Faster Contracts, Kill Fee
Q: I’m drawing up my first contract with a client. How do I ensure the client doesn’t walk away from the project through no fault of my own?
You can’t. Not completely.
There’s several things that you can do to lessen the odds of a client walking away though. First off, make sure they’re doing this project for the right reasons. Is this something that’s core to their business? (Is Acme Cheese branching into spray cheese?) Or just a lark? (Is Acme Cheese branching into bespoke man bun scrunchies?) A project based on a lark has a pretty low percentage of completion.
Secondly, are these people you want to work with? You’re about to spend some time working together. In close proximity. This right now is the honeymoon period. And if you’re already rubbing each other the wrong way, this thing is gonna go south fairly quickly. Doesn’t mean you need to like each other, although that doesn’t hurt. It means you need to be able to say no to each other.
What about just doing good work, Mike?
Obviously, good work. But your question said “through no fault of my own”. If a client walks away because you did shit work they’re walking away for cause. We’re only dealing with clients who walk away without cause today.
Which brings us to a topic that’s near and dear to me. Of all the clauses in our master services agreement, none has caused more grief than the kill-fee clause. In summary, if you hire us to do a project and your company wants out of the contract for reasons that have nothing to do with the quality of our work or service, you owe us a percentage of the remaining project budget.
Here’s why we’re not going to let the client’s lawyer strike it from our contract: if you’ve committed to do a project, we’ve reserved that time on our calendar for you. We’ve also stopped looking for jobs to fill that timeframe because that time is now yours, and we want to make sure you get our full attention. Now, if we’re working on the project and doing a terrible job, you can flat-out fire us. That one’s on us. But if we’re all moving along okay and your company unexpectedly kills the project, for reasons that are beyond our control, the kill fee kicks in. Because now we’ve got a hole in our schedule, which you’d previously purchased, and we need to protect ourselves against that.
It’s no different than when your doctor charges you for missing an appointment without 24 hours notice. You’re not giving them enough time to fill that appointment from elsewhere, and you’re affecting their livelihood.
How much is the kill fee, Mike?
Great question. As a general guideline, I’d say 50% of the remaining contract. But that means you need to be able to stand there and convincingly demand that. A kill fee is kind of like a game of chicken. If you think you can ask for 50% and be willing to stand your ground, then do it. If you’re just starting out, you may want to aim a little lower. Just make sure there’s a cost associated with them walking away.
So if you’re working on a contract and your client’s lawyer says, “I’m gonna strike the kill fee from the contract,” tell them not to bother, because you’re not budging on that one.
Mike Monteiro is a nice guy or a total asshole depending on your opinion. He is also the Design Director at Mule Design. And the author of Design Is a Job and You’re My Favorite Client.
