If you want to be taken seriously as a freelancer, you need iron-clad contracts that protect you and your work. Not only is a sensible contract good for ensuring your business continues, it sends a clear message to prospects:
“I’m a professional in my field, and I’m proactive about the ups and downs of running a design business.“
A contract doesn’t have to be complicated, but it does need to cover the basics. It should also avoid awkward, unclear, or amateurish terms that can come back to haunt you down the road. These are the most common mistakes seen in today’s freelance contracts. Avoid them and you’ll see a better result in client communications, work flows, and invoicing procedures.
After working with thousands of freelancers using Bonsai’s contracts, our team found the biggest mistakes you should avoid when creating your contracts.
Mistake #1: Only mentioning deliverables
Your client probably hired you based on what they thought you could do. While an effective sales pitch usually involves at least one promise, it can become dangerous to include too many goal-oriented guarantees in your contract. Scope creep is a common consequence of charging clients for “what they get” instead of “what you do.”
As you achieve milestones on a project, you may need to adjust goals to stay on track, keep your billable hours under control, and maintain your value to the client. A good contract will incorporate process steps, revisions, reporting, and feedback sessions—and will price those things accordingly. Round out your promises with language that explains what you’ll need to do your work, and allow room or adjustments if the client can’t provide their end of the bargain.
Mistake #2: Not offering any add-on options
Since scope creep is a very real threat to freelance profitability, it’s best to employ a second strategy to stop it before it begins. Many clients end up needing their designers more than anticipated (rather than less), so you should work language into your contract that allows for this.
Be sure to write in your cost to work beyond the original scope of the project, whether it be an hourly billing plan or daily rate. Acknowledge that you’ll probably be asked to work more and avoid awkward conversations by putting all possible scenarios in your original contract.
Mistake #3: Not asking for payment
While today’s freelance invoicing options make it simple to ask for payment, there are better ways to get paid. One is to include the option for prepayment in your contract. This is especially wise for working with unproven, first-time clients who haven’t demonstrated a track-record of timely compensation. (Having no reputation can be as sketchy as earning a poor one.) Give your new client a chance to save a bit—5% or so—on their total project price by putting half the project cost up front.
Mistake #4: Not charging late fees
We like to believe that all our clients are of the highest caliber. Why wouldn’t they pay on time?
Well, even excellent companies default. Force your projects to get paid first with the inclusion of a penalty for late or returned payments. This not only gives you recourse in the rare case of non-payment, but bad clients will typically run away before you ever sign them on.
Mistake #5: Giving them too much time to pay
Along with the wise practice of including late fees, most successful freelancers have shortened their payment windows. Many popular bookkeeping software products have net 30 terms as their default, but there are no rules saying you can’t ask for money earlier.
In fact, the recent Freelance Isn’t Free Act put into effect in NYC states that 30 days is the longest a client can take to pay their freelancers if a contract doesn’t specify a due date. Take advantage of this trend by aiming for a shorter accounts receivable goal; 7-10 business days is an acceptable requirement for small business clients.
Mistake #6: Not using milestones
By breaking up your contract into measurable chunks, you’re creating what the industry refers to as “milestones.” Milestones may seem like an extra step in your workflow, but it actually benefits freelancers—especially when addressed in the contract phase of the partnership.
By letting the client know what work will be done (and when), you are giving them answers to their questions before they even ask. It cuts down on back-forth-emails, micromanagement, and guessing games. It also shows them that you are a professional who is competent at managing projects. Clients are also less likely to question ROI when they can see what they will be getting from the get-go.
Mistake #7: Being too generous with rights
It’s not uncommon for clients to demand all work in a design project to be “work for hire.” This essentially grants the client all rights to your finished project so that they can use it however they want, forever, and with or without credit to you. While this may be common, it’s not a rule. You can choose to grant whatever rights you deem appropriate for your work.
Pricing should reflect your choice, however. The more rights you grant to clients, the more you need to charge. You should also remember that your research, notes, and supporting documentation is yours to keep and separate from final project files delivered as part of the completed work.
(Note: Copyright infringement occurs when someone claims your work for their own. Be sure that you address this common complain in your contract. If you are giving away all rights to your work, understand that you will no longer have the copyright for that work.)
Mistake #8: Sharing your process
If you’re being hired for a design gig, there is something about you the client loves. It’s essential to fill them in on things like milestones and deliverables, but don’t give away the recipe to your success before you do the work.
There are many horror stories out there of designers who shared exactly what they would do, only to have a prospect apply those proprietary methods for use by in-house talent—or a cheaper freelancer. Even when you’re actively working for a customer, you have no requirement to divulge how you do your work.
Related: Dear client—we need to talk
Mistake #9: Overcommitting to their work processes
On the other side of that caution is the importance of knowing your place as a contractor. Since you aren’t an employee, you aren’t getting many of the benefits and are also no subject to certain workflow requirements. If a client insists that you work a set number of hours, at a set time, and to very strict oversight of required processes, this has the feel of an employee structure.
Stand your ground from the first contract draft explaining how you’ll do your work on your terms while still accommodating certain processes that the client requires.
Mistake #10: Agreeing to exclusivity
If you’re a professional, you’ve likely learned how important client privacy is. It’s not unreasonable to expect that you’ll keep anything learned about a client under wraps. By acknowledging in a contract that you can be expected to hold all proprietary info confidential, you can keep the door open to working with multiple companies within the same niche. If a prospect insists that you work for them—and only them—it should cost them. A lot.
Mistake #11: Dismissing taxes and fees
While you shouldn’t let on exactly how your price your services, it’s important to account for the cost of doing business from the very beginning. Freelancers are subject to paying their own Social Security and Medicare taxes (also known as the “self-employment tax”), and not preparing in advance can cause a financial crunch come tax filing time. Get a grasp on your true expenses and add those in to any service plan pricing.
Does it seem like there are a lot of mistakes to be made with a contract? Sure. But it takes just one good contract to set the tone for a continued success. Once you’ve created an error-free document, save it. Contract templates are common practice for the best designers, and you’ll be able to rework this winning version time and time again to ensure a very bright future in design.