Long Term Contracts

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Allison Williams: [00:00:05] Hi, everybody. It’s Allison Williams here, Your host of The Crushing Chaos with Law Firm Mentor podcast. Law Firm Mentor is a business coaching service for solo and small law firm attorneys. We help you to grow your revenues, crush chaos in business and make more money.

 

Allison Williams: [00:00:30] Welcome to another episode of The Crushing Chaos with Law Firm Mentor podcast, where today we’re going to talk about long-term contracts. Now, I was given this topic by a colleague of mine, and we had a very spirited debate about this particular discussion. And at the end of the discussion, at the end of the debate, we essentially agreed to disagree. But then he circled back to me a couple of days later and said, you know, I want to explore this a little bit more. And we started talking about ways that, ways that lawyers can spot when a long-term contract is appropriate. His original thought was long-term contracts are never appropriate, you have to have an exit, you can only agree for a short period of time. And there are definitely times where I agree with that. But rarely are you going to hear me say 100% always, or 100% never to most things in business, because there are circumstances in just about every scenario that can come to mind where I might say generally never, except when A, B, C, or generally that’s a good idea. Always. But here are the caveats to that. Right? In other words, I’m a lawyer, so it depends is definitely in my lexicon. But the conversation went a little bit like this. We were, we were talking about someone who had recently signed a contract for a two-year commitment to a coaching program. And the person was unhappy a few months in and wanted to exit. And the company took the position, you’ve signed a contract, we want to have you honor the contract. And there were a whole bunch of comments about this particular topic on social media, and people were saying, Oh, that awful company, they’re trying to enforce their contract. What’s wrong? You know, this really isn’t fair. This is the reason why you should never sign a long-term contract. And my male colleague actually said to me that he was in that camp. He was of the belief that because people generally want to honor their contracts and because a person could grow dissatisfied with a service after some period of time, that they should never sign a contract that they don’t intend to honor. And by virtue of it being a longer-term contract, it’s harder to get into that position. And what struck me about that position was that there are long term contracts all the time, that people, by societal expectation, enter into that we recognize could very easily span a period of time where we might change our position, but yet we don’t feel that we are somehow being taken advantage of by having a long term contract.

 

Allison Williams: [00:03:12] So, for instance, mortgages, right? That’s kind of the quintessential example where a person will agree to be indebted for the purpose of enjoying an asset which would be their home, or the house, or the structure that they’re purchasing and mortgaging that they are going to in exchange for a long term, 15 or 30 year, depending on what type of mortgage is secured, they are going to agree that they will be obligated. And the obligation doesn’t end if you hit a financial challenge, the obligation doesn’t end if you change your mind and just decide you no longer want to be in debt or you no longer want to particular, to have that particular debt, it’s a fixed expectation that you’re going to honor that contract.

 

Allison Williams: [00:04:02] You know, another of the long-term commitments that we make that very easily, people say it’s a contract and you’re going to honor it and your quote stuck is marriage, right? When you enter into a marital relationship with someone, you are committing to that person. Most people would say for life, even though we know that there is divorce, there is a way out of the contract. Most people don’t take it lightly to get out of that particular contract. So what is really the, the key to deciding when a long-term contract is appropriate and when it is not?

 

Allison Williams: [00:04:40] Well, if you think about what you’re committing to when you commit to a marriage, I’m going to use that one because that is the one area where most people would say that they are not ever going to see their marriage as negotiable or something that they should have committed to for only a few months. So they could try and test it and see if they liked it and then opt-out. Most people by societal indoctrination, by religious expectation, by spiritual belief, by childhood upbringing, have a belief that marriage is a lifetime commitment. Most people and if that’s not your belief, there’s no, there’s no moral judgment to that. There’s just, by and large, people see this as a lifetime commitment. And so if you think about what people are really committing to, they are committing to what they are ultimately driven by, which is the outcome of choosing their partner for marriage, i.e., they’re committed to the idea that life is going to be better with this partner than without. Now, that doesn’t mean that they go in blind and they say, you know, I am never going to be unhappy. I’m going to be emotionally satisfied, sexually satisfied, physically satisfied. I’m going to be at the height of my level of, of satiation for the rest of my life because I marry this person. Most people recognize that marriages are relationships and relationships take work. So there is an expectation that you’re going to go through challenges with that particular contract. There may be times where you say, I want out of this, but the commitment that you made to the outcome, i.e. that life as we are creating it, will be better with my partner than without. It’s something that you have committed to. To a degree that you say, even when we encounter challenges and even when we have a desire to escape, we’re not going to do that. We’re going to honor our commitment.

 

Allison Williams: [00:06:33] So how can we use that particular contract, that long-term contract? Right. You can say a contract for life is the longest term contract you could ever enter. How can we use that contract to determine when other contracts, business contracts, are appropriate to be longer-term versus shorter-term? So there’s a few different strategies you can use to think through this. And there are three that I’ve come up with that I have seen pretty regularly and routinely used in order to make the decision for myself whether I’m going to enter into a long-term contract. And there are absolutely times where I say, Nope, not doing it. And when I have coached my clients here at Law Firm Mentor through making a decision about whether or not a particular service provider organization program is appropriate for them to enter into for a long-term contract term.

 

Allison Williams: [00:07:25] So the three strategies are as follows. The first thing you have to do is you have to ask yourself, what is the deliverable and what is my projected return on my investment? Now you might say, what does that have to do with the term? Right. What is that? What is the length of the contract have to really do with the return on investment? Because if I’m going to get a return, I could, I’m going to have some level of return at three months or six months or a year versus two years, or three years, or five years. Right. The longer-term contract. Why would I want to ask myself deliverable and projected ROI? Well, the reason is pretty simple. When you think about what you are signing on for, you have to recognize the value of that in order to trade the freedom that you perceive you will have by virtue of having a shorter-term contract that you can walk away from. Right? There are some contracts where a commitment is required in order to ultimately retrieve, achieve the return on investment.

 

Allison Williams: [00:08:26] So an example of that would be if you’re working with a marketing company and they say, now listen, if we’re doing something short term like pay per click marketing, right? It takes a landing page, it takes a couple of days of us optimizing the algorithm. It takes some period of time to get the ad copy right. It takes some period of time to get the graphics right. We do some AB testing, but generally speaking, in the month that you sign on for our pay-per-click marketing, you’re going to get leads through that act, through that activity. That is a shorter-term, that is a shorter-term by which before which ultimately you’re going to get that return on investment. But if you’re looking at something like search engine optimization, right, you’re looking at a broader, a broader sphere of characteristics that are going to determine when success is likely to happen. And that includes things like how glutted is your market and how much content do you have available and where are you already placing on Google? Are you already on the first page of Google or are you on the 5th page or the 10th page? You know, what keywords are you coming up on Google for? And I’m using Google, but of course, we’re talking really about all search engines. But like, where are you kind of in the race? Because if you’re already near the first line, you know, the finish line is going to be easier to knock you into a high ROI faster than if you are just starting out, have no web presence, have a shorter-term URL that you’ve only owned for a short period of time. Right.

 

Allison Williams: [00:09:52] There’s a whole lot of factors that go into when your search engine optimization strategy is going to be effective. And if a marketer says to you, okay, we can let you try this out for three months and you don’t have any content created or the content that you have is minimal. And it’s not, it’s not appropriately tagged, it’s not branded to your website, it’s not hyperlinked, you’re not making use of link-building strategies. You have no first-party data plan. Most of your data is through third parties, and ultimately you’re not going to have the same level of access to that data in the future as you have now.

 

Allison Williams: [00:10:29] Well, then letting you out, if you will, after three months is probably going to be an opportunity for both of you to be dissatisfied, because the search engine optimization company, the digital marketing company, hasn’t had an opportunity to really make use of all of your, all of your strategic assets. Right. There’s a certain way that we build content. If we’re building content for getting you an immediate result versus if we are building content in order to play the long game of consistently and on a consistent recurring basis having you appear on the first page of search engines. You can do both of those strategies contemporaneously but longer term and shorter term need to go hand in hand for a cohesive, comprehensive marketing plan. And most search engine optimization is geared toward the longer term, not just the longer term, but certainly, the longer term is something that you’re looking for because we’re looking for the sustainability of your driving leads to your website. So when you think about it that way, if you don’t ask yourself, what is the deliverable, what am I getting right? Am I getting a short-term turnaround? Am I getting dollars for leads like an even exchange, or am I getting branding? Am I getting stronger messaging? Am I getting a higher likelihood of consistent referrals coming in through my website? You don’t know whether or not a term that is proposed is appropriate to what is being offered.

 

Allison Williams: [00:11:59] And then, of course, your projected ROI has to take into account that term. If you’re looking at your ROI is something that you’re going to have turned around in 30 to 60 days, then a one-year contract might be excessive relative to what your return is going to be. Versus if you’re looking for a shorter-term turnaround. Right, but not necessarily an instant turnaround. Maybe you’re looking at 3 to 6 months, then having a one year contract might not be perceived as, as onerous, because in that scenario, you’re going to get a return before the contract ends, but you’re going to have a relationship vested by that time so that what you continue to do with the company is not going to instantly go away the moment you start to recoup your investment. And really start to generate a return on that investment. So that’s question number one. What is the deliverable? And as an adjunct to that, what is your projected ROI?

 

Allison Williams: [00:12:52] Major question number two that you have to ask when you’re considering a long-term contract is, has there been a history of non-delivery of the service with your provider? Now, this one can be touchy, right? Because for a lot of people and lawyers, we all know this. We all know that no matter how hard you work, you are always going to have some client be dissatisfied. Right? It is impossible to be in business serving a high volume of people and not to have someone who is unsatisfied. But there is a distinction between having the errant person, kind of the random person who had unreasonable expectations could never have been satisfied. Nothing you did was ever good enough and having a pattern of dead bodies along the path of people who left the company upset. Right. And we recognize that when we start to see a pattern of behavior, then we oftentimes should be cautious about going with that company, because the pattern of unhappy people means a couple of different things. It may have been that the unhappy people were unhappy in general. Nothing you said or did could have satisfied them. And you’re choosing wrong, right? So the company is making a deliberative decision that any dollars are good dollars and therefore they’re not vetting who their clients are going to be. So when they’re offering a service, the service is statistically more likely to have a high rate of dissatisfaction just by virtue of who you’re selling it to. Or it could be that the company is making very strong promises. They have great salespeople that are getting prospects really excited about working for the company.

 

Allison Williams: [00:14:33] However, when the clients come in, they’re turned over to a completely different team. It’s no longer the great salesperson, it is now the mediocre deliverable person, and that person is not able to consistently deliver on what was promised. Maybe that is because the salesperson overpromised, or maybe that is because even though the salesperson offered exactly what the company offers, the company changed its deliverable.

 

Allison Williams: [00:15:01] I’ll give you an example of this. I won’t name the name of the company because I have now learned that this company has remediated this particular challenge, and I’ve actually become quite friendly with the owner of the company. But at one point in time, I worked with a marketing company. This is many, many moons ago, and I work with this marketing company and had a wonderful experience to start. We had a great sales conversation with them. We had the opportunity to speak with some of their clients, so we knew that they had happy clients, both those that they gave to us and others. We found others that worked with them that they had not offered up. Everyone expressed, expressed generally positive feedback. And then we started our relationship with them and the relationship started off great. We had kind of a key point person, and that point person was over various different tributaries of our marketing. We had a person that dealt with our PPC, a person that dealt with our SEO, a person that dealt with our reputation marketing. And then we had a person that dealt with what I refer to as other.

 

Allison Williams: [00:16:01] We had press releases, we had, we had some banner ads that were going up. We had short-term campaigns in different places, and we were very happy with our point person and with the individuals in the distinct areas where they were performing services for us that started off great, and then at some point, the relationship went downhill and I later learned that it was because the company decided to grow, right? Because who doesn’t want to work with an expanding company? When companies expand, typically they’re able to provide you more value for either the same amount or less, or even if it’s for more, it is something that you are happy to pay because you’re getting such an immense value, right? So I highly recommend by and large working with entrepreneurial companies and supporting the entrepreneurial vision of the owner of that company. Just as you want to have your clients buy into your vision and support your company because of your vision, doing that same really triggers the reciprocity of the universe, right? You do for others and they will do for you.

 

Allison Williams: [00:17:06] But in this particular instance, this person had such a strong desire for growth that they grew too quickly. Right. And growing too quickly is not something that I want to throw out there as a casual thought, you should have in your mind as to why you should not be growing aggressively. You can absolutely grow quickly in a strategic way that still takes care of your clients. This particular company did not do that. And so after having a multitude of conversations, we got to the end of our contract and we opted not to renew. And that was really because even though we loved what they were able to do. They weren’t doing it anymore.

 

Allison Williams: [00:17:44] Now, that was my individual example, but I later came to learn that quite a few people had started to have that experience with them, started to have that experience. So the fact that one person may have had that experience would never be a justification for you to say, Oh, I can’t work with that company because this is how they roll, because you don’t know that this is how they roll if one person is saying it. If you start to see a pattern, however, and you start to kind of prime the marketplace and ask around, why did you leave this company? What was your experience there? What you’re going to find is that people are going to tell you, right? They’re going to tell you generally my experience was positive except for this thing, or except for this moment, or except for this person.

 

Allison Williams: [00:18:28] And you as the consumer have to consider whether or not you are likely to encounter that same challenge when you go there as a client. The fact that there are complaining clients or former clients does not mean that a company that requires a long-term contract should be avoided, but it does mean that you should be asking the questions. Is this a problem associated with the relationship between that client and the company, or is this a problem inherent in the company, or is this a problem inherent in the person? I have definitely gotten referrals from people who were dissatisfied with a particular vendor, and then I get on the phone with them and the person, frankly, just sounds like a whack job. And I hate to put it that way, but, you know, the person just hearing them, I hear, oh my God, you know, the company took a full 30 minutes to return my first email or the company delivered great graphics, but they used a darker shade of green than the green that I sent them, and as a result, it threw off the whole esthetic. That means these people don’t know what they’re doing, right. And if you start to hear things from the people that you’re talking to that make them sound unreasonable or even just irrational based on how you would have evaluated that problem, it doesn’t mean that the problem wasn’t real or didn’t exist, but it means that that person may or may not be the best source for you. More likely than not, not the best source for you to draw upon your decision-making framework. Okay.

 

Allison Williams: [00:20:01] So the third and final area that you should really delve into when you’re thinking about a long-term contract and this one is really, really important. This is probably the most important of the three that we’ve discussed so far, right? We’ve discussed what is the deliverable and the projected ROI. We have discussed the history of non-delivery by the company. And the third and final area is the explanation provided by the company. So there are a lot of companies that will say things that are very glossed over and generic about why they want to have a long-term contract.

 

Allison Williams: [00:20:37] Now, as a business owner, I am sure you understand that it is better for business. If you have a long-term contract, it is easier for you to project out revenue. It is easier for you to make investments with a knowledge of what your expected revenue is going to be three months out, six months out, 12 months out, and so forth. Right. So that’s part of the reason why there’s a movement now in the legal space of lawyers creating subscription programs. Right. The value of knowing that you’re going to get a consistent amount of money every single month and on the tail end or on the, on the flip side of that, you have to plan out what your time allocation is going to be. But you can plan out your time allocation by virtue of what you include in the contract for your subscription. So you can plan your time and you can plan your money and have a certain level of continuity and consistency in that. That’s different than when you’re planning out your revenue for a billable hour model or a flat fee model.

 

Allison Williams: [00:21:33] But the challenge when we start thinking about that from a business owner’s perspective is we aren’t really considering the consumer in that in the same way that we consider ourselves as the consumer when someone is presenting us with a contract. So I want you to really think about if someone were to say to you, why do I have to sign on for a term of X months or x years with you when you are delivering the service? Why is the contract justifiable? Their query is very much guided by the idea that they don’t want to be locked into something that is not going to serve them. They want to have a level of confidence that what they are signing on for is going to be for their ultimate good throughout the term of the contract, starting middle and end. Well, the same thing goes through your mind when you’re evaluating a contract, right? You’re evaluating whether or not you’re going to be happy when you start. Happy throughout and happy at the end. And when you think about that and someone says to you, I want to have a long-term contract or what you consider to be a long term, right? Most people say a year is a long term, right. So once you get to a year or longer and you put the categorization of the contract into that long-term status, the question is why? Well, if a company provides you with a glossed-over kind of half-assed reasoning as to why they want a long-term contract, oh, we think it’s in your best interest, or we can’t really start to get any results until seven or eight months in.

 

Allison Williams: [00:23:04] That is going to be a red flag, right? Because that company is really giving you their justification, kind of turned around for you. Right. We can’t get you to where you need to be except over the term of a year. And we don’t want you to be dissatisfied because we haven’t gotten a result in three or six months. So therefore, we’re kind of giving you a clear, definitive we will serve you, but this is the time it’s going to take, rationally speaking. That seems like that is a client-facing justification, but it also leaves you with an undesirable feeling of, well, if I can’t get the result for, for that longer term, do I really want to make the investment right? Wouldn’t that be better served by making a shorter-term investment where I can get my investment now? And that’s not always the case. There are definitely times where you want to make an investment and you want to pay it out over a period of time, even though you’re not going to get the return on your investment for some time, way down the pathway. Right.

 

Allison Williams: [00:24:07] And I want you to think about that from the perspective of building, right. If you’re investing in something that requires a level of building a relational investment, like I’ll give you an example of a friend of mine. He’s a photographer. And he offers marketing packages. And so you hire him and ultimately he does your photography for a certain number of events, but he also builds packages around where you’re going to put your images, you know, having your images cut for social media as well as for your ongoing marketing strategies, your website stills, things like that. But really, he’s really packaging things in a way that spans out the relationship because of the amount of time that it’s going to take for him to be able to be coached into giving you what you want. Now, this is, this is a friend of mine, but I do have a photographer slash videographer that I’ve worked with for many years now. He does not have the same packaging, even though I frankly, I’ve recommended it to him. And when I first started working with him, he would give me images and I was happy with them. But it took a lot of my giving him feedback about what I personally liked and what I thought my audience would like in order to get to optimal performance, right? Sometimes you think, okay, the photographers, the professional, they’ll just nail it. And yes, they’re professional eye. Their, their eye toward the use of lighting and the use of imagery and the, and the posing and all of that is definitely something that you’re paying for.

 

Allison Williams: [00:25:43] But there is a certain level of subjectivity that goes into the artistry of photography and videography. And so whether or not a videographer uses a certain, a certain music reel or a photographer uses a certain stage of lighting, right? The all of that goes into what you personally like and how you like to be presented. And if they just simply did a one and done with you and you came to the first event and there was a period of time of leading up to kind of get the strategy around the event. And then you got your deliverables and you said, okay, I’m generally happy with this, but I’m not wowed and I’ll keep looking for the next best photographer next time that you miss an opportunity, right? Versus staying it through the course and knowing that the person has a planned strategy for how to improve. They know that you’re going to ultimately move yourself from where you start to where you are at optimal success, i.e. optimal happiness with your photography by virtue of working with them in this way.

 

Allison Williams: [00:26:45] So it really is about the explanation that you receive. It is about what the person who owns the company can explain to you as to why they use a long-term contract. And you should ask questions about what should happen in the event of contingencies. Now there are contingencies that should warrant you getting out of a contract, but simply I don’t like this. I said yes and I changed my mind is not an appropriate contingency and I am sure you would agree with that, where you have your clients who are receiving a high amount of value from you and they say I really shouldn’t have to pay for the last month of work because you took too long to return my phone calls or because I wasn’t happy with the judge’s attitude when we went to court last month. You shouldn’t be paid, right? Clearly, you would say I did the work. I’m entitled to be paid for that your dissatisfaction is something we have to deal with, but not by virtue of you trying to claw back what we have agreed to in our contract.

 

Allison Williams: [00:27:46] And that’s the other part of it, is that a lot of times I will see lawyers get upset with vendors for one reason or another, and they try to address the issue. Most of us are dedicated to the idea of honoring our commitment. And if things go awry, we try, we have conversations. We don’t just give up the moment that, that a problem arises. But sometimes, and I think rightly so, lawyers feel that the reason why the long-term contract was created was for the benefit of the company and its revenue, not for the benefit of the client. And then when you complain about something, you kind of have a gotcha moment where they say, well, you’re stuck for a contract year, so let’s just get over this and move on as opposed to legitimately addressing your concern.

 

Allison Williams: [00:28:35] So when you go into these conversations with companies that want to offer you a long-term contract rather than say absolutely yes or absolutely no, ask yourself the question. As the, is the explanation being given to me a justifiable one? Does it make sense? Is it something that I can live with? And if it’s something that I can live with, then you have to really go to the other two questions about the deliverable and the ROI and any history of non-delivery, and that will help you to make a decision as to what is best for you and your company.

 

Allison Williams: [00:29:06] All right, everyone, I’m Allison Williams. Your Law Firm Mentor and you’re listening to The Crushing Chaos with Law Firm Mentor podcast. I’ll see you in our next episode.

 

Allison Williams: [00:29:23] Thank you for tuning in to the Crushing Chaos with Law Firm Mentor podcast. To learn more about today’s show and take advantage of the resources mentioned. Check out our show notes. And if you enjoy today’s episode, take a moment to follow the podcast wherever you get your podcast and leave us a rating and review. This helps us to reach even more law firm owners from around the country who want to crush chaos in business and make more money. I’m Allison Williams, your Law Firm Mentor everyone. Have a great day.