Small Business Strategies: Writing and Using a Contract with Clients

Does the thought of creating a contract bring on a cold sweat? As a small business owner, there are many instances where having a contract in place between you - and your clients - is the right choice. Whether it's as simple as an online agreement, like the one I establish with my pattern writers, or a formally written and signed contract, knowing how to write and use a contract is a skill you'll use throughout the course of your business. This month I'm sitting down with Sarah Carafelli from SC Art and Design, a freelance graphic designer and photographer in Ohio, to discuss contracts.

As a small business owner, there are two parts of your business to manage — the “business” side and the “creative” side. The business side of things may not be as exciting, but it is still very important for the health of your small business. An essential part of the business side is writing and using contracts with clients.

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Why Use Contracts?

You may wonder why you would want to use a contract in the first place. It may seem like using a contract conveys that you do not trust your client. On the contrary, using a contract shows you are professional. A contract fosters trust because in it you explain what your client can expect every step of the way. Think of a contract as a communication tool and a way to provide excellent customer service. Outlining expectations up front prevents misunderstandings later.

What Goes Into a Contract?

This article provides some general details you can use in any contract. (I wish I’d known these when I first started freelancing.) Because I don’t know your specific freelance gig, whether design or writing or crafting, I highly recommend doing some research about your particular specialty. Reach out to people in your same line of work with more experience. Ask them for pointers or a sample of one of their contracts. Read small business blogs and find some good books about your niche.

Details to Include

1. Scope of the Work: The scope spells out clearly what is and is not included in your price quote. This is important as clients will sometimes want to add work beyond the original scope. Refer back to the scope stated in the contract and say you would be glad to do the additional work for $x more.

2. Pricing: Whether you use hourly rates or flat rates is your preference. If you use hourly rates, it is vital to state how many hours are included for the quoted price. Then state you will inform your client when you’re approaching the time limit and will ask their permission before adding more time at $x/hour.

3. Payment: How will you be billing your client and what methods of payment do you accept? Do you require an initial payment? Clarify your procedure here. For example, I use Freshbooks to send invoices by email and clients can pay via check or credit card. If you are working remotely, I highly recommend including that you will release all files after you receive final payment. This protects you from non-payment.

4. Cancellation: In case a client wants to cancel a project, it’s important to clarify expectations. Key details to include: you will be paid for all work done (hours logged) up to the date of cancellation and you retain ownership of the work.

5. Signatures: Make sure you and your client both sign the contract so that it’s legally binding.

These five guidelines are really just a starting place for writing a good contract. There are many more details that could be included, such as:

• number of rounds of editing

• turnaround time

• hours you’re available to work

• who will own the copyright

This is where your research will really come in handy. Here are a few places you could check out — millo.co, blog.freelancersunion.org and professional groups for your specialty. I wish you all the best in writing and using contracts for the success of your small business.

(This article is intended for information only; I am not a legal professional. If you have specific questions about writing a contract, please consult with a lawyer.)