From the very start of discussions around potential scope and fee let your prospective clients know that your proposed fee assumes you will use your standard contract. Make it clear to them that deviation from your usual terms may lead to a price increase or adjustments in deliverables and timelines.
If you can make this practice a regular part of your negotiation process, you stand a better chance of minimizing your agency’s risk and maximizing your profit potential. Let’s look at some of the specific reasons why this is a valuable strategy for any creative agency. We will also identify the most common areas where changes should mean a higher fee.
Tying Terms to Your Fee Gives Your Agency Added Protection
You can’t always use your in-house services agreement. If that is the case, let the client know how the changes in terms impact your price. The more significant the changes are (or if they insist on using their service agreement), the more significant the fee increase.
Your work is scoped for your MSA: your specific terms around indemnification provisions, your right to use work in a portfolio, guarantees you receive when using client-provided materials, and so on. If the allocation of risk shifts and you no longer have those protections and rights, your fee goes up.
One negotiating strategy is to quote multiple prices depending on certain key variables: e.g., the price is $X assuming we get full portfolio rights and $X+ 20% if we do not get portfolio rights.
Just remember that you can (and should) increase your fees if clients — even big important clients — want to change the terms.
Give Your Client a Heads Up on Potential Fee Changes
Before a client gets into the details of your contract, make them aware that changes may come at a cost. Put this in an email when you send them your contract. Here’s the language we include in the cover page for our standard MSA:
Please realize that our pricing reflects the scope of work and allocation of risk in these documents. If your proposed changes to these terms affect project scope or risk allocation, our price may change accordingly. We will let you know if any of your changes affect the price.
The more transparent you are about how your fees are calculated, the likelier the client is to think twice about proposing any changes.
What Elements in a Contract Should Trigger an Increase in Fees?
Your standard contracts should position your agency for profit and protection. If a potential client wants to deviate from your standards, that’s a signal you need to have a discussion: What exactly are they looking for? How does that expose your agency to greater risk? How would an adjusted fee help you mitigate some of that risk?
Here are some of the most common areas where a client might look at making changes to your contract and that should at least lead to a discussion about a bump in your fee.
This is one of the most common sticking points in contract negotiations for creative agencies. You’re proud of the work you do and want to showcase it on your website as part of your portfolio to attract additional clients.
But some clients are firm in their opposition to letting agencies feature the work on their websites or in other marketing materials. That’s fine. But that opposition should be met with an increase in your fee. For example, you might quote $20,000 for a branding package. But if the client won’t give you portfolio rights, the price is $25,000.
That leaves it to the client to decide whether they want to pay a premium to deny you portfolio use.
Trademark and Intellectual Property
The work of a creative agency is to come up with clever, catchy slogans, logos, website design, and so forth. Your job is not to clear trademarks or uncover potential IP infringements. It should be clear that this is not included in the scope of your work.
Additionally, your contract should make clear that ownership over any intellectual property that results from the engagement only transfers upon your receipt of payment.
Changes to your standard indemnification clause justify increasing your fees. If a client insists on using their own indemnification clause, that could put your agency at greater risk.
Decide whether you can tolerate what the client is proposing. If you are taking on greater risk, you should consider adjusting your fee accordingly.
Amendments to your warranties provisions could also lead to a price increase. Your contract will include the basic “representations and warranties” such as using qualified staff, not infringing third-party intellectual property rights, etc. But anything beyond that should come at a cost because you are making additional promises about your work.
Sometimes one party will seek to end an engagement, and the implications of that decision are outlined in your contract’s termination provisions.
If, for example, you require a standard 90-day notification period for termination but the client would like 30 days, that should be reflected in your fees. That means less time for you to find replacement work, and you should be compensated accordingly.
Not every client will be able to accommodate your standard billing process. If they seek to lengthen their time to pay you, make sure your fee is increased enough to cover the gap.
Let’s say your standard contract calls for a net 30 payment time frame but the client is asking for net 60 or longer. Consider how that timing would disrupt your normal revenue cycle and adjust your fee to smooth that disruption.
In Contracts, Everything is Negotiable. So Negotiate.
The takeaway: feel empowered to dictate new pricing if your client tries to dictate new terms in your contract. Consider how their proposed changes will impact your bottom line, let them know the consequences if they go that route. If they still want to move forward, capture that new price in your contract.
If you’d like to learn more about how your contracts can be leveraged to increase value for your agency, let’s talk.