why I deserve

Applause but when Mike asked me to um to to come participate in this I said yes right away um my relationship with him

has been great he's he's a fabulous client um a little bit about me real quick um I started my law practice at a

big firm as so many young lawyers do um after two years I realized it sucked um I went and joined a small firm where I

get to serve small companies like mule design um and I enjoy working with them and um what I what I enjoy most is

preventing problems because when you have small companies as clients um you need to make sure that you at the outset

take care of issues that are going to arise and in the context of your jobs as web designers you do that in your client

services contracts you make sure that if something goes wrong and you're not going to get paid that there's a

mechanism in there for dealing with that um and to be blunt um with both mule and um other companies that have come to me

in the early stages their contracts can be if they have them a mess um so today we're going to talk a little bit about

how you want to um deal with that have confidence in your business have confidence in yourself structure your

contracts to make sure that uh you're protected we're your favorite client right absolutely my favorite client

hands down if there are other clients in here sorry so the the the basic gist of a

contract is clear definitions clear expectations yeah you want to make sure that you know everybody understands what

what they've agreed to um all too often when you're when you're negotiating people don't understand what they've

agreed to and that's something that um I enjoy about working with Mike and Erica and all of their employees um because I

can explain something they listen they don't beat about the bush um and and the other side and mule understand what

they're agreeing to when they go into a contract you don't want to just ignore something and make make it muddled not

clear clear expectations clear definitions so we've put together our greatest hits of bad predicaments that

Gabe and I have um Gabe has helped us with we were working for a large organization that um the whole the we

were working with a new a new division for a new thing they were doing and the project was going really great they were

all super smart everything was going going fantastic there was absolutely no sign that anything was going to go badly

one day we walked in for a presentation we waited in the lobby for 30 minutes and then finally they walked us up to an

MTV vp's office who um came back in and said I've had the worst day I just had to lay off

so many people prick uh that entire division that we

were working with was laid off that day um at this so and and we were told the project was over at this point

there's nothing left in the room they're gone we're gone there was a contract that stipulated they had to pay us had a

contract not been in place we would have spent a ton of time and energy and money trying to get paid for that job

and probably ended up getting and we' probably end up getting paid a significant portion less

yeah it's it's a difficult conversation to have when somebody comes to me and says um you know I've got a job that I'm

working on I've done X hours and they refuse to pay me and I my first question is do you have a contract um no is

really bad answer um the the situation you find yourself in there is that the truth of the matter is I can write a

mean letter um or I can you know try the you know persuasive phone call but if if you have to file a lawsuit um you're

going to want a written contract um if you want to avoid a lawsuit and have persuasion early in in your talks you're

going to want a written contract you're going to want a written contract that has attorney's fees so you don't have to

worry about paying me $20,000 if it's going to cost that much to collect 50 um they know that they have to pay that if

they lose so yeah you would have collected significantly less without a contract and the other thing to note in

this particular project was one of the people who was actually laid off that day ended up sticking around for a

couple weeks and ended up being an incredibly good Ally for us um and when they were trying to get out of paying us

she basically told them [ __ ] you pay them as happens often with their clients how many people here have have

um been hired to do a project and halfway through the project project requirements change project goals change

it becomes a totally different project than the one you initially agreed to I see a lot of nodding heads thank

you um at that point the way our contract works at that point if you've changed goals in a project that much

that project is done the contract closes you settle up and you open up a new contract I've heard from way too many

people who have who have kept on working for the initial job even though it turned out to be something totally

different than what was originally agreed to yeah and this this can be a sticky point but um again one of the

things about working with mule and and you know clients that I generally enjoy is they have confidence in their work so

when you're negotiating a sticky Point like this um you know I'm able to say that you hired them for for their their

presentation and uh the scope of work that they they outline for you so if you want to change it um you need to uh you

need to negotiate a new contract or at least amend the scope of work which can act as a new

contract this is the biggest red flag in client services if you ever hear this phrase just walk

away yeah um it's it's not a matter of trust um lawyers frequently have conversations with each other where one

says to the other what you don't trust my client no that's not the case um I don't know your client um I don't know

him from Adam if I don't as an attorney do my job to make sure that my client's protected which is assuming bad faith by

the other side I have to I have to not trust them and um the fact of the matter is when you're you're doing business

deals and that's what you guys are doing when you're agreeing to provide services for money that you use to live um you

don't want to trust the person that to pay you um necessarily you want to make sure that you get paid we were actually

negotiating a u pretty large project with a client that we were very excited to be working with we had agreed on

everything we were down to payment terms and they didn't want payment terms in the contract and they said said you

can trust us on that um the project was scheduled to kick off like 2 days later and we ended up walking away from it

because you cannot start a relationship like this if you agree to something like this at the very beginning you are going

to have to agree to things during the project that are as onerous as this so let this be a sign of what's to come and

walk away from it I am sure nobody has had this happen client brings in another designer to

work on the project that's a firable offense we have been hired to solve a problem it's our job to solve that to

work with the client to solve that problem if the client decides to bring in somebody else we're now in

competition for that person for the client's time and we now have to compete with that person that is not what we

signed up to do we've been in situations like this where we have had to fire clients and

yes you can fire a client was as much as they can fire you it should be in the contract um we one in particular the

situation had deteriorated to such a point that we knew that there was no there was no way out of it other than to

walk away and um it led to a very uncomfortable phone call with the client and uh they threatened legal action and

that's actually how we found on Gabe almost six years ago yeah Mike mikee so the two things that I hear Mo

like I get people who who contact me they telling me like hey something just happened with this project I'm having

trouble getting paid that I submitted my invoice weeks ago I haven't heard anything and my first ADV my my advice

to them is is usually you need to talk to a lawyer about this stuff and there's two things that I hear most

often lawyers are so lawyers too expensive I can't afford to talk to a lawyer and the second is are we at that

point already do you think to answer the first this guy makes me money this guy has has gotten our

contracts to such a point where um we're we're no longer leaving that money on the table we're protecting

ourselves really well what I pay him is a pittance of the money that I would have lost had had I not had him taken

care of this stuff and secondly um you're at the point where you need a lawyer when you've decided to stop being

a design amateur and become a design professional it's time to bring in a legal professional to at least look at

those contracts that you're signing with clients there are two checks I write every month that I'm very happy to write

the first one is to him the second one is to my th best and um on on the money front that's

uncomfortable both in your situation with your clients and in my situation with my clients um and um it's

uncomfortable at least for the clients that are coming in so I try to make them comfortable and I think any good lawyer

would um ask questions if you're worried about how much you're going to pay I'm happy and I'm sure most lawyers are

happy to tell you at least decent ones if that term isn't an oxum [ __ ] for you um what you're going to expect to uh

have to pay with regard to a particular project and most attorneys um will give you 30 minutes maybe even an hour of

free time so um that's not to say you should go around trying to get a bunch of free advice from lots of different

attorneys but you know if interview a couple attorneys um just like you would any you know anybody else do your due

diligence on you know there's there's websites out there I I don't know how much Yelp but other websites that talk

about attorneys um and ask questions and and if they don't answer your questions about how much something might cost in a

way that satisfies you go find another attorney so we got a quick list of the top six things you need to know about

contracts that uh we whip together we we'll go through them real quick um number one most important thing

contracts protect both parties a contract is in place to protect you and a contract is in place to protect the

client should anything weird happen on either end what to do is stipulated in that

contract yeah and we'll we'll actually hit this in a slide or two but um the process of negotiation makes makes the

thing Fair um and uh if you you know if you roll over um or you just sign blindly whichever side does that it's

not going to be fair don't start work without a contract starting work without a

contract is like putting a condom on after you've taken a home pregnancy test it is just not going to help you at that

point you have lost any leverage that you had yeah I

mean there's there's not a lot more to say you know how you follow that don't blindly accept their

terms um we we have had contracts handed To Us by clients that were written

Years Ago by people who are no longer working there they have no idea what's in the contracts we've seen contracts

that stipulated that work needed to be delivered on 5 and a qu inch discs when we were done they don't know what's in

them you need to have a a your your lawyer review them and make sure that they're okay and if something's not

working for you strike it yeah again the process of negotiation is what makes the contract Fair um if you're finally

accepting terms from uh your client and particularly if your client is an established business chances are you

know they've had a lawyer uh draft a contract for them and when I'm doing that I usually start with my wish list

you know and I and I tell the client that you know these are these are items where your your your clients are going

to push back and and frequently they do so if you just sign on the dotted line you're going to be agreeing to a lot of

things that you probably can't deliver and you don't want to agree to and we'll hit that those points a little bit later

there's always going to be some amount of negotiation but there are things that you shouldn't back down

on this is the stuff that we don't back down on um IP transfers on full payment this is the most leverage that you have

on a project is that the work that you've done is yours until the client pays you for it if they use that work

before they've submitted a final payment you can sue the hell out of them uh termination Kil Fey yeah real quickly

on the first point um I mean again if you're getting a contract from a from an established business what you're going

to get is two two pages of intellectual property assignment where you give them everything and you keep nothing um and

the way it's going to be written is it happens instantly when you sign the contract um you know I had some

difficulty when I started dealing with this at first in in trying to parse out you know what transferred when and blah

blah blah and and I found that the easiest way to deal with this is just say at the beginning of this very long

two-page assignment provision upon full payment for the services everything happens so in

conjunction with that that's something that really does help guarantee payment um in conjunction with that you you have

a termination or a kill fee in your contract and this is something that I've seen in a lot of um the web services

contracts that I've looked at um so it seems to be something of an industry standard

um and uh you know you get your payment your deposit and then maybe you have a second payment or you break it out into

three payments and what the kill Fe is is it's it's an amount that the client is going to have to pay um if the client

terminates without some very good reason um that is over and above you know what they've already given you in the deposit

to ensure that you haven't done a bunch of work and invested a bunch of time and turned away other projects that you

could have been working on um For No Good Reason liability

liability which you told me is legal for what oh gosh what did I say um you're in trouble um yeah um so liability is just

a broad term one of those legali that means you know something's gone wrong and and now you you bear that

responsibility for dealing with that problem um and in these contracts that you get from established businesses and

sometimes not even established businesses you can pick them off the internet now um so somebody could be

handing you a contract that you know uh somebody from some giant Law Firm drafted to protect their client even

though that wasn't their lawyer and what these contracts say is you know you will have a couple pages of representations

and warranties that you make about the work that you're delivering um and it and it represents you know I'm not just

talking about good work it's you know you're not infringing on anybody else's rights maybe it says there's no open

source code in there maybe it says you know there's nothing that you've purchased such as stock pictures um and

if you ignore that and just sign it um and you get in trouble later some of them say there's not going to be any

bugs nothing's going to go wrong if something goes wrong with the website and it costs the company money you sign

those contracts without looking at them you might have to pay that company money that's

liability lawyers talk to lawyers uh if I'm talking to a client and they tell me that they have legal on the phone we

finish we wrap up the call and we wait till we have legal on the phone with us um lawyer people hire lawyers to protect

them and they're very good at it he's very good at protecting me and if he's not on the phone with their lawyer then

they're going to be telling me things and I'm going to be agreeing to things because I'm nervous because there's a

lawyer on the phone so the minute they show theirs I have to show mine I didn't me it that

one I'm used to it be specific and confident about money money is an incredibly

nerve-wracking thing to talk about [Music] um but if you are trying to convince

somebody to give you their money and that you're the right person to give it to and they're asking you how much

something costs and the first thing out of your mouth is um you just lost 10 grand if you know how much something

costs stand up confidently and tell them if you don't know how much something costs then say I don't know but I'm

going to find out and I'm going to get back to you as soon as possible but just sound like you know

what you're talking about even when you don't because you can always find out later couple of uh about a month ago I

did a podcast with Dan Benjamin where I talked about um being confident about you know asking being confident about

asking for your rates and a couple days later this came up this guy who I I don't know uh it says I quoted a company

and absurdly higher rate than I ever have after listening to you and I got the gig uh one I I bet that wasn't an

absurdly high rate I bet this guy had been undercharging for years but he had the confidence to go in and ask for the

rate that he actually could have been getting all that time and he got it does that made me feel good

just hope his client isn't following him on Twitter that was good you got one

off so to sum up our three-point winning strategy contracts up front make sure you've got a contract in place before

you start working make internal allies when you can you need to you need to have somebody working with the client

who knows the ins and outs of how the the client runs their business and who to talk to should something weird happen

and then work with advisers like this guy on your side who were helping you and giving you good

advice yeah I hope so yeah and I know this wasn't as much fun as coming in here and talking about like typography

and color and design and layout and grids but if you learn a little bit about this stuff and just feel a little

confident about this stuff you can do that stuff the stuff that you really love doing that much longer and that

much better if you just get this stuff locked out then you can enjoy what you really

love doing because I love design and I love designers and I want designers to know that they actually have a lot more

power than they think they have it's Friday you've got one more day in the work week go out there and do

something really awesome thank you all right so I'm gonna let Gabe use Mic here we' got about 10 minutes for

questions um if you want to speak a question please stand up and speak very loud are you still on hello yes yes you

any questions the client goes Rogue and they decide to change the project is that you

have to you're in that moment they like halfway through and at this point you can either you could do the kill and

charge them by deliverable you know like i' I've done this kind of work for you now so I'm going to charge you this or

do you just char whole project and like I this is what we agreed on and even though you're making a change in the

middle of it the whole thing because the reason I asked is because I had had that

experience where I was like well I do the Kil thing try what we've done there's all this

opportunity like what I could be let me address one thing you said before I turn it over to Gabe for the legal answer um

you said not legal advice disclaimer provided go you said the client was making you

change something a client cannot make you do anything if you are not comfortable with what a client is asking

you to do walk away you aren't you nobody here has held hostage to a client's

whims so are you asking how how they have it how we have it structured in their in their contract or yeah

yeah so there there's various ways to deal with it but um would I maybe misspoke but it goes when I talked about

it it goes over and above sort of you know what the hourly work that you've done um so there is you know say you're

in phase two of of three phases in the project and each phase is is $10,000 um you know the kill fee might

just be you've got your $10,000 deposit um and then phase two is going to be$ 10,000 and they pay it upon you know

some some receivables deadline um if they if they kill it without a good reason in the middle of phase 2 you get

the whole 10 for the second phase that's a somewhat common example of a kill fee does that answer the question okay

anybody else um when you're drawing up the contract um how do you approach L

pay do Tre [Music] um you might have a um you know a small

we don't like to call it a penalty in the legal World cuz penalties aren't enforceable but it is a penalty it's

it's a you know call it interest or whatever you want but it's a small percentage for um you know something if

you're working net 30 that's not paid 30 days um after you send the invoice and then if it's out you know 60 days or 90

days or 120 days boom you kill the contract you get the kill fee um and if you have to assume your your attorney's

fees do you have any tips on firing your clients that's such a softball for

him you need well the reason that you're firing the client needs to be solid and it needs to be in writing and the client

needs to be very aware that they've um they've transgressed against X thing in the contract and this is why they're

being fired and um do it quickly and do it clearly they they should know they're

getting fired um and you know do it as kindly as possible because again this isn't somebody who walked into a

relationship with you to be a dick this is just a relationship that went sour so do it with as much respect as

possible yeah perfect answer but you weren't expecting that he's

learned horse head in bed and that's what he did when I met him anyone

else in the back Miss hamwood um relationships you're talking then about relationships well often you

really like the people even know cuz you know like we're we do design work and we're um you know trying to tie up these

points well they're doing work and maybe their ability to tie contracts isn't so great so maybe they're really messing us

around but it's partly because they're just have all their [ __ ] together so we want to keep the relationship but we

want to protect ourselves at the same time so what about advice for handling those situations where you know they are

really messing you around but you want the relationship I'm I'm sorry I didn't really okay

they're messing you around all right right clients messing you around but in the same way that sometimes we

don't have our contract [ __ ] together they don't have their contract [ __ ] together and they're good people but

they genuinely are messing you around so it is lawyer time but lawyer time but you yeah and I seriously I've had to do

that I've had to lawyer up and it was the right thing to do um but how do you what what's advice around

preserving the relationship or you know like not just you know that that aspect of it

first of all I can be really nice on the phone with and and lawyers and one of the things that you

know I think um you know Mike would acknowledge is this sort of stuff makes him uncomfortable still yeah um it

doesn't make me uncomfortable and it's probably not going to make the lawyer on the other side uncomfortable so we can

have a perfectly civil conversation about it um it's not like pressing the uh atom bomb um so if things things are

being held up I think you're asking how do you preserve the relationship and deal with the the delay and the

difficult issues let the lawyers deal with the delay and the difficult issues and and everybody's always telling me

including these guys we need it done so the lawyers are getting that pressure and we know how to deal with it I mean

the other side has got to turn it around quickly and then I've got to turn it around quickly back to him yeah and even

when things go wrong are the the first thing we try to do is to preserve the relationship in 10 years in business I

think we've only had we've only ever fired two clients and we've certainly had projects get weird

um but most of the time you can resolve that stuff by just talking talking it out with the other person don't do it

over email on on the phone if nothing else in person if at all possible there are

plenty of client relationships that I've that that we've been able to fix just going out and having a cup of coffee

with somebody and realizing that we both wanted the same thing we just had a different way of getting

there that's good advice anybody else how do you deal with the acceptance criteria both for clients and

contractors that's that's really tricky um and um I'm still learning to be honest on it um but uh ideally they have

you know a certain amount of time to reject a deliverable and they have to do it in writing and if they don't it's

deemed accepted and of course you want that that time frame to be as short as possible but you know I've seen 5 to 10

days or maybe 5 to 10 business days um I assume you're that's what you're talking about the deliverable acceptance yeah

it's also on the flip side you're working with a contractor that does that where you don't want to pay them oh you

don't want to accept something from somebody yeah um I mean I would same advice as Mike gave in firing a client

make make the problems clear um put it in writing um if you're done with them and you know if the relationship can be

Salvage then Mike said try and Salvage it but if not um yeah make the reason for the rejection very clear hopefully

there's something in writing to rely on you know a contract or maybe emails that describe what was supposed to be done

um yeah we have time for one more Mr sippy in the front for Gabe are you worried about what he does on

Twitter honestly no um you know there's there's been there's been some

Ventures from from my standpoint I I don't want him to disclose anything that we discuss that's that's that's

privileged um so he knows that and we talked about it um because some of the stuff we discuss is funny and we'd like

to disclose it um just for pure entertainment value but um also in in full disclosure I don't

follow Twitter that much I'm trying to get better um but you know my stream is full of San Francisco Giant stuff and

Mike and so for me it's just it's entertainment I don't I don't actually worry that much about it just um as as a

rule I never ever talk about clients on Twitter um that relationship is sacred and Twitter's U you know Twitter's for

dick jokes so for client you know even if a client does something

in my office that's really funny it's it's part of our relationship and it doesn't go on

there that's you and me babe all right thanks