Smart Business Begins With A Signature

Success in business requires a passion for business.

In my sixteen years of experience, I have met only one self-employed creative of any kind who went the extra mile and obtained an MBA. Generally speaking, it's safe to conclude that this means the vast majority of independent creative professionals have taken on the enormous task of learning how to run a business on their own. Their entire experience is on-the-job-training.

This certainly has been my personal experience. I'm passionate about my business. I'm passionate about running an ethical business grounded on inviolate principles. I've spent as many hours absorbing the how's and to's of running a business as I have learning HTML and CSS or EE.

I'm always interested in listening to a colleague's experience or reading an article penned by someone who has weathered the test of time as an independent business owner. What frustrates me, however, is that I am routinely disappointed by their opinions or conclusions. And every now and then, I even find myself frothing at the mouth.

A recent article published by .net magazine is one such example. I have not met the author of the article, Carl Smith, who is the founder of nGen, one of the most respected web agencies in the country. I have no doubt that Carl is a fantastically interesting and decent man. And I want to make it clear that I have no grounds nor interest in assessing his character, but I am going to spend a handful of moments explaining why I find two of the opinions in his article "Charlie Sheen transformed my agency" entirely objectionable.

Everyone who owns his/her own business and who is passionate about said business should almost constantly be considering how to reinvent himself. This basic fact is the secret of success: Never be complacent.

So I was excited when I began reading Carl's article. I found myself nodding in agreement to many of his points … punctuated by a couple of stunning statements that sent my wee mind to places where the words "what the mother fuck?" is the only appropriate response.

I'll start out with the obvious:

"Be honest.

No shit. I'm always shocked when I hear people admit to having been not-completely-forthright in their dealings with clients. It frustrates me even more to learn that "respected" members of our community admit to having been dishonest with their clients.  The simple fact that people believe that they need to spin tales to make a client happy is precisely why I receive as many inquiries from unhappy prospective clients as I do.

Honesty is one of the cornerstones of my ethical guidelines. I have never and will never be dishonest with my clients. I'm well aware that honesty is hard to come by in life. I am also well aware that honesty is an inconvenience to our corporate overlords. One of the most unfortunate side effects of corporate malfeasance is that small businesses learn the wrong lesson from executive titans … that dishonesty is acceptable providing you earn a profit.

I've been called a lot names throughout my career but no one, and I mean no one, will ever be able to call me dishonest.

Honesty is a matter of respect.

My biggest gripe with Carl's article is one for which I am struggling to find a diplomatic voice.

Carl explained that nGen has stopped using contracts; rather, their client relationships are "based on nothing more than a virtual handshake and a deposit."

I am envious that nGen has been able to assemble a coterie of clients who are so trustworthy and respectful that a handshake and gesture of good will is enough to solidify a business agreement.

The problem with this fantasy is that we live in an incredibly litigious world. Promoting the idea that it is possible to accept someone else's money in exchange for services with a handshake is among the most irresponsible pieces of advice any professional can give newbies. And anyone in Carl's position should know that some young upstart will take his opinion to heart and begin building his business under the dangerous assumption that his business relationships can be equally as honest.

Whether or not a client or a vendor has the freedom to bail on any given project, the primary purpose of a contract is to protect the vendor.

I too have almost fully converted to hourly billing. I also purposely keep my statements of work vague so as not to get locked into specific criteria. Instead, I rely, exactly as Carl described, on emails and personal conversations to determine how my time is spent from one hour to the next. I don't respond to RFP's, and I stopped presenting formal proposals some time ago. But I never … Ever … Work without a signed contract. 

Yes, a signed contract is no guarantee that you will skate through a trial; however, a signed contract describing the various terms of your service is far more beneficial to you than a handshake. A handshake carries as much weight in a court of law as your mother's estimation of your character.

Maintaining a good client relationship versus dealing with a bad client relationship has exactly zero to do with a signed contract. The success of your business relationships is heavily dependent on your interpersonal skills. Nonetheless, there is a reason why the words business and relationship are combined when describing the client and the vendor. And what are you more likely to trust? A handshake and a promise? Or a document with a signature that establishes the responsibilities of both parties? Relationships of any kind are built on a foundation of trust; the primary difference between a legal business relationship and a personal relationship is the physical exchange of money.

Working without a contract is just stupid. Suggesting that working without a contract is somehow the key to gaining a client's trust is not only stupid, it is cosmically irresponsible. 

The only question an independent professional need ask himself is this: "Can I afford to take my chances in a court of law?" You may want to ask this question of yourself whilst you are looking at your wife and child or, if you have employees, at the people who depend on you to pay their mortgages. Can you afford $200,000 in court costs?

You may be one of the lucky people who will work his/her entire career without ever being faced with a legal threat. I truly hope you are. But I speak from experience when I say that being threatened with legal action is without question scarier than anything you can possibly imagine. One court case can not only ruin the business you have worked tirelessly to build, but also ruin the life you have worked so hard to enjoy. Are you prepared to lose everything based on a handshake and a smile?

Always use a signed contract. Period.