Jul 1, 2020
Summary:
Terms and contracts are overwhelming to begin with. No one wants pages of legal documents, but at the same time clear guidelines are essential to a successful and safe relationship. In some ways this can be the most intimidating part of business ownership, and it’s certainly one of the most important. There is a “traditional” route that advertising agencies have taken in the past, but it doesn’t always work. Most agencies have developed their own terms and contracts based on their unique experiences and services Today we are sharing some of the reasons for the parts included in our own contracts. Ultimately the goal is to build healthy, safe, and successful client relationships that create awesome, long-term business partnerships. From knowing when and how to charge for creative projects, to drawing boundaries for difficult personalities - this episode is packed full of seasoned advice based on our experiences.
Top 3 Curtain Pulls in this episode:
For more tips, discussion, and behind the scenes:
About The Guys:
Bob Hutchins: Founder of BuzzPlant, a digital agency that he ran from from 2000 -2017. He is also the author of 3 books. More on Bob:
Brad Ayres: Founder of Anthem Republic, an award-winning ad agency. Brad’s knowledge has led some of the biggest brands in the world. Originally from Detroit, Brad is an OG in the ad agency world and has the wisdom and scars to prove it. Currently that knowledge is being applied to his boutique agency. More on Brad:
Ken Ott: Co-Founder and Chief Growth Rebel of Metacake, an Ecommerce Growth Team for some of the world’s most influential brands with a mission to Grow Brands That Matter. Ken is also an author, speaker, and was nominated for an Emmy for his acting on the Metacake Youtube Channel (not really). More on Ken:
Show Notes:
[2:25] We discuss Ken’s pizza-making skills (or lack thereof)! While you can’t go wrong with the classic mozzarella and basil pizza, the newest fad at his house is a pizza with arugula on top- how do you like yours?
[5:14] Bob introduces today’s topic- Contracts and Terms.
[7:00] Ken asks Brad to talk about MSA’s or Masters Service Agreements.
[7:30] Brad: Most people in agency business aren’t Masters of Marketing, they came into this business because of their passion for the product and process.
[10:51] Brad talks about a SOW- or statement of work- and what it looks like for his agency.
[12:20] Brad continues, often he feels that providing these two large documents can feel like you’re roping a client into some lengthy legal contract… but ultimately, his agency is a business that needs guardrails in order to run efficiently.
[13:08] Bob clarifies: “So all of those clauses and agreements, they come from experience.”
[13:25] Ken affirms this, and encourages other small-medium sized agencies to put up those guardrails for themselves. A giant list of terms isn’t fun to dispense, but it’s necessary and also allows you to lean on character and relationship.
[14:12] Brad speaks on the experience of seeing the best in people, hiring clients being a very personal relationship in his agency.
[15:55] Ken speaks on boundaries. They are healthy in every relationship, but especially with clients. Set up an agreement that allows you to handle any situation with any person, regardless of their personality type. Your agreement can also help to filter out people that are not right to work with.
[17:26] Bob recalls the idea that you don’t know what you don’t know, so learning is inevitable. Because of this constant learning, there is an ongoing tendency to slowly increase the size of your MSA and SoW. There is incredible value in editing these documents every few years to make sure that every line is still applicable to your mission, vision, brand, and company.
[19:35] Brad adds that every SoW that is signed also has a clause where the client agrees with the MSA. Other companies have separate agreements for different clients, either based on project or how much they are spending, and Brad is considering that for his agency.
[20:28] Ken talks about how his agency Metacake rarely uses MSA’s. Typically is a SoW and contract.
[20:50] Brad adds that some agencies even put their MSA on their website, so that there is no excuse that the client doesn't have access to it.
[22:00] Brad shares some interesting experiences with clients in the past.
[25:03] Ken talks about the things that we have control over versus what we do not. “You can’t tie your success to things you don’t have 100% control over.”
[26:03] Bob: “If it’s intense, it’s yours. Meaning if there is something that keeps making you angry, even if it’s something another person does that sets you off that creates conflict… it’s something that’s inside of you.”
[27:30] Ken: Often in the course of doing business, you come across people who are working with a great deal of pressure on them. Their intense reaction is theirs, not yours.
[28:05] Bob dials it in- “If there is something that seems to be happening with a client or continuing to happen in your agency or with your team, it’s probably something you’ve got to fix internally.”
[28:31] Brad says he tries not to talk badly about your clients, as that is a mindset that can fester and have certain poor results. ESPECIALLY as a leader, never talk badly about your clients!
[37:30] Bob asks for 3 things an agency needs to cover in their agreement.
[37:35] Brad: Scope Creep. Make sure your scope of work, timeline is reasonable and make sure your client agrees. There are changes, delays, etc and one month projects become three month projects.
[38:27] Bob adds: Terms of payment- are terms of payment tied to milestones in the project or not?
[38:52] Ken talks about taking monthly payments- this means there is no question of why money is being pulled, no misunderstandings of timeline. Time and cost are associated, but ultimately when you sign an agreement for scope, you’re agreeing to payment as well. De-coupling payment from milestones is an enormous thing to overcome.
[41:00] Brad adds: Limit your time based on creative. Somehow, put together a process within your agency- add benchmarks within every part of the project so that is things change later in the process, the client knows they have to pay for those changes.
[43:30] Ken: “A lot of agencies just operate fluidly, organically… I would really encourage everyone to think through- what is the formula for success? It’s a process…. Business is systems and processes and people are just there to manage it.”
[46:55] Brad talks about how it may be helpful to write into an agreement that you will review the Statement of Work together again at certain points throughout the project, to maintain expectations.
[57:45] Ken: “I would say you constantly need to revisit it [your MSA], and it is always this balance between it being too much and just enough.”
[58:57] Ken adds another element that should be covered- protections against bad character.
[1:00:49] Brad encourages you to add terms as you deem them necessary and then simply see if clients will agree to sign- and if not, discuss and figure out how to change that language to something that clients are more comfortable with.
[1:01:05] Ken: “The more terms there are, the less likely people are to read it… I want them to read everything.” So if you need to refine specifics and reiterate the important parts, do so! Make sure your terms are actually readable.
[1:02:25] Bob adds a final thought: “For a small or medium-sized agency, so much of this is born out of measurement of scope creep and cost. Many agencies may not have a process in place to know these things…” They won’t mind doing a bit of extra work here or there, extra hours or slightly extending the scope, etc.
[1:03:30] Ken mentions the next episode topic: How to measure profitability and what it looks like on a realistic basis.