Red Flags to Look Out for when Contracting New Web Design and Development Clients

| October 25th, 2011 | , , , ,

Red Flags to Look Out for when Contracting New Web Design and Development ClientsThe team here at Pelago has been designing and developing web sites and web-based applications together for eleven years now — and individually since long before that. In this time, we’ve worked with a broad spectrum of clients. While we’ve been fortunate to work with a long list of stellar clients, we have had our share of soured client relationships. Regardless of how it went down, the red flags were there in the beginning.

Looking back, the red flags seem so obvious, but the promise of new work and lack of experience can blind us to warning signs. So before you take on your next new client, look out for these red flags. I’ve also included some snippets from our contract, which can be downloaded and used for free, to illustrate how you can address difficult clients with a stronger contract.

All the rights

It’s a common misunderstanding that when a client pays for a web site to be designed and developed they are also paying for the full exclusive rights to your work. This is simply not the case. When a client hires a web designer or developer they are paying for the digital rights to your output, not the full exclusive rights to reuse or resell your work. If a client asks for exclusive rights to your work, it means they are asking you to hand over your designs and your code, never to be used by you again. While there is nothing wrong with doing this, it usually requires the client pay you a much larger fee. Few clients, however, are willing to pay more and will expect you to amend the contract without any additional compensation. Web designers and developers should not hand over rights so quickly, and for good reason. Web designers and developers tend to reuse design elements and code snippets — intellectual property developed over time, the basic building blocks of our portfolios and code libraries. Don’t let a greedy client take that from you.

Your contract with the client should have a clause that reads something like this:

COMPANY shall retain all right, title and interest, including all copyright, patent rights and trade secret rights in the Background Technology…

And if you would like to give the client more rights, which is helpful when dealing with a web site or web application that will need to be maintained, a contractual clause like this can suffice:

COMPANY hereby grants to CLIENT, to the extent it is legally able to do so, a nonexclusive, perpetual, worldwide license to use the Background Technology in the Web Application Project developed for and delivered to CLIENT under this Agreement.

Bug free for life

Bugs are just one of the realities of web site and application development that must be addressed, sooner rather than later. No amount of testing is going to eradicate every bug, whether it be a simple web site or complex web-based application. Once you and the client understand the reality that the final product will have bugs, you need to agree on a warranty arrangement. At Pelago, all of our contracts are hourly-based time and materials contracts, so we simply do our post-launch bug fixing under the same hourly contract we used to manage and develop the original project. If you do flat bids, it can be a good practice to fix bugs during a limited time after a web site is launched. But it’s also important to agree on a cut-off date for said warranty work.

When working with a client on a flat-bid project, there needs to be an understanding that you, the web designer or web developer, will be further compensated for working out kinks and rifts. What the client considers ‘bugs’ are often times a misinterpretation of their business logic. Don’t let a client bog you down with change requests masquerading as bug fixes. Let them know you will warranty your work for a set amount of time after which the business arrangement will need to be re-negotiated.

Providing a warranty clause is important for two reasons. One, it stops clients from trying to get free work done under the guise that it “should have been done right the first time,” and two, it stresses the necessity of performing QA during web site development. Here is an example of a “no warranty” clause from one of our contracts:

The developer content furnished under this agreement is provided on an “as is” basis, without any warranties or representations expressed, implied, or statutory; including, without limitation, warranties of quality, performance,
noninfringement, merchantability, or fitness for a particular purpose. COMPANY does not warrant that the operation of the site will be continual, uninterrupted, or error free

To include a warranty period, the contract can include instructions to this effect:

COMPANY warrants for that 30 days following acceptance of the web site by CLIENT, the web site will be free from material reproducible programming errors and defects in workmanship and materials, and will substantially conform to the Specifications in the Development Plan when maintained and operated in accordance with COMPANY’S instructions.

I’ll gladly pay you Tuesday for a Web site today

Your time is your most valuable asset. You only have so much of it to give, so you want to give it where it counts — paying client work. If a client tells you they will pay you later, for whatever reason, kindly explain to them you will begin work once you receive your first payment. If the client then goes on to explain that their deadline is concrete and that they must begin right this instant, but pay you later, walk away. This is the sign of a Narcissistic client that will continue to put their priorities before your own. While there is a pretty good chance you will receive your first payment from this type of client, there is a significantly higher chance you won’t see the last.

Be sure to provide the client with a payment schedule that clearly dictates milestones and the payments required at each milestone. The first and the last payment will give you the most leverage because there are tangible deliverables associated with each one. The client has the most at stake during the beginning and the end, which gives you the upper hand when dealing with a difficult or unethical client.

In the terms and conditions of your contract, include a clause that reads:

CLIENT agrees to pay total fees as described in the PAYMENT SCHEDULE.

And if you really want to get your point across, include a clause for late payment of fees. It can read something like this:

Payment is due and payable upon presentation of an invoice. Delinquent bills will be assessed a $100 charge if payment is not received within 30 days of the due date. If an amount remains delinquent 30 days after its due date, an additional 1.5% penalty will be added for each month of delinquency. The grant of any license or right of copyright is conditioned on receipt of full payment

Discussing payment schedules with a client can be the most uncomfortable exchange of the contractual process, however, it’s not nearly as uncomfortable as being stuck in a bad client relationship — one where you’ve fulfilled your contractual obligations and the client isn’t paying. You will have wasted time in doing the work and will have to waste even more time persuading the client to pay.

A large stake of uncertainty in exchange for your brilliance

Often times a potential client will approach you with the offer of designing and developing their web site in exchange for ownership in their business venture. There are two problems with this. The first is that these clients typically have not developed their business plan beyond the basic concept, an oversimplified idea, that is somehow going to make them millions. What this means is that they are expecting you to take their idea and run with it, to extrapolate their idea into a fully functional online business, all for a small percentage of their business. This is a lazy client and their business will undoubtedly fail.

The web is not field of dreams. Once a web site or web-based application is developed, it takes a lot of work to bring in customers and create revenue. If the client is unwilling to take their own ideas past the conceptual phase, it’s highly unlikely they are going to take it any further with or without your help. Second, if they were truly committed to a business that depends so heavily being online in a web-based application, they would also be committed to finding a way to pay for it. Do yourself a favor and stay away from entrepreneurs who promise a payout down the road. In our eleven years, we have turned down every single offer for ownership in exchange for web design and development work. And not a single one of those companies is still around.

Kept in the dark

Web design and development client contractsThere is a plague that infects new entrepreneurs with the misconception that a great idea is all it takes to be successful in business. Ideas aren’t worth shit, unless they are executed. And even then, only if they are executed well. If a client asks you to sign an NDA before they will even begin the estimating process, politely decline. (Chances are the idea is just another social network for pet lovers or gardeners or some other special interest group — “like Facebook, but different.”) They are investing too much into their ‘idea’ and not enough into how they are going to make it a profitable reality.

No idea is so brilliant it needs to be this closely safeguarded. In fact, every idea I’ve ever heard that was precluded by an NDA (which we refused to sign) was something I’d either heard before or had actually worked on before with another client. It doesn’t matter if the idea is patent-pending or revolutionary, because it’s not. And even if it was, where would you find the time to steal it? If you work on a large number of client projects, you’ve already got your hands full running your own business. And there is a good chance you have already developed similar ideas for other clients — putting you in the middle of a potential legal matter if you sign the NDA. You have your own business to run. Focus on that. In the long run it’s going to be far more consistent and profitable than someone else’s ‘idea.’

But, what if…

These red flags are based entirely on our experiences and the stories we’ve listened to from other web designers and developers. There are going to be exceptions, and each client should be given the benefit of the doubt until you have good reason to sever the relationship. Some clients will work through these issues to maintain a good-standing relationship, while other clients will balk at your most modest attempt to address these red flags. In the end, you will need to make the call on whether or not to begin or continue working with a client who displays these behaviors.

Photo credit: Cyclelicious & Howie221

5 Responses to “Red Flags to Look Out for when Contracting New Web Design and Development Clients”

  1. Quora says:

    Red Flags to Look Out for when Contracting New Web Design and Development Clients…

    [image: http://d2o7bfz2il9cb7.cloudfront.net/main-qimg-3dd86d16d8c3d664d25fc1a605848dfd In the last eleven years that I have been a principal at a web design and development agency, I’ve had my share of bad client experiences. In this blog post, I wr…

  2. […] Red Flags to Look Out for when Contracting New Web Design and Development Clients Posted by jjriv under Resources From http://www.myintervals.com 14 hours ago Before you take on your next new client, look out for these red flags. I’ve also included some snippets from our contract, which can be downloaded and used for free, to illustrate how you can address clients with a stronger contract. […]

  3. Quora says:

    How do you spot a bad client?…

    I recently wrote a blog post about this very same subject. In summary, the red flag warnings I’ve seen are: * Expecting exclusive rights to your work (or amending the contract to state this) * Expecting all post-contractual work to be done for free be…

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John is a co-founder, web designer and developer at Pelago. His blog posts are inspired by everyday encounters with designers, developers, creatives and small businesses in general. John is an avid reader and road cyclist.
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