“Make Peace with Your Conscience, but Don’t be a Patsy”: Negotiating a Contract with a New Client

12/11/2016 9:42 AM | Ed Graziano (Administrator)

By: Catherine Seibel, Impact Assessment for Foundations and Nonprofits
Listening to Kelly Kleiman speak about developing a contract with a nonprofit client is like being splashed in the fact with cold water. At ACN’s fall program “The Nitty-Gritty Details of Running a Consulting Practice”, Kelly pulled many of us out of our kitten-hugging, social justice reverie to remind us that, “Until they’re your client, you have to recognize that your interests are inevitably at odds. You can’t wish for harmony – you have to set up a structure to assure you’re harmonious.”

An attorney by training and [board development consultant] by trade, Kelly reminded the audience that negotiating a contract with a potential client is both a science and an art. Beyond the obvious elements, a well-structured agreement reflects a number of more subtle efforts on the part of the consultant.

The Lead-In

Why goes into a contract?  ACN’s Code of Ethics dictates that our members: 1) Ensure that, prior to accepting any engagement, there is mutual consultant/client understanding of the objectives, scope, work plan and payment arrangements; and 2) Agree in advance with a client on the basis for fees and expenses and charge fees that are reasonable and commensurate with the services delivered and the responsibility accepted. Or, as Ms. Kleiman puts it, to “have a meeting of the minds when we really haven’t had a meeting of the minds yet.”

As for how it’s structured, Kleiman uses the first paragraph is to listen as closely to what the client said and then try to reiterate it back to them – “It’s a test of my ability to actually listen” –  to make sure that everyone sees the project in the same light. If you can’t get to a contract that you can both agree on, it’s a canary in a coal mine – understand that it’s not a good fit, and walk away.

What doesn’t go into a contract? For the simplicity’s sake, Kleiman merges her proposal and contract into a single document. A few pieces of advice:

  •    Remember that potential clients have a legitimate need to know what they’re buying, but they don’t need to know the specific plan of how the consultant plans to get them there. It’s the difference between scoping it out for yourself (i.e., planning the project) and scoping it to the prospect (i.e., giving away the milk for free). Give them as little as possible for them to understand what you will provide.
  •      If a prospective client asks for more details, turn it into a list of references. Your previous clients will remember what got done, but not how.
  •       Keep your estimated number of hours out of the contract. You don’t ever want to find yourself in the position of haggling over a fee simply because you’re doing your job efficiently.

How do you negotiate a price?  Remember that your contract is a negotiating document. If you go in to the negotiations with your minimum number and they counterbid, you’ll feel ripped off. Instead, consultants shouldestimate out how long the project will take – and then add 1/3 for all the contingencies that you can’t anticipate. Ask yourself if the number is both legitimate and something you’d be willing to come down from.  

One member noted – with nodding agreement from others – is that a peculiar feature of nonprofit consulting is the frequency with which we are approached by potential clients asking for the discounts or pro bono services we offer. When this happens, remind the nonprofit that consulting is not a hobby or a philanthropic endeavor, but rather our career.

How do you ensure organizational buy-in? Once consultants enter into an agreement, they approach the project in good faith, believing that the organization’s leadership has agreed on the consultant’s scope of work and will continue to work toward the agreed-upon goals. As a safeguard, Kleiman suggests a few strategies: asking the Executive Director and Board Chair to sign the contract; expecting partial payment up front; and billing the client monthly (“If they’re paying on a schedule , they’ll work assiduously”).

Managing Expectations

Kleiman noted that a peculiar feature of working with smaller organizations that clients may have an outsized expectation for the results that a consultant can produce. For example, less savvy clients may assume that experienced marketing consultants can get secure a story on the front page of the Tribune. The best way to meet – or pleasantly exceed – client expectations is to manage them from the start.

Remind your client that they are paying you for your best effort, not a specific outcome. Think of it this way: you wouldn’t pay a doctor who promises to cure your disease, or a lawyer that guarantees a win in court. As a consultant, only guarantee that which over you have complete control – e.g., number of meetings, a final report or strategic plan. If you encounter clients who say they don’t want to pay you unless you produce desired results, turn and run. They will  never be happy.

Failure to Pay

One of the most difficult scenarios faced by an independent consultant is failure to pay. Obviously, your contract is your first line of defense – your agreement should memorialize their promise to pay you for your services.  Beyond that, Kleiman notes that her contract includes a 15% late fee. While she often refrains from enforcing the clause for short-term delays, she adds that “the unspoken part is that I’ll stop working when you need me the most.”

Remember that failure to pay is a breach of contract – and your response is stop delivering services if they won’t deliver money. For those of us who become very identified with our client and its mission, this can be difficult to enforce. But. Kleiman, notes, “Do whatever you need to do to make peace with your conscience, but don’t be a patsy.”

Who does what? When? (And Don’t Ask How)

During the group discussion, three additional themes repeatedly emerged. First was the notion of scope creep – what do you do when a client “adds 19 other things to the project”?  Again – make sure your contract specifically addresses this contingency. Include a clause specifying that the client and/or the consultant has a right to renegotiate. By appending the proposal to the contract – including what each party is accountable for – you have a specific working document to point to. Anything beyond the initial scope can be discussed, agreed upon, and billed separately. Aside from this, consultants simply have to stand firm to their agreement – “If you don’t want mission to creep, just stop working.”

A second raised by fellow consultants was the notion of what to do when the client isn’t holding up their end of the bargain – e.g., not producing the required documentation, responding to e-mails, meeting agreed-upon deadlines for specific work products. Kleiman suggests that if you’re not getting what you need from the client, “send a letter where there’s a pressure point” – let the leadership know that they’re paying you for less than they bargained for. Avoid being penalized for the client’s breach.

And finally – what if a client specifies how a project should be completed (for example, in my line of work – evaluation – clients often begin by saying that they need a survey, without considering what kind of information they want from respondents)? Remember – you as a consultant decide how to get from point x to point y; “If they want to tell you how, tell them you need a 401k and a health plan.”

As consultants, we are obligated to provide the best possible service to our clients – but not to the detriment of own professionalism, reputation – or sanity.

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