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How to Handle a Client that Wants Free Work

Posted by Dave Clarke on June 29, 2015 at 7:22 AM

Could you just take a look at this and provide some feedback?

It shouldn't take you too long to do this little extra thing, right? 

So as part of this project, we just want to add a few extra things, ok?

Phrases like these are all too familiar to small business owners—especially those that work in the services or consulting capacities. And while you always want to make a client happy, these phrases are indicative of one thing and one thing only: free work. And that's something you're not in the business of.

Here's why free work shouldn't be in your vocabulary and how you can avoid falling into its grip...

Free Work Hurts Profitability

We've talked about profitability in a tactical accounting context, but for those in the services or consulting businesses, it can be traced directly to time spent. Say you're a graphic designer and you bill at $75 an hour. Every minute you spend doing free work costs you $1.25. That's not so bad, right? Well, what happens when a little extra work turns into 30 minutes? What about 45 minutes? Pretty soon, drops in a bucket result in a full bucket. 

Need a refresher on profitability and profit margins? We gotchya!

work

Free Work Devalues Your Work

We've talked about the economics of working for free, but there's also the qualitative element. Doing free work indicates to your clients—whether they recognize it or not—one thing: that they can get free work out of you. They likely aren't consciously asking for free work, but they'll get used to the idea of you doing little favors here and there on the house. That in itself makes for an awkward conversation when you do finally decide to stand your ground. Imagine how they'll react? Well you didn't bill us for this last time.

So How Do You Prevent Working for Free?

There are a few key tactics you want to employ when it comes to making sure you don't work for free, but it all starts with aligning expectations from the get-go. When you sign on a new client or customer, make sure there's actual signing. Put an agreement in place (also called a master services agreement) that outlines the entire scope and terms of your working relationship. In this document you'll include things like net payment terms, ownership of work product, marketing rights, non-competes, the jurisdiction in which you'd settle disputes, warranties, and liabilities. (That's a partial list, and if there's ever anything you want to consult a lawyer on, it's your master services agreement.) 

Since you're probably putting a master services agreement in place because you're going to be doing some work for the client, the next document you want to put in place is a scope of work (aka, a SOW). This is where you get airtight about the exact work deliverable you will produce. Each scope of work includes the project description, the deliverables, the cost, the timeframe and deadlines, and the terms. (Again, a partial list.) Also, most SOWs include language around change orders. A change order occurs when both parties agree to change a given aspect of the SOW. Usually this has budgetary, deliverable, and/or time impacts. When a client makes a request outside of the SOW, a change order is how you would implement it—but only with mutual written agreement. This is a great way to avoid doing free work. It's not that you don't want to, it's that you can't. Doing so would break the SOW and is akin to you not fulfilling it.

So creating clear, specific SOWs is a great way to ensure that you're not working for free because you get to blame the paperwork.

Prove You're Equal

Sometimes, clients or customers can subconsciously take advantage of their vendors or contractors (aka, expect free work). It happens. But you're just as much of a business as they are. If the free work expectations become so persistent that you're really struggling with how to deal with them, it may be time to pull the "I'm a real business too" card. Of course, you're not going to say those words exactly, but you should make it clear that when you are doing free work for them, that time you could be spending doing paid work for someone else. As a business, they should understand that. If they don't, they don't respect your time which means they don't respect your work. They're probably a client you don't want. 

Striking the Balance

At the end of the day, a healthy business is one that has work coming in and customers that stick around. Sometimes that may require going the extra mile—and most extra miles aren't paid. The key is to use your judgment. Know when it'll be worth it and know when you're getting taken advantage of. Easier said than done, but absolutely possible. 

 

Topics: Know and Grow Your Business