Welcome to the Simplifying Legal podcast, brought to you by Businessese. I’m your host, Danielle Liss.
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Hey there, I’m Danielle. Welcome to Episode 53 of Simplifying Legal for Small Business Owners. Today, I’m talking about how to save time, money, and stress with MSAs.
Disclaimer: As always, before we get into today’s topic, a quick disclaimer. This podcast is meant to provide you with legal information only. It’s not legal advice and doesn’t create any type of attorney-client relationship between us. Please don’t take any action without consulting your lawyer first.
In the last episode, I talked about managing proposals and contracts. I’m talking about contracts again today, but from a different perspective. This episode is all about MSAs, which are a tool that I love for service business owners. For this episode, I will focus on service business owners, but this is an agreement that is regularly used in many types of businesses.
What is an MSA?
First, let’s start with an important question: What is an MSA?
An MSA is a master service agreement and I’ll be referring to it as an MSA throughout the episode. It’s typically used by service business owners who will have ongoing work with clients because it gives you the ability to easily incorporate future projects into the same agreement. In other words, an MSA can cover current and future work with your clients.
A service business owner’s MSA is typically comprised of a couple of key pieces. First is the MSA itself. In the MSA, you define the key terms of working with your client. This might include things like general intellectual property rights, confidentiality, controlling law, and more. You may include payment terms, general termination provisions, dispute resolution and so much more. A lot of the same things you would put into a general client agreement.
If you want a review of some of the things I recommend for client agreements, check out Episode 18: Client Agreements for Service Business Owners.
Then, once you have the terms of the MSA negotiated and finalized, you can add statements of work, which are often referred to as SOWs. The terms of the MSA will reference the statements of work and incorporate them as part of the agreement between the parties.
The statement of work then contains the details of a particular project. It’s where you list all of the specific details, like the deliverables, pricing, timelines, contact information, and more.
Since I love hypotheticals, let’s do an example. Let’s say you are a creative service business owner like a copywriter. You have a client that you work with regularly, on different types of projects. For example, you may create a sales page for each new product that they launch. You may also do things like revising copy on existing website pages. And there may also be other special projects that come up occasionally like funnel creation.
If you want to use the same client agreement for that, it can work if you do everything under an hourly rate and it is ongoing as you get new tasks. But, if you do things on a project basis, or even a mix of an hourly and flat fee, an MSA may be a great option.
First, you would negotiate the general terms of your relationship in the MSA. Then, you would use a separate statement of work for each project. In each statement of work, you could detail the differing deliverables, pricing, and timelines. Once the MSA is signed, you would then only need to get a signature on the new statement of work, which incorporates the terms of the MSA. Because all of the other terms have been agreed to, this way can be really easy for both you and your client.
How Does an MSA Differ from a Client Agreement?
Now, you may be thinking, well, my client agreement already includes all of my key legal terms and a specific scope of work to outline the deliverables, so how is this different.
A typical client agreement for a service business owner covers one project. Even if you attach an exhibit with the statement of work, that’s the project it covers, unless you amend the agreement. It isn’t always the easiest process when you need to add or change things.
On the other hand, an MSA still covers those key legal terms, but it is written with the express intent that it will also cover future work, which would be handled through separate signed statements of work, so it is already customized in a way that helps you avoid doing amendments to the entire agreement.
Why You Should Consider an MSA
If you still aren’t convinced and thinking, eh, my client agreement is easy enough, so why should I consider an MSA instead?
Very simply, you negotiate the main terms once, then you are just adding new project terms in a statement of work. This can be especially important if you work in a B2B space with larger companies. Contract negotiations can take a while, especially if the legal department gets involved in the contract review. Or, for my clients who work with academic institutions, an MSA is almost always preferred because getting the initial MSA approved can take a while and we don’t want to continually go through the process.
If you anticipate having more than one project with the company, then an MSA can make the process so much easier. Unless the statement of work has substantial changes to the terms, it usually won’t require additional legal review.
Also, from a client perspective, it’s easier to read a statement of work, rather than a full contract. The amount of legal language isn’t as intense, and it will generally refer back to the MSA and state that it’s being adopted as a part of the agreement.
What If You Need to Override the Terms of an MSA?
Some businesses hesitate about implementing an MSA because they may need different terms for different types of projects. You can do this by inserting a clause into the MSA about which agreement controls in the event of a conflict between the two. If you want the ability to override, you can state that the terms of the Statement of Work will control.
For example, let’s say that you are a designer and the terms of your MSA state that you own your designs and you license certain rights to your client. If you have a specific project where your client will need full ownership of the work, you can override the terms of the MSA in your Statement of Work. There, you would include a section on ownership and make sure it is specific as to what the terms for that particular project are.
Hourly Work in an MSA
If you do ongoing hourly work, in addition to some other types of projects for your client, an MSA may still be a good choice for you. You can have a statement of work that is specific to the type of ongoing hourly work that you do and contains all of the payment terms related to that type of work.
Then you would have a new statement of work for the other projects, which may be at an hourly rate or flat fee.
And, of course, you can have multiple active statements of work at one time, if you have overlapping projects.
Can I Modify a Client Agreement to an MSA?
You may be wondering how to convert your client agreement to an MSA. Of course, this can definitely be done. However, this is typically where I do advise people to work with a lawyer to make sure you aren’t missing any of the most important terms. Your MSA will be ongoing, so you want to make sure that it is broad and can cover a lot of circumstances.
If you’re working with a lawyer on your MSA, I recommend asking them for the MSA and a couple of sample statements of work that you can then customize for your clients. This is especially handy if you want to know what it looks like to have the Statement of Work signed separately, but still be incorporated. Plus, you can ask for the statements of work to include samples of how to override terms, if you think may need it.
How to manage MSAs logistically
Once you’ve started using an MSA and it’s time to send out a statement of work, you may wonder how to manage it logistically. First, you’ll get the signature on the MSA. Your MSA may even include the first statement of work if you will have a project starting immediately.
Then, when you need to get a new Statement of Work signed, it will be similar to the contract signing piece. You will still need to get signatures, but the document itself is typically much shorter. Then, once you have the signatures on the statement of work, it’s then incorporated into the MSA as an exhibit.
As you would with any contract, make sure you track all of your signed MSAs and statements of work just like you would for any other client project.
How can an MSA save time, money, and stress?
It’s probably clear that I absolutely love MSAs for service businesses that do ongoing work for their clients, and I think they’re a fantastic tool to help you streamline the contract process. But, since the title of this episode is to save time, money, and stress with MSAs, I want to look at each of these areas before I dive into today’s action steps.
How an MSA Can Save You Time
First, how can an MSA save you time? With an MSA, you are negotiating the main legal terms once. After that, instead of negotiating a full contract every time, you save time by generating only a new statement of work, rather than the full contract. This typically takes less time to review and create.
Additionally, depending on the size of the company signing your MSA, it can also save considerable time for your client to review. They’ve already accepted the MSA’s terms, so the big difference is that they are reviewing the statement of work only. If it’s a larger company, this may also mean that it won’t have to go through legal department review. And anyone who has had to go through delays with legal review knows that this can sometimes cut weeks to months out of the review process.
How an MSA Can Save You Money
Next, how can an MSA save you money?
First, an MSA can help you prevent scope creep. Scope creep happens when you do more than the deliverables listed in an agreement without an increase in the compensation, so scope creep can have a big impact on your revenue. By carefully outlining your statements of work, if you are asked to do something outside of the stated scope, you can ensure that it is easy to say, yes, let me send you a new statement of work for what you’re requesting.
An MSA can also save you money on legal fees. Typically, an MSA is a bigger initial investment with your lawyer, but it is usually easy to manage internally once it’s set up, which can save you legal fees in the long run. If you’re using an attorney to draft your MSA, try to draft a couple of typical statements of work so that it covers everything you need.
And, of course, your time is incredibly valuable. Creating the statement of work is usually quicker than a full agreement, so it will also save you time during the contract process. Or, the time of team member who puts the agreements together for signature. And, of course, that helps your bottom line.
How an MSA Can Save You Stress
And, finally, how can an MSA save you stress?
MSAs are easier to manage when you have ongoing clients. It’s not always a brand new client agreement and it is simply memorializing the new statement of work. It’s shorter and easier to review.
I’ve heard from many clients that the process is so much easier when they’ve moved from a simple client agreement to an MSA.
And, since so many businesses hate dealing with contracts, anything that makes it easier is going to help save you stress.
This wraps up my discussion of how an MSA can save you time, money, and stress. Now let’s talk about today’s action steps.
- First, are you a service business owner with clients who request multiple projects? If yes, are you using an MSA rather than a client agreement for each project? If you aren’t using an MSA yet, is it something that makes sense for your business? If it does, check what you would need to do to get it set up. Can you convert your existing client agreement?
- If you’re already using an MSA in your business, make sure it covers all of the most important terms that you need for your business. If you need to make updates, I definitely recommend you do so.
- If you use MSAs and you have started offering something new, ensure that you have a statement of work for those new products or services. And, most importantly, when you are preparing those statements of work, make sure you consider whether or not you need to override any of the MSA terms.
- Last, as always, if you have questions about MSAs, including how to convert a client agreement to an MSA, please contact your lawyer for advice. I regularly work with clients on this through my law firm, Liss Legal, and I’d be happy to see if we would be a good fit to work together. If you’d like to learn more, visit LissLegal.com.
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