You know business and how to get the most out of your clients. Business coach contracts are an important part of business (unfortunately). They help you see around corners…both for you and for your clients (and even repel those dreadful clients so you can focus on the ones you can really help!).
For that reason, business coaches need a working knowledge of contract law. Not only do you need to understand contractual obligations in your business life, but your business clients expect fluency in contract law as well. Don’t worry, we’ll make it easy on you and explain everything in plain language.
Let’s review the basics, but first an example.
After 12 years in business, including 2 as CEO of a mid-sized company, Jared became a business coach because he wanted to stay involved in business and wanted to share his hard-earned insight with more people. A client, Margaret, contacted him via email to inquire about his services. Jared sent over a nice email along with an offer to work with Margaret.
Is Jared’s email a contract? How would Margaret accept Jared’s offer? What needs to be in writing and what does not. These and many other questions will be answered as we navigate the world of business law and contracts.
Contract Construction
Let’s knock this out…(or if you want to make your life easier without taking a deeper dive, then you’ll find attorney-drafted contracts for download here)
Any contract is comprised of three main parts: offer, acceptance, and consideration. Putting those pieces together creates a contract. Another way to define a contract is this way: “An agreement between two or more parties creating obligations that are enforceable otherwise recognizable at law.” (Black’s Law Dictionary). We like to call it a “meeting of the minds.” Most of the time, contacts are reduced to writing, but that’s not always the case. It does, however, help resolve many uncertainties, as we’ll see.
In the business coaching world, the business coach offers to provide professional training and advice, the client accepts the offer and agrees to pay money. Offer, acceptance, and the tender of money for coaching is the consideration. It’s that simple.
But what about when Margaret…reschedules at the last minute (and does it again and again)…doesn’t pay on time or at all…goes radio silent…uses Jared’s work products as her own…poaches an employee…and on and on?
Those terms can, however, be complicated, which is why it is important to nail down the exact terms – in other words, the language matters so pay attention.
Types of Contracts
Business coaches need a bevy of contracts. Of course, the main one is your client contract but there are others that will equip you with the protection you need. See our Business Coach Template Bundle for more information.
The key is figuring out what you need before you need it. Let’s take Jared, for instance. Before he accepts his first client, he needs to have contract dictating the terms of the agreement with the new client. It also needs to be flexible. He can hire a lawyer to draft a new client contract for him or use a legal platform like Drafted Legal or copy one from another person in the industry (and hope it works and hope you don’t get sued for copyright infringement – unlikely but it happens).
Two things are essential:
- Have the correct contract before you need it, otherwise it will never get done.
- Ask all parties to sign the contractual agreement. It can be a bit awkward, but it should not be. It’s actually very professional. If someone is giving you money, make sure you respect him or her enough to reduce the agreement to writing. Pro tip: give the other party a signed copy.
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Scope of Work
Each new client contract needs to describe precisely the scope of the work to be performed. Sometimes it is a challenge to know the entire scope of the work to be performed. Usually, there is a basic package and then options to build from there. However it’s done, you need to communicate the scope of the work you intend to perform.
The scope of work will depend on numerous factors, so as the business coach, you need to draft this section. No one else can do it because only you know what you are agreeing to undertake. Here are some things to keep in mind:
- Exactly what will you be doing?
- When will you be doing it?
- How long will performance take?
You need to account for flexibility with every contract – the scope section is no different. Canceled meetings, sickness, schedules, deadlines, and all the rest of life can create hurdles. Flexibility is essential to maintaining a good working relationship, but you cannot let go of structure completely. Like most things, there is a healthy balance.
Payment Terms
Figuring out how to get paid is obviously a big question. It starts with upfront pricing and an explanation of the costs. The one sure thing is that nobody likes surprises. As long as the contract is transparent, you’ve cleared the first hurdle.
What is your collections policy? Are you requesting payment upfront? What if someone does not pay, will you charge a penalty? It’s your business, do what you think works best, but make sure pricing, payment, and penalties are understood.
Pro Tip: Require your client to pay something up front. It shows they value your service and increases the likelihood that they will continue to pay.
Waivers, Releases, and Indemnification
Most agreements that people use do a decent job of explaining what you do, but sometimes the most valuable part of the agreement is explaining what you don’t do. This is just as important in setting expectations because it limits what they can expect of you to…well, what they can expect of you. In other words, you’re a business coach, not a magician that can change their business, marriage, income, happiness, and so on.
A waiver and release clause contemplates a wide scope of potential claims. The client waives potential claims he or she may make against the business coach or company offering advice. People often think of it as waiving physical harm, but a waiver or release can relate to breaches of contract, debt collections, and various other claims.
Lastly, some business coaches might want to place an “assumption of risk” clause into the contract. What this does is states clearly that the client assumes responsibility for any decisions he or she makes on the advice of the business coach. It’s a way making sure the client cannot blame you later if a decision becomes detrimental.
Waivers and releases are crucial, not just for protecting your business, but also for narrowing the scope of your responsibility. Including them communicates, ‘don’t try to hold me responsible for mistakes you make in managing your own business and I will not blame you for my mine.’” The point he makes is waivers and releases, while not definitive, are persuasive to both courts and clients. They set the tone for the relationship.
Rescheduling Policy
With regard to meetings or deliverables, how do you set a policy that’s fair to you and your clients? How do you reframe rescheduling, so the client is happy?
In some respects, it does not matter how you handle it so long as you address your policy upfront. Considering the Jared and Margert example, Jared needs to make clear his rescheduling policy. Too much grace invites people to constantly break meetings and appointments, which wastes your valuable time and limited resources. As long as Jared is upfront, Margert can decide if that works for her.
What Jared wants to avoid is spending time preparing for a session that gets rescheduled last minutes (over and over again). That time could have been spent preparing for another client or even with Jared’s family or exercising. The goal is to have clear rules so that your client knows how and when to notify you. It also encourages them to respect your time.
Expectation Setting
Any business coach, and lawyer and most other professionals, knows about expectation setting. Set reasonable expectations and then over deliver- that’s how you impress clients. This is done not only in the interactions and conversations with the new client but can also be built into the contract.
Your contract will discuss pricing, a menu of options and add-ons, and the scope of work. In each of these, you can easily craft the words to communicate when your job is complete. A final review after a series of meetings is one way. Another way is by accepting final payment. Most of the time, you might want to keep the relationship going, which is fine, as long as you communicate when you have completed the initial agreed upon services.
There is no science to it or letter of the law, expectation setting is a feel. Just know, your contract can play a significant role in setting expectations.
Recap + 1
Here is a quick reference for what every business coach must pay particular attention to when drafting or review a contract:
- Properly define the scope of work;
- Clearly state the terms of payment;
- Include waivers, releases, and indemnification;
- Communicate a rescheduling policy;
- Set expectations from the beginning.
And One More Thing…
Entity Formation is a must-do. Most people get an LLC or some form a business out of the gate (along with a tax identification number and local business license), but if are operating as a business coach without it, drop what you’re doing and get an LLC. Having the proper entity is critical to long term success and risk management. Business coaches who fail to set up a business form are operating as sole proprietors, which invites disaster. Sole proprietors don’t have liability protection, don’t have tax options, and may not have the ability to raise capital or borrow money. The big thing, however, is the lack of liability protection. LLCs work wonderfully for most business coaches in most states.
Back to the Example
In response to Margaret’s email, Jared should respond with a friendly email welcoming the opportunity to work with Margaret. In it, he can easily attach his “New Client Contract” for her reference. As we have outlined above, as long as Jared’s contract covers the necessary elements – scope of work, pricing, waivers and releases, and any additional particulars like rescheduling, he should be fine. Usually, a client will want to talk first, at which time you can answer any questions.
Conclusion
As we have reviewed, a basic knowledge of contracts can go miles. In addition, every business should have an LLC or other formal business structure, purchase insurance, and understand the fundamentals of employee rights and responsibilities. For more information on each of these subjects or to purchase contract templates, visit draftedlegal.com or check out our social media pages.
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