Welcome back to another Ask Me Anything, a weekly series where we talk to our friends, our viewers, and our community about all of their pressing needs, questions, wants, and desires.
Let’s take a look at the mailbag to see which questions are burning this week.
I know some larger agencies make clients sign agreements with 6- or 12-month cancellation clauses. For our agency we use a 60 day clause as standard notice. 1. How do other agencies/contractors address cancellation notices? 2. What do you do if a client breaks the agreement early, ie demands to cancel immediately?
The Value of the 90-Day Cancellation Clause
We have a really great attorney who suggested we add in a 90-day cancellation clause when we were redoing our contracts and letters of agreement five or so years ago.
That’s for a couple of reasons:
- It prevents a client from firing us on the spot (and us with them, t00) without a proper transition; and
- As a small business owner, I have to protect my cash flow.
If a client wants to cancel a contract before the annual review, we have to be able to account for that.
For us, it’s both a business decision and an ethical decision so we can transition work effectively.
We also have a clause that you cannot cancel the contract within the first 90 days because there’s a ramp-up period.
It takes at least 90 days to figure out what’s truly needed and to get all of the information we need to be able to do our best work and make the most informed decisions.
And, just like an employee, it takes that long to get your arms around everything.
If you look at it that way, we pretty much don’t let anyone out of their contract with us for the first six months—no cancellation for the first 90 days and then a 90-day notice.
You’re Not a Nonprofit. Or a Bank.
We’ve never had a client tell us they don’t want to work with us after the first 90 days.
There has been one situation where we spent two days with the client for our strategy session and, in digging into everything, we realized they’d spent their entire marketing budget on the strategy session.
In that case, we evolved to create a plan for them that they could execute and we gave it to them at the end of our two days together.
We’ve also had one case with a client that needed to go away so we agreed that we’d stop working immediately and they’d pay out the contract and we were done.
But, for most cases (last March/April notwithstanding), this cancellation clause has protected us.
Before we had it, we had clients who would ghost us or not pay what they owed us or forced us to have our attorney send a mean letter.
Of course, I’ve probably just jinxed us, but none of that has happened when we implemented these new expectations.
I like to tell my team, “We’re running a business. We’re not a nonprofit. We’re not a bank. Clients hire us for our expertise—and they should pay for it.”
I repeat that to every one of you who struggles with this.
You’re not here to work for pennies or to give away your expertise for free.
If a client wants to buy things or spend money on out-of-pocket expenses, they can pay for it. You shouldn’t be carrying that debt for them until your invoice is paid. You’re not the bank.
And, just like your clients have to know where their cash is coming from and what to expect in the near- and long-term, you do, too.
Even if your only salary is yourself, you have to know that you can pay yourself.
Run your business like a business, set expectations, and hold clients to their contractual obligations.
That’s what it’s there for.
Have a Question For Us?
What about you? What is your cancellation clause and do you hold clients to it?
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