As many of us know, structuring contracts effectively can be the difference between a thriving business and one struggling with inconsistent revenue.
For MSPs, who often face the challenge of balancing client satisfaction with profitability, getting your contracts right is crucial. Unfortunately, however, many find themselves puzzled about how to organize their contracts to secure more Monthly Recurring Revenue (MRR) - while ensuring both client appeal and business profitability.
The Winning MSP Contract Formula
To streamline the process and enhance your contract management, it's essential to understand the three main parts of a winning contract formula:
- Master Service Agreement (MSA)
The MSA is the foundational document that outlines the overarching terms and conditions governing the relationship between the MSP and the client. It covers general clauses such as liability, confidentiality, and dispute resolution. The MSA provides a solid base for the contract but usually lacks specific details about the services and pricing. Think of it as the "big picture" document which explains how your businesses will work together, regardless of the engagement type or scope of work.
Every Customer needs to sign one of these – even break fix customers as it protects the MSP!
- Scope of Works (SOW)
The Scope of Works (SOW) details the specific services provided, including deliverables, timelines, and performance metrics. It is where you'll find the nitty-gritty of what you're offering and how you’ll deliver it. Crucially, it also includes the pricing information. This document is key for aligning expectations between you and your client.
- Proposal
The Proposal is typically the initial document that outlines the proposed services, pricing, and terms in a more informal manner. It serves as a starting point for discussions and negotiations. Unlike the MSA and Service Schedule, the Proposal is sometimes non-binding (depending on how you write it), and is used to gauge interest and facilitate preliminary discussions.
Two Common Approaches to Structuring Your Contracts
When it comes to integrating these documents into your contract process, there are two prevalent approaches. These two differing structures are often reflective of your own sales style – casual at first & deal with detail later, or everything up front.
- Approach 1: Detailed Proposal & SOW Upfront, with Subsequent MSA
In this approach, your Proposal includes all the necessary details, including pricing and the Scope of Works (SOW). Once the Proposal is accepted, the client signs the MSA during the onboarding process. This method is straightforward and ensures that all terms are agreed upon before the MSA is finalized. However, as the proposal is binding here it requires careful attention to detail to avoid discrepancies later.
- Approach 2: Indicative Proposal first, with SOW and MSA later
***Best in class approach***
Here, the initial Proposal serves as a preliminary document that provides indicative information but is not legally binding. The SOW, which is more detailed and includes specific pricing, becomes the key document for commitment. The MSA is then signed to formalize the agreement. This approach can be more flexible and allows for adjustments based on ongoing negotiations.
Navigating Contract Confusion with ZenContract
Structuring contracts can undoubtedly be confusing, but ZenContract (the contract management platform I developed while running my own MSP) simplifies this process.
Our platform provides for you:
- Best Practice Templates: Included in all subscriptions to ensure your proposals & contract documents are top-notch.
- Seamless Integration: Works effortlessly with your existing systems (Autotask or ConnectWise, and Microsoft).
- End to End Workflow: including digital signatures, compliance and renewals.
- Professional Services:
- ZenLegal: An audit service to review your existing contracts.
- ZeroToZen: Coaching to help you achieve contract maturity.
- ZenDesign: Custom document design and copywriting services to create branded templates.
Streamline your contract management and secure more MRR effortlessly. Book a chat with me here to learn more about how ZenContract can transform your contract process and boost your profitability.
With ZenContract, you’ll turn contract complexity into an opportunity for growth and efficiency.
This October (2024), we're offering , you can get ZenUltimate—our most feature-packed plan—for the price of ZenMaster. This is a limited-time opportunity to streamline your operations with ZenContract at a significantly reduced cost, helping you get up and running faster and more affordably.