How to Use Contracts to Manage Consulting Client Expectations
Updated: May 10, 2019
Has this ever happened to you? A client signs a contract for you to provide consulting services. Great news, right? But then you start the work and the client starts asking you to do things that weren’t what you were expecting to do and that you did not include in the contract or budget. Maybe they’re asking you to travel and be onsite every week, but you only budgeted for being onsite a couple of times. Maybe they’re expecting you to facilitate a 6-hour meeting, but you had only assumed a 2-hour meeting. Maybe they expect you to produce a detailed narrative report, but you thought you were only giving them a PowerPoint. Yikes! Situations like these happen all the time and either result in you having to have awkward client conversations or (gulp) not getting paid for all your work.
The good news is that most of these situations can be avoided! How? It starts with understanding that contracts are more than legal documents for a consulting gig. Contracts are one of your primary tools to clarify and manage client expectations.
I can’t emphasize that enough. I and most consultants I know have learned that the hard way. I inherited a contract once that said we had to engage external stakeholders but included zero limitations on the number of stakeholders we had to engage, how many times we had to engage each one, whether we had to engage them in person or remotely, and for how long the engagement process should last. It was no surprise that the client expected much more engagement than was in the budget. Why wouldn’t they?
The key is this: If you don’t clarify and document expectations in a contract, your client will almost always have different—and often bigger—expectations than you do about what you’re going to do for them. Getting the contract right not only protects you and the client from confusion and frustration, it also helps you focus on what really matters: delivering value to the client.
So how do you create contracts that protect you and your clients from unclear and misaligned expectations?
First, you need to use the process of developing a contract to clarify the details of an engagement before you sign the contract and start the work.
Negotiating the scope of an engagement. If a client says they want you to do work for them, use the contract development process as a tool to prompt clarifying conversations with prospective clients about what they expect and the specific details of what they want you to do. Those conversations should include questions like:
“How often and for how long would you like me to be onsite?”
“I think it makes sense for me to do 3, 2-hour strategy sessions over 2 months with you and your team. Does that sound right to you?”
“For my analysis, will you give me a raw data file that I have to clean and organize or will your team do that before they give it to me?”
“For the final deliverable, do you want a detailed narrative document or a PowerPoint slide deck that summarizes the context of what you are doing and indicates the key questions, decisions, and next steps?”
All those details that you discuss and negotiate need to be included in the contract language.
WHAT IF…a client doesn’t want to go through all those details with you? Maybe they hate talking about process or they just want you to start helping them as soon as possible! In those instances, you can ask the most important questions and then tell them you are going to develop a draft scope and budget to review with them to make sure everything is clear and matches what they want. Then once they agree to what you propose as your scope and budget, you can put it into a contract.
Negotiating the budget of an engagement. You deserve to get paid for every minute of work and every ounce of value you provide to your client. That’s why it is critical that your budget matches the scope of work that you have negotiated. That’s why the details matter. A 6-hour, in-person meeting costs more than a 2-hour conference call meeting. It takes longer to prepare for a 6-hour meeting. The meeting itself is an extra 4-hours. You have to travel to get there, which increases the expenses. This may seem obvious, but it is a common mistake I have seen in contracts and budgets of all sizes! The math matters! To illustrate my point, let’s look at an example of cost differences. Say you charge $300 per hour and half your rate for travel. It takes you 1 hour each way to get there and back. The 6-hour, in-person meeting, with prep, would cost the client $3,000 vs $900 for the 2-hour conference call. That’s a $2,700 difference! If you don’t clarify and document those expectations while you are negotiating a contract, you either have to tell the client you need $2,700 more dollars (awkward!) or have to lose $2,700 (no way!). And that may be just one piece of work in a contract so you can imagine how unclear expectations can add up.
WHAT IF…the client is not clear about what they want you to do or what their expectations are? Maybe they know they need something or are stressed out or frustrated. They know they want someone to help them but they haven’t formulated how or can’t figure it out. How on earth do you write a contract with clear expectations? You have a few options.
You could tell them that you will help them sort out what the key issues are and a plan for addressing them, but since it isn’t clear now they could just hire you on a monthly retainer or for a defined bank of hours over a defined period of time. That would give you the flexibility to work with them and define the scope and expectations with them, which is a valuable service worthy of payment.
You could also execute a small contract with them to host one or more planning and strategy sessions. In those sessions, you would facilitate their decision making about what they need and what they would expect in an engagement. That’s useful for them because it’s a smaller commitment and they get help sorting out what they truly need—again, a valuable service for them. You get to demonstrate your value in doing that and can gain insight into how they think, approach issues, make decisions, communicate, operate, etc., which can help you size the scope and budget with more precision. The output of those sessions can form the basis of a contract that will meet their specific needs and clarify expectations. But don’t forget to check the scope, budget, and expectations with them again before you sign the contract!
Second, you need to use the contract to manage expectations during the engagement. Why do you have to do that if everything’s clear in the contract? There could be a lot of perfectly legitimate reasons. The client may not remember all the details in the contract. Or maybe something new comes up and now they want you to change what you’re doing. Or you’re doing such great work that they want more help from you.
How do you do that? The answer is skillfully. This is where craft matters. Here are some of the best practices I have learned over the last decade that can help you do that:
Don’t wait to mention the contract scope, budget, and expectations until there’s an issue. You should make discussing the scope, budget, and expectations a normal part of the engagement. There are a lot of ways to do that. If you develop a work plan, timeline, or tracking tool, mirror the language in the contract scope so they see the same language repeatedly. Stage when you give them drafts of deliverables so that you have ample opportunities to get feedback and clarify expectations. (And make sure that creating, reviewing, and revising those drafts are included in your scope and budget.) Schedule regular check-ins about project status and progress with your client (which you included in your contract, right?) and use the scope and budget as the tools to talk about status and progress in those conversations. Ask questions about their expectations and whether they want to make a change. Normalizing those types of discussions from the beginning will often remove or reduce the emotional charge for you and the client when you have to bring up an issue.
Don’t make it about the money and money matters. Wait, what? How can both of those be true? Here’s the deal: You don’t ever want your client to feel like you only care about the money and not about them or what they need. Don’t assume they know that because they may have had experiences with other consultants who really did only care about the money and didn’t hide it! So, say it and, more importantly, show them you care over and over again in how you approach the work. At the same time, you have to manage the scope and budget, the expectations you clarified in the contract, and new expectations that arise. So, you have to talk about it. Just don’t make it the main thing you talk about, and don’t talk about it without ever having shown them you care. Also show your clients that you care about their budget too. I often preface conversations about scope and expectations by saying, “I know staying on budget matters to you so that’s why I want to talk about this.” Saying and showing you care in these ways will often make conversations about scope, budget, and expectations easier.
Focus on value. If delivering value means you need to switch up some of what you’re doing for the client, do it! That’s one of the things that my clients like best about me and my colleagues. We will do what gets to the best outcomes. But we don’t do it for free. Renegotiate the scope and, if needed, the budget so that the client gets what they need and you get paid for what you do. If the client wants you to change your scope or you think you should change it to get the best outcome, talk to them about the value of doing that and how the scope would change. For example, saying something like, “I know our scope said I would do X, but I think doing Y would get us a better result given what we heard in the last meeting.” Tell them you need to see what that change does to your scope, timeline, or budget. Say what you would change and give options for how to do it within the budget you have, if that’s possible. If you can’t accommodate it in the budget, say that and tell them you can develop a budget and contract amendment for the new work.
Give it a try! These practices can help you avoid most tricky situations related to client expectations and make sure that you get paid for what you do. These practices also keep the focus on what you and the client both want: making good things happen because you are helping them!
Want more? Click here to get a checklist of what to put in contracts to clarify and manage expectations!