You’re signing new business agreements every month. But, when was the last time you stopped to look at how these agreements are actually impacting your business?
These documents have the power to boost your profitability if done right – or send your business into a reactive spiral of death if handled incorrectly. So, what should an MSP business agreement accomplish?
The purpose of an agreement is to define the business relationship between two parties. It details the fee arrangement, including what’s included and what isn’t. It also outlines what happens when things go wrong.
Asking an agreement to do more than it’s meant to usually has adverse effects. That’s why it’s important to avoid the common pitfalls associated with drafting MSP agreements.
Are You Making These MSP Agreement Mistakes?
Balancing the value clients want for their investment with the prices you offer makes creating business agreements a complicated yet important task – but that’s where many businesses stumble.
If you incorrectly price and package your services, there are going to be negative ramifications for your employees and the client you’ve just signed. You may over-promise on what your employees can actually deliver, or you could end up in a situation where the client isn’t getting the level of service they were expecting.
Before you both sign on the dotted line, review your business agreement to ensure you’re not making the following mistakes.
- It’s too long and complicated. Transparency is key to avoiding future lawsuits that may arise from broken MSP business agreements. The longer and more complicated your agreement is, the less your client is going to trust you. Don’t create a 10-page agreement that deals with a variety of items that will never happen or that you can’t control. When a vendor hands you an agreement that is too long and complicated, you probably wonder if the relationship is more complex than you understand or if you have more risk than you thought. The same holds true when clients receive your MSP business agreements.
- You’re missing important pieces. Sometimes an agreement covers a lot but misses a few critical items for protecting your MSP. The most important role of a business agreement is to safeguard your MSP from liability in the event that things go wrong, so including a liability clause is essential. Protecting your employees is also important, so it’s a good idea to formulate a non-compete clause. Start with the most import items to protect you and your business.
- It doesn’t reduce risk. Why do you have MSP agreements in the first place? Because you’re a smart businessperson who wants to protect your company from risk. Overly complex agreements don’t eliminate risk; they just transfer the risk from you to the prospect. This is called an entrance barrier because it often keeps the prospect from buying. The only thing that truly reduces risk for MSPs is having enough endpoints under management at the right price.
Guidelines For Creating The Right Agreement
Create a simple one/two-page document that outlines the core of your business relationship with a new client – how the client will be charged, the details of the service arrangement and overall expectations.
You’ve already discussed what the relationship will look like with your client during the sales process, and they’ve already agreed to it. Now, define the edges of the agreement by what’s included and excluded in the monthly fee.
Next, develop a master service agreement that contains the key legal protections, like liability, jurisdictions, non-competes, disclosures and other items that your lawyer thinks are critical based on your business and local laws.
Ensure that your clients are paying the right price for your services and that you’re protecting your business in the process. When you develop the right business agreement, you build a strong foundation for future relationships.
Want to learn more about packaging and pricing your business agreement the right way? Download our packaging and pricing tipsheet.