Handshake business deals may still work for some people, but without a solid consulting agreement in place, signed by both parties, you are putting yourself and your business at risk.
That’s why today, we’ll be providing you with the optimal consulting agreement template for 2018.
Most independent consultants and contractors significantly underestimate how much needs to be covered in a consulting contract:
- What happens if the client wants to add additional work mid project?
- What happens if the client decides they want to pull out?
- Should you distinguish between one-time setup services and ongoing services in your contract?
The answers to these questions and many more need to be definitely covered in your consulting agreement, and today, we’ll cover all of these key components and provide you with a rock-solid, downloadable template for you to use in both PDF and Google Doc forms.
Since you will need to customize our template for you own use, It’s important to understand WHY each component is critical, but if you simply want to grab the template, you can do so below:
18 Components Every Consulting Agreement Needs
Believe it or not, an effective consulting contract needs a full 18 components to get the job done. A few of these components are strictly legal considerations, but the vast majority of them are actually critical to the day-to-day nature of your work with a client.
If you are new to running a consulting business, looking through these components will probably help you make a plan for challenges you never even considered. And if you have spent a few years in this line of work, you will probably realize that some of your most annoying problems with clients can actually be preemptively solved directly in the consulting agreement.
Here’s the full list:
- List of involved parties
- Listing of services to be provided
- Listing of required contributions by the client
- Compensation and payment details
- Timeline details
- Termination details
- Ownership of materials
- Proprietary information and use of materials
- Terms for additional services
- Limitation of liability
- Handling of disputes
- Communication details
- "No Guarantee"
- "Entire Agreement"
- "Interpretation & Enforcement"
- Signatures of involved parties
Let’s look at each component individually and learn why we need it in our contract.
1. List All Parties Involved In The Consulting Contract
This first component is very straightforward. Your consulting agreement should start by listing out all parties involved in the contract, including their official names and locations.
2. List All Services To Be Provided By The Consultant
The next component is the listing of all services being offered in the consulting agreement.
This might seem simple at first glance, but it’s important that you distinguish betweens the types of services you are offering. The most lucrative types of consulting contracts involve both an initial one-time project as well as ongoing monthly services, and you will need to separate these, as well as any other unique service types, within your contract.
If you don’t differentiate your services, you can run into problematic situations where the client is demanding extra work or claiming to not have understood they were agreeing to ongoing work. If you spell everything out in your contract, you can simply show them the contract and clear things up.
3. List All Required Contributions By The Client
Have you ever been stuck waiting on a client to send you information or materials that you need in order to complete your service for them?
Have you ever been stuck waiting for weeks... maybe even months... only have them turn around and complain about you not delivering your work sooner?
This is an absurdly common part of running a service business, and fortunately, it’s something you can solve preemptively in your contract by listing all required contributions or actions on the part of the client.
If extended timelines are a concern, you can even specify that failure by the client to deliver their required contributions will result in termination of the contract and forfeiture of their deposit.
4. Spell Out Compensation & Payment Terms
Including compensation terms in your consulting agreement goes without saying, but it’s equally important to detail the exact terms for payment.
If you leave payment terms vague, you are risking a scenario where you are constantly hounding the client for payment, which is the last place you want to be.
Spell out full compensation and payment terms in exhaustive detail within your contract.
5. Clearly Communicate The Project Timeline
When does the project start? When will it end? Are there any key checkpoints along the way? Does the client need to provide materials by a given date for the project to continue? If either you or the client fails to meet a given timeline, what happens next?
All these details should be covered in your consulting contract.
6. Outline Grounds & Procedures For Contract Termination
Sometimes, clients decide they want to cancel a consulting agreement mid-project. Other times, you might be the one wanting to bail.
What are the grounds for termination? What happens when one party wishes to cancel? Are refunds involved? What about money that hasn’t been paid yet?
Once again, every detail needs to be accounted for in your contract, preferably with terms that are favorable for you.
7. Establish Ownership Rights For Created Materials
Most clients understand the nature of a consulting relationship, but you should never make assumptions. Clients can have very unique ideas about their ownership of you and your time during a consulting engagement, which is one of the reasons contracts are so important in the first place.
This reality extends to the ownership of materials created or used during your engagement. Clients can have outlandish ideas about what they own, so it’s important to spell out your ownership over created and used materials during an engagement.
If your deliverables include created materials that will be transferred to client ownership, you can make exceptions for specific materials listed in the services section.
8. Establish Ownership Rights For Information
Proprietary and sensitive information will often be shared by both parties during a consulting engagement. This is sometimes protected via a non-disclosure agreement (NDA), but if your engagement doesn’t call for a more advanced NDA, it makes sense to simply include an NDA clause in your consulting contract.
9. Establish Terms For Additional Services
One of the most common challenges faced by virtually every freelancer, independent contractor, consultant, or service provider of any kind is when the client comes to you mid-project and wants something extra that wasn’t part of the original agreement.
Maybe they want a more complex version of what you agreed to do. Maybe they want a larger quantity. Maybe they want a more advanced option that they had previously declined.
Simply put, you need to establish terms ahead of time for additional services requested mid-project. Never be generous with these terms. You aren’t going to have as much time to prepare for additional requests and they represent a failure on the part of the client to plan ahead. You should always be locking in these terms at a premium rate.
10. Limit Your Liability
This component is straightforward. A "Limitation of Liability" clause can help protect you from frivolous lawsuits.
That said, if the nature of your services creates any sort of real potential for damages, it’s important to write out this clause with the help of a lawyer who understands your business and industry.
11. Establish Terms For Handling Disputes
Contract disputes are always a costly hassle... usually for everyone involved. Depending on the size of the contract, however, some less upstanding clients might simply cancel payments and completely ignore you, hoping that the cost to litigate will prevent you from coming after them.
While this is often the reality for independent consultants and contractors, if you do decide to pursue legal action, you’ll want to cover all your bases and ensure that should you succeed in court, you will be compensated for every area that you have lost time and money in pursuit of the payment owed to you.
12. Establish Terms For Project Communication
Remember when your old boss demanded hour-long meetings for things that should have been a 20 word email? Well guess what, your clients are exactly like your old boss.
Clients have their own preferred method of communication, and if you don’t establish expectations for how communication will happen during the project, you stand to lose a lot of time.
13 - 17: Legal Stuff
The last five components are definitely worth looking at but mostly just come down to legal due diligence. These are not really going to impact your work with the client in any way.
It’s always preferable to write these out with the help of a lawyer who understands your specific business and industry.
18. Signatures Of All Parties Involved
You can’t have an official consulting contract without the signatures of all parties involved. Be sure to include Name, Company, Signature, and Date. Other identifying information can be included as well, but these are the essentials.
When building out your consulting agreement, remember to keep a few things in mind.
Your contract is a limited protection should legal action be required, but the reality is that legal action will rarely happen. It is always a last resort that both parties will want to avoid.
This means that a contract is best used as a resource for establishing expectations with a client AND a reference you can refer the client to when they inevitably forget those expectations.
On that note, it’s important to understand that you are dealing with people, complete with all their quirks and complexities. They may not even read the contract you’re signing, so be sure that you are clearly communicating expectations in addition to including them in the contract.
And finally, if you haven’t already, make sure to download our consulting agreement template. Enter your info below, and we’ll send it to you as both a PDF and editable Google Doc.
Finally, if you’re interested in starting or growing your own consulting business, be sure to sign up for our free webinar and learn how our students are getting between 30-50 high ticket consulting clients every single month with predictability down to the dollar and day.