Suit of Armour or Flying Naked?

Do you ever find yourself feeling unsafe in your business and wondering if you need a little more protection? Contracts are one of the best ways to manage expectations and set responsible boundaries for your business relationships, but how do you know when you need one, and if you do need one, how thorough and formal does it need to be?

The answer is… it depends! 

I am really not a fan of one-size-fits-all solutions, and I am totally in favour of empowering people to choose what is right for them and their unique business, so when clients kept telling me they knew they needed something but they didn’t know exactly what they needed, I developed this sliding scale to help them feel into what they need and why.

There are three factors to consider, and each factor is a sliding scale. The closer you are to the higher end of the scale for each of these factors, the more important it is for you to have solid, reliable legals that increase your sense of safety.

The other thing to remember is that your position can change over time. You might start working with a new client niche, or offering a new service, and suddenly what used to feel safe now feels scary.

Factor 1 – Investment Level

The first factor to consider is how much time and money your clients are investing with you. It is pretty obvious that the more money someone is spending with you, or the more long-term your relationship, the more upset people are likely to get if they feel you have not delivered on your promises. As a result, when you are selling higher priced, longer term packages, it is much more important to manage their expectations, so they know exactly what they are getting in exchange for their money and when they can expect to receive it.

In this context, it is important to remember that what is expensive or a “long time” must be determined from your client’s perspective. What is loose change for a successful CEO is a significant investment for a single parent, so put yourself in your clients’ shoes when feeling into the kind of investment involved in working with you.

Similarly, the more time you have invested in the relationship, the harder it will be to untangle yourself from emotional involvement in any problems that crop up. Given the cash flow problems common to small businesses, it is also important to remember that while you might not think twice about refunding a small purchase, when the money involved is significant, and you have already either spent it or determined how it will be spent, a request for a refund can be much more difficult to deal with.

As a result the greater the investment, the more important it is to have really clear written communication about all those little details that make the relationship run smoothly. Providing this in the form of a client service contract ensures you approach this task consistently and don’t have to worry about what you might have forgotten to say. It not only gives your clients peace of mind, it educates them about the best ways to work with you.

Factor 2 – Risk Level

The second factor is how much risk is involved. Risk refers to the potential for someone to suffer some kind of loss, injury or damage from working with you. As always, the nature of the risk depends on the work that you are doing. Some fields are inherently risky, such as where you are providing financial or legal advice, or dealing with people’s health and well-being. However, even seemingly safe work such as coaching or social media scheduling could conceivably be problematic for your client’s business if something goes wrong.

In addition to the nature of your services, risk can arise from the type of clients that you work with. Some niches carry more inherent risk than others. For example, any work involving children, the elderly or those who are seriously ill can give rise to an increased level of risk. For business to business services, the risks involved in working with startups is different to the risks involved in working with a major corporation.

Every business has risks, and a realistic appreciation of the dangers is important. Admitting that potential problems exist and getting curious about how best to protect everyone involved is the task of every responsible business owner. Denial is not a strategy for long-term survival, especially as your subconscious will know the doubts you are suppressing and try to keep you safe by sabotaging your efforts. You have the choice of whether to play safe or play small.

The greater the risk, the more important it is to have a contract that clearly specifies who is responsible for what, warns of potential danger so your clients can make informed decisions and take appropriate action to safeguard themselves, and sets an appropriate dispute resolution procedure so if trouble does arise, you have a non-adversarial method for dealing with it.

Factor 3 – Comfort Level

The final factor is how comfortable and safe you feel. As I mentioned above, if your business does not feel safe to you, you are more likely to subconsciously sabotage your efforts. This can show up as procrastination, failing to show up and promote your business, or even falling ill.

I have clients who have been in business for many years and have never felt the need for a contract. They are perfectly happy flying naked. At the other end of the scale are clients who don’t feel safe without a suit of armour and a tank around them. The closer you are to the armour end of the scale, the more important it is for you to set clear boundaries in a contract that feels protective of both you and your clients.

The other thing to remember is that this position can change over time. What feels safe and comfortable now might feel less so when you launch a higher priced service, or start branching into a new market. If you find yourself feeling stuck or holding back on promotional activities, it might be a good time to check in with how safe you feel.

How I can help

As you can see, there is no “yes or no” answer to the question of “do I need a contract in my business?” If the investment and risk are low and you feel safe, then flying naked may well be a viable option for this stage of your business, so long as you remember to reassess regularly to make sure that is the best option for the highest good of all involved. A change in services or clientele, a run of refund requests or a boundary stretching challenge are all signs that is time to check in with how you are travelling and what you need. If you are feeling like some extra protection wouldn’t go astray, check out my Contracts that Care.