Protect Yourself: How to Structure Your Consulting Contracts

In Start Your Own Consulting Business, the staff at Entrepreneur Press and writer Eileen Figure Sandlin explain how you can start a profitable consulting business, no matter whether your consulting business will focus on HR placement, computer troubleshooting, or anything else you can dream up. In this edited excerpt, the authors discuss the importance of contracts to your consulting business and what they should include and why.

Now that you've laid the foundation for your new consultingbusiness, it's time to think about two important tools you'll need to be an effective consultant: the consulting contract and the client report.

A contract is a legal document between two or more parties that involves what attorneys call "an exchange of value." That is, if something of value (money, goods, services) is provided in return for something else (in your case, consulting services), then the agreement is considered to be a contract. And it doesn't matter if the task or service you're performing is quick and easy, or complex and time-consuming. You must always protect yourself by creating a contract the client will sign. After all, this is your livelihood at stake, and if something goes wrong, you'll need solid legal documentation to make sure you get paid.

Contracts protect both the contractor and the client. To make sure there are no misunderstandings, you must be sure every contract you write is clear, specific and detailed enough to cover all the important points or clauses. Your contracts should be written in plain language, which is clear and easily understood prose. This doesn't mean, however, that you don't need an attorney to look over your contracts or help you create a template you can reuse.

In addition to spelling out all the terms of your agreement, a contract can help you avoid what's often referred to as "project creep," in which you begin with a specific task that morphs into more work than you agreed to as the project proceeds. Having a signed contract that details exactly what you've agreed to do will help you rein in projects before they take on a life of their own.

Contracts can be very simple one-page documents, or they can be 100 pages long, depending on the subject matter and how many complicated issues they cover and in how much depth. They also can take the form of a letter of agreement, which is shorter and less formal but is just as binding as a formal contract.

Here's a short list of what should be included in every consulting contract:

• Full names and titles of the people with whom you're doing business. Be sure they're all spelled correctly.
• Project objectives. Making a list will help you achieve the project goals and figure out when the job is done and you can stop. ("Project creep" can go both ways.)
• Detailed description of the project. Write a global description that specifies every aspect of the task you've been asked to do.
• List of responsibilities. Record exactly what you'll be expected to do or the major steps you'll take to complete the project. It can be helpful to create a list of checkpoints you can refer to as you work. You might also want to have the client sign off on each phase of the project to ensure his/her satisfaction with the work as it progresses.  If so, the sign-off process should be included as an item on your list of responsibilities.
• Fees. In addition to mentioning the agreed-on fee, you can include a payment structure.
• Timeline. Specify the start and end date of the project, and indicate any pertinent dates in between (including those dates on which you wish to have the client sign off on your work in progress and/or payment dates).
• Page numbers. This might sound basic, but the idea is to keep the client--or you, for that matter--from adding pages to the contract that not everyone has agreed upon.

This is not an all-inclusive list. Your attorney may recommend including other information, such as legal definitions, legal recourse in the event of nonpayment, nonperformance clause (as in what will happen if either party reneges on his or her obligations), and so on. This is just one more reason why it's a good idea to have your legal eagle draw up your contracts or give the ones you write the once-over before they're presented to clients.

In addition to the details discussed above, every contract has three key elements that must be present for the contract to be valid:

• The contract must contain an offer. An offer is simply something proposed by a person or business. For example, an offer for one of John Riddle's fundraising clients may include language like this: ". . . JR will act on behalf of the XYZ nonprofit organization as a fundraising consultant to raise the necessary funds required for . . ."
• Each contract must contain acceptance. Acceptance is when one party accepts the terms offered in the contract. It's usually a good idea to put a time limit on any contract or letter of agreement you offer a client. For example, you might state that the offer will expire in a set number of days unless it is signed and accepted.
• Each contract must contain consideration. This is the amount you'll be paid. For example, the contract language could say something like ". . . in exchange for a monthly payment of $5,000."

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17 Daily Habits My Dad Insists Will Make You Happier and More Successful

My dad (Bill Murphy Sr., if you're doing the genealogical math) has enjoyed business successas a lawyer who built his own firm, and who has worked for himself since the early 1970s. He and my mom raised five kids together, and they're still going strong. They're devoted to their grandchildren, and moreover my dad is a man who enjoys both his work and the rest of his life.

In fact, as I read his email, it occurred to me that he's achieved many of the things that younger people tell me are among their goals in life. (Of course, I've been too close to realize it.)

My dad went on to offer four daily habits, each of which made great sense to me, and which I know he's backed up with experience. However, I also know my dad well enough to realize that offering only four pieces of advice isn't exactly his nature, so I racked his brain. Here's what we came up with.

1. Carpe diem.

You know that this is Latin for "seize the day," right? This is the first daily habit on my dad's list. No matter how yesterday went--whether you had great triumphs or whether you wish you'd spent the whole day in bed, remember that every new day is a new opportunity. You can't rest on yesterday's accomplishments, and you never have to repeat yesterday's mistakes.

2. Spend as much time as you can with the people you love.

Your spouse, your kids, your parents, your close friends--whoever they are--make sure that you find lots of time to spend time with the people you truly care about. If you want to feel really guilty about this, check out the calculator at seeyourfolks.com, which will calculate how many more times you're likely to see your parents based on past experience and life expectancy. (We'll wait here while you go give them a call afterward.)

3. At the same time, love the ones you're with.

There are many different kinds of love, and here my dad is talking about showing respect and concern for the people you spend your days with. "That is simply, love everyone," is how my dad put it, and he added a quote from Thomas Merton: "Love is our true destiny. We do not find the meaning of life by ourselves alone--we find it with another."

4. Work hard.

You can't always determine what you get out of something, but you can often control what you put into it. When I was growing up and I'd be anxious over some school assignment or other project, my dad would usually ask me the same question afterward: "Did you give it your best shot? Then forget about it."

5. At the end of the day, go home.

This one seems simple, until you start to realize how most of us are almost 100% on and accessible all the time now. Now, I'm not going to pretend that either my dad or I truly live up to this advice, but it's a good goal to have.

6. Later, go to bed.

"Get the rest you need. Your body needs sleep--not just 'rest and relaxation'--for it to work well," my dad insists. He's right of course--and it's even become fashionable to admit thatpeople need sleep.

7. Get some exercise.

My dad's sport is swimming, and while he came to it late, my dad has the zeal of a convert. A few years ago he did a half-mile open water swim off the beach in Narragansett, R.I. Regardless of what sport or activity works for you, my dad advises, your day will be improved if you do something athletic. Science backs him up.

8. Have a little faith.

As a lawyer--the kind of lawyer who takes on real clients and tries real cases in court--dad has pretty much seen it all. He also has stronger religious (Catholic) faith than most people I know, perhaps in part because he's had his faith tested in many ways. It helps immensely if you believe in something bigger than yourself.

9. Learn another language.

My dad studied ancient Greek and Latin in high school. More recently, in his 60s, he decided to try to learn Farsi, I guess to better understand what some of our nation's enemies were saying about us. Whether you're literally learning another language or simply learning how to do new things and to challenge your preconceptions, the lesson is clear: Keep learning.

10. Read every day.

In a few weeks, guess what I'll get my dad for Father's Day: a book, most likely something on the top of the New York Times nonfiction bestseller lists. It's what I've been doing for decades, so why stop now? I can't think of many people I've known who read more than my dad. Importantly, he usually reads about things that have nothing to do with his work.

11. Keep your wardrobe simple.

My dad gave me this advice years ago when I first started working--so of course I completely ignored it at the time. However, had I gone ahead as he'd suggested and bought a handful of white and blue shirts, for example, and worn them every day, it would have been one fewer decision to have to make in the morning. It looks like that kind of simplification worked for Steve Jobs and Mark Zuckerberg, anyway.

12. Shine your shoes.

Shined shoes make you stand out these days, because most people are so casual. You can probably substitute something else for this habit. Just pick things that advertise to the world that you take care of small things. So maybe you also take care of bigger things.

(Here's a text from my dad a few hours before this column ran: "Just read it again. On point 11, change 'one less decision' to 'one fewer decision.' Your grammar is wrong. Then, point out this message as an example of point 12.")

13. Tell the people you love that you love them.

Hey, we're back to love. Don't just spend time with the people you love, as advised back in No. 2. Make sure you actually tell them that you love them. For example, when I talk to my dad, he'll tell me to tell my wife that he loves her. Unnecessarily but amusingly, he'll add that I should be sure to mention that he means he loves her "appropriately."

14. Don't worry.

This is one of those do-as-I-say-not-as-I-do pieces of advice, as my dad is in fact pretty good at worrying about things. That said, worrying rarely improves the odds of good things happening, and can actually diminish those odds.

15. Be kind to animals.

My dad has had dogs since he was little. He treats animals well. His advice? If you want to treat a dog well, treat it like a dog. Don't try to make it into something it isn't, and doesn't want to be (for example, a little human being). Help it become the best possible version of itself.

16. Find good assistants.

For many years, my father had the same, excellent secretary. He taught me long ago that even during the times when you're working by yourself, you have to be willing to depend on others for help. The most productive people in the world often succeed because they refuse to do some things.

17. Repeat as needed.

This is perhaps the most important bit of advice on my dad's list, so it's fitting to have saved it for last. None of these items are actions so much as they are behaviors. The first time you commit to them, you won't see results. Over a lifetime, however, they can greatly improve your life. Aristotle put it best: "We are what we repeatedly do. Excellence is not an act, but a habit."

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