In this session I want to cover what I consider to be some key points to include in a customer agreement. You will notice I do not call it a contract. I found that some people put up a barrier when you ask them to sign a contract but if you ask them to sign a maintenance service agreement, it doesn't seem to invoke the same kind of legalism.
I want to make it very clear that we are in no way offering legal advice. Develop your own agreement and get your legal counsel to review it and make recommendations.
I will, however, recommend that you, with the advice of counsel for wording, include the following points in your agreement.
1. Request a 90 day termination clause by EITHER party. If the prospect balks at a 90 day clause you can always negotiate 45 or 60 days which is still better than the standard 30 day clause so common in our industry. Our success with 90 day clauses was about half and half with the rest usually being 60 days and some with the standard 30 days. My policy always was that I would sign whatever termination clause the customer wanted as long as both sides had the same terms.
2. Make the agreement an evergreen agreement meaning it goes on forever unless and until either party gives the 90 day termination in writing. This takes you out of the re-bidding process every year. I also suggest a "notice to cure" clause whereby the customer gives you a written 30 day notice to correct deficiencies before a 90 day termination letter is issued. "Stuff" does happen and this gives you an opportunity to "cure" the deficiency.
3. Have the billing begin the first of the month. Our business is all about cash flow and the customer should understand you will have payroll to meet. I usually reminded them the first invoice would be in their hands within the first week after we start. If they tell you they only want to bill at the end of the month, do it. I never made a big issue of it. Most of my customers never objected to first of the month billing.
4. Spell out specifically what triggers price increases.Some of these items are increase in the minimum wage, payroll tax or workers compensation insurance increases. One item that I tried to include was a clause that stated if I did a big strip and wax job or carpet job near the beginning of the agreement at the customer's request and they then canceled the agreement prior to the one year anniversary, they were to pay me for the job as if it were a one time job. It came about when early in my career I had a customer request I strip and recoat 30,000 square feet of white tile in the first month of the agreement. They then canceled the agreement stating the floors were really what they wanted done and they sure looked beautiful. I learned my lesson.
5. I suggest you put in a paragraph that outlines what happens in the event the customer "steals" your employee. Happens all the time. I created wording that said that I had a major investment in recruiting and training the staff that worked at my customers place of business. In the event they wanted to hire them, they were perfectly welcome to do so and we would invoice them at 15% of the annual wages of the employee they hired. This was not a penalty but rather a recruiting and training fee because if we had not done such a good job of finding a great employee, the customer would not be trying to hire them. If you put it in words like that rather than making it sound like a penalty, it is very acceptable. Did I ever collect? Absolutely! Many times.
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Have a great week.
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