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ALP 35: How to protect yourself from an unexpected client breakup

Chip and Gini talk about how to prepare for a client suddenly ending their relationship with your agency.

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Clients may end their relationship with your agency for a variety of reasons, many of which you have no control over. On this episode of the Agency Leadership Podcast, Chip Griffin and Gini Dietrich suggest the best ways to protect yourself, your work, and your finances when the unexpected happens.

Quotes

  • Chip, on thinking ahead about what happens if the relationship ends abruptly: “If this relationship were to terminate suddenly, what would I lose access to? What do I need continued access to what should I be keeping backup copies of?”
  • Gini, on protecting yourself as an agency owner: “But really looking at the relationship, at the very beginning of the relationship as if it may end in divorce, for lack of a better term, because things happen, and relationships don’t always work out. And so you have to protect yourself from a contractual perspective, so that when a client does get a bee in his or her bonnet, you are protected.”
  • Chip on the importance of contracts: “Ultimately, that’s the only reason you have the contract. Nobody ever pulls out the contract and says, ‘Everything’s going great today, I just think I’m going to look at our contract to see what it says.'”
  • Gini’s advice: “The moral of the story is, protect yourself, protect yourself, protect yourself.”

Transcript

The following is a lightly edited computer-generated transcript. Please listen to the audio to verify accuracy.

CHIP: Hello, and welcome to another episode of the Agency Leadership Podcast. I’m Chip Griffin.

GINI: And I’m Gini Dietrich.

CHIP: And we’re here today to talk about ending this show. Unexpectedly. We’re just we’re, it’s all over. No more. This is the last episode. Did I not get – did I not get the topic right Gini? Did I screw this one up?

GINI: You got the topic right, but not ending this show unexpectedly.

CHIP: Oh, okay. So but what are we ending unexpectedly, then?

GINI: Client relationships. Or when clients end relationships with us unexpectedly.

CHIP: I see. Okay. All right. Well, thank you for clearing up that confusion. Yeah. Yeah. Sometimes I don’t pay attention to our pre show meetings.

GINI: That’s not true. You’re just finding clever segues.

CHIP: Well, hopefully the listeners find them just as clever as I do. I know that my wife listens to these, working on the transcript, she does not find them nearly as entertaining as I do. But…

GINI: I’m sure she groans and rolls her eyes.

CHIP: Yes, indeed. But in any case, it is an important topic for any agency owner to contemplate. And it does happen from time to time, we’ve all had it happen to us, at one point or another where a client says, You know what, we’re not going to keep going forward. And it may be that they’re unhappy with your work, it may be that they run out of budget, it may be that their circumstances change, or all sorts of reasons that it can happen. But it does happen. And then the question is, as the agency owner, what do you do to deal with it?

GINI: Yeah, it’s – it was a conversation that happened in of course, the Spin Sucks Community. And I think there are a few things at play here. Certainly, client relationships end, and hopefully all of us have termination clauses in our contracts. We have 90 days, I know that the person who posed the question has only 15 days, I’d probably recommend increasing that a little bit. But the point is, is that you have to protect yourself. And you know, Chip, we’ve talked about this probably ad nauseum. But really looking at the relationship, at the very beginning of the relationship as if it may end in divorce, for lack of a better term, because things happen, and relationships don’t always work out. And so you have to protect yourself from a contractual perspective, so that when a client does get a bee in his or her bonnet, you are protected.

CHIP: Right. And ultimately, that’s the only reason you have the contract. Nobody ever pulls out the contract and says, “Everything’s going great today, I just think I’m going to look at our contract to see what it says.”

GINI: No, nobody does that. They only look at it at the beginning. And when they’re trying to decide what to do at the end.

CHIP: Exactly. So if you look at it from that perspective, it helps you prepare. But that said, People always get thrown curveballs. And in this particular instance, the curveball was access to a collaborative workspace. So it was not merely a question of, okay, the agreement’s over, how do I get what I’m owed? It was also there were some important documents in a shared collaborative workspace. And so how does that get taken care of when the relationship terminates? So there are multiple issues that you have to deal with anytime a relationship ends, but particularly an agency client relationship.

GINI: Well, and I think you know, you and I pre recording talked about this. But as an employer, anytime anybody’s terminated, you immediately knock off access like you don’t let them stay on email, you don’t let them stay in Google suite, you don’t let them stay, don’t let them stay on social media, you terminate their access. So I think there has to be A, an understanding that we collaborate with our clients, and we have access to those workspaces as well. But if they are terminating us for any reason, they have the right to terminate access to those things. And so you have to think through, you know, how are you keeping copies of important documents on your own drive? How are you keeping copies of the work that you’re doing so that you can do your timesheets, all that kind of stuff, in something that you own versus relying on having access to the client’s workspace because they have absolutely have the right to terminate it.

CHIP: Well, not only do they have the right to terminate it, but it’s the smart thing to do, both for them, and actually, for you, as the agency or the consultant, or employee or whatever. Because if you don’t have access, then nobody can blame you for something that may happen. And I frankly, I’ve seen this happen, in previous experiences where I’ve worked in a place and an employee is terminated, it turns out, they still had a key, something goes missing, they get blamed for it, they probably had nothing to do with it. Right. But because it hadn’t been properly collected at the end, it opens them up to it. And people have a tendency when a relationship goes wrong to start attributing anything bad, of course, to that departed contractor, employee, vendor, whatever, yes. So so you’re actually protecting yourself by not having access. But what that means is you need to be thinking ahead, okay, if this relationship were to terminate, suddenly, what would I lose access to? What do I need continued access to what should I be keeping backup copies of, etc. And so in this particular case, it’s a difficult lesson for the consultant. Useful for others to learn from, because it’s, the contract shouldn’t be looked at simply from a financial standpoint, it’s the whole big picture of the relationship and what happens to everything afterwards.

GINI: I thought what John Goldberg commented on this, and I’m going to pull it up. Here, he said, in the future, I’d go so far as to say in your contracts, that all documents and materials will be available to the client in a collaborative workspace provided by the agency at no cost, which is what we do. The contract should also say clearly, that all work produced by the agency remains its exclusive property until all amounts due are paid, at which time the rights pass to the client as work for hire. It’s amazing how quickly a final invoice gets paid. When the client realizes they can’t legally use any photos, written or video material until they think they own until their account is clear. So I think that’s a really good way of thinking about it, too. We would never rely on a client’s collaborative workspace, we always invite them into ours, so that we own that, and then we terminate their access versus the other way around.

CHIP: Right. And obviously, that’s the ideal scenario. Sometimes it’s not possible for whatever reason, sometimes you need access to something of the client’s in order to do your job effectively as their agent.

GINI: Yeah, sure. Facebook manager, for sure.

CHIP: So there’s, there’s all sorts of things where that where that may not be feasible. But so you know, you just need to think about it. And I think the point that, you know, your contract makes clear that any work that you’re producing for them doesn’t, the license doesn’t transfer until you’re paid. That’s a very common thing particularly for those in the you know, who are doing more creative work, building websites, graphic design, that’s a typical clause in those contracts. But you know, it may not be in all agency contracts, so if you are creating work product, that you’re shifting over, that is something that’s worth looking at, and obviously, if it’s something like you’re doing Media Relations, Well, okay, that horse has left the barn, right, you can’t unwind the phone calls you’ve had, emails you sent, and all that and say, I’m sorry, you don’t have a license to that work idea. But nevertheless, thinking those things through and making sure that your agreement allows you to have some degree of leverage at the end of it is important. Just as important is having clear expectations about what the financial arrangements are when it terminates. And so, you know, one of those is the, the termination clause. I mean, you know, is it 15, 30, 60, 90 days? But it’s also, you know, what are you being paid for. And so sometimes an agency may have an expectation that, you know, this is, this is what the scope of the project is, and so I’m going to get paid for it. But if you’re billing hourly, and the contract only says you get paid for the hours you work, well, if you it doesn’t matter, I mean, you could have a 90 day termination clause, but if you’re being paid for your hours, right, you’re only going to get paid for you – so you just have 90 days where they assign you no work. So, you know, those, those termination clauses for days tend to work best if you’re getting a retainer or some sort of recurring revenue. But if it’s if it’s more work product related, or hours related, that’s not going to help you, so you need to think that through and plan ahead and say, okay, you know, maybe I have a minimum. So, you know, in order for this relationship to continue it, I get paid hourly, but it’s a minimum of $1,000 a month or something like that. I mean, there’s, there are ways to address that, so that you can deal with those sudden terminations that do happen from time to time.

GINI: Yeah, and I think, especially when it’s a retainer relationship, protecting your cash flow is one of the most important things you can do. And that’s why we have 90 days, because in 90 days, I can replace a client, I can’t in 15. And there’s also, you know, we like to be very transparent. And we like to transition well and make sure that that you know, nothing’s lost in the shuffle and that whoever is taking over whoever they’ve hired, if they’ve hired another agency that that transition happens flawlessly too and you can’t do that in 15 days. So that’s why we really push for those 90 days, typically, clients will get us down to – will negotiate us down to 60. But we won’t do less than that.

CHIP: What and i think that you know, the other thing that just points out is the importance of understanding who’s responsible for what, who owns what. If you’re dealing with a collaborative workspace, there are simple questions like who’s paying for it. Now, if it’s, if it’s one, you’ve created a project, to be very clear about that, particularly if you let’s say, I’m working on on something where the service is6 only available in annual contract durations. If I’m doing that, you need to be very clear about who has to be paying for that if the contract terminates. So be careful that you’re not getting into those situations where, you know, you buy an annual license to something. And it turns out, the client can cancel on 30 days notice with you, if you haven’t specified that or you haven’t had the client pay for that service directly. You could be on the hook. Similarly, the work that you’re creating for them, what does your contract say about that? Is it work for hire, do you maintain some residual license to your own intellectual property, that’s, that’s pretty common. For example, if you’re doing web design, web development work, where the client gets a license in perpetuity for the work that you’re doing, but you can reuse that code for other clients. But you have to be careful, because if you haven’t specified that, then you can’t reuse that code potentially. So, you know, all of these are things that, again, when you’re putting together your agreements, you want to think about from a worst case scenario, so that you make sure that when and if it does terminate, suddenly, you’re prepared to deal with it.

GINI: So here’s what I think is the bigger issue at play with this specific example. And I’m, I’m reading between the lines, because it’s certainly something that I have done in the past, definitely been guilty of it. This person worked with a client for about two months to build something specific for them, and ended up there were lots of you know, there was lots of scope creep and lots of things, challenges, issues that happened throughout the process that they didn’t expect, which happens. And she worked pretty much full time on it for the two months to help them succeed. And to help them have the success that she knew that they could, even though a lot of the work was outside of her scope. And some of the challenges and issues had nothing to do with her or her agency. But she felt responsible to helping them have success. And as soon as this project was complete, the client terminated and took away access to everything. And I think the bigger issue at play here is that she put everything she had into this client. And she thought that they had a really good working relationship, and she helped them have success, only to have them terminate without conversation. And I think that’s the bigger issue at play here. Because we all tend to do that. We over service clients, we go above and beyond, we try to help have them have success. And there’s something happening on their end that we may not be aware of. And they’re not considering that we’ve done this for them. Or maybe they don’t see it the same way that we do. And I think that’s what’s at play here, especially in this situation is she completely went above and beyond. And she used the Spin Sucks Community to help her and we did, we all rallied to help her. And he just didn’t even give it another thought, just terminated it and was done.

CHIP: Right. And it’s, you know, it’s a good reminder that in any kind of relationship, whether it’s business or personal, each party may view things differently. They may be coming at it from an entirely different perspective. I mean, in some respects, this is this is sort of like, you know, the the guy who dumps his girlfriend after he goes to his brother’s wedding or something like that. I didn’t want to do it beforehand, right? You know? And yeah, and there’s also so maybe this relationship actually went sour months ago, and the client just didn’t say anything, because they wanted to get through, you know, that next critical stage? Who knows? Right? There are all sorts of things that we don’t know about this, and that probably even the agency involved doesn’t know. And so the fact of the matter is, these can happen at any time for any reason. Yep. And so, you know, while it’s great to feel like you’ve got a strong relationship with the client and go the extra mile, you always have to be prepared for, you know, maybe it doesn’t pan out, and it sucks, it really does. It’s not It’s not good in the short term financially, it’s not good, psychologically, just to deal with these situations, but they will happen. I mean, you and I have been in business long enough. This has happened to me more than once.

GINI: Yes, me too.

CHIP: And, and you learn from them, and you move on. And and in some cases, you never find out what actually happened, right? Somebody times you will, you know, months later, you’ll you’ll have a conversation and realize, oh, there was something going on behind the scenes with that client that I had no idea about. And now Okay, now, it all begins to make sense to me. And it’s it’s not me. In some cases, maybe it is me, right. Now, in some cases, maybe I was not delivering what the client was actually expecting. And, and that happens, too. And so you know, the bottom line is, for whatever reason, these things happen, how to extract yourself from them is important. And so trying to figure out how to prepare in advance is important. But now, how do we deal with it when it actually happens? How do we, if we’re sitting here, as this individual is saying, Okay, this relationship is over. But somehow I’ve got to get compensated for the work that I’ve done. You know, so so you have to think through what levers do you have in order to collect?

GINI: Yeah, it’s a tough one. I mean, because I think you’re right, there’s the emotional piece of it wrapped up into it, too. So it makes it really tough. And, you know, and then of course, the Spin Sucks Community is all rallied around her because we did all help her. We all helped her, help him help this client have success. And so then, of course, we’re all like, that’s baloney!

CHIP: Right. And so I think that the community has that same emotional reaction to it.

GINI: Of course, yeah.

CHIP: But obviously, as you step back and sort of start walking through some of the details, you know, that everything is more nuanced than it seems at first. And so you have to just figure out how to make the best out of what you’ve got left in front of you.

GINI: Yeah, the moral of the story is, protect yourself, protect yourself, protect yourself.

CHIP: Right. And, and protect yourself with the contract, protect yourself with keeping copies of whatever information that you need to have, so that you’ve got control of it, make backup copies, you know, whatever it is that you need, always assume that you may lose access to, to important information at a moment’s notice. And so if you don’t have your own copy, there’s probably not a lot you can do.

GINI: Yeah. And that’s, that’s rough. So yes, protect yourself. If it’s – if you’re coming up on scope creep, have a conversation about it, don’t just do the work and expect that you’re going to be compensated on the back end. And make sure you keep copies of stuff on your own, whatever you own.

CHIP: Right, or at the very least, be prepared not to be compensated. So in some cases, when you’re going a million miles an hour, you know, I, I will sometimes say yes, I’ll do that for you. And we’ll sort it out later. But I always have in the back of my mind that…

GINI: You’re not gonna – Yeah, absolutely.

CHIP: You know, this may be a freebie. Yep. And, and, and sometimes that’s okay. Because sometimes there’s goodwill or learning or whatever, but, but be prepared for that. So that if and when it does happen, you know, it doesn’t become a crisis. It’s like, okay, that sucks, but I knew it was a possibility.

GINI: Yeah, yeah. Yeah, it’s a rough one. It’s definitely there’s definitely some emotion charged up into it. But and like we both said, We’ve both been there, so we feel bad for her.

CHIP: Well, you know, the good news though, Gini, is that this show is not what’s ending. So listeners will have an opportunity to hear my charming wit again next week if all goes well.

GINI: If all goes well. Yes.

CHIP: So on that note, I’m Chip Griffin,

GINI: And I’m Gini Dietrich,

CHIP: And it depends.

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