One of the most annoying and expensive aspects of running an agency is when you do a lot of groundwork on a project and then the client pulls the plug before you’ve been paid. The phrase is actually an American idiom that originated in the 19th century. Back in 19th century America, toilets had plugs so to flush a toilet, you needed to pull the plug. To avoid this issue, agencies need to be clear about their scope of work upfront. But, what does scope of work mean?
The toilet idiom shows sort of what it feels like when you get that call from the client, saying that something has changed and the project (or the project’s budget) is going away. You can almost see your profits going right down the toilet. But it doesn’t have to be that way. Not if your contract/scope of work protects you.
For most agencies, we invest a significant amount of time/energy on the front end of a project, knowing we’ll recoup our time/costs by the time the work is complete. That works great when there are no complications. But there’s almost always a complication!
There are some things you can do to protect your agency but the time to do them is before you start the work.
How to Determine Your Scope of Work
First — be sure you are getting 50% of the project fee upfront. Build payment milestones by date, not by deliverable (otherwise, they can stall on approvals, etc. to delay payment). In addition, here’s some language you should consider incorporating into your contracts/scope of work documents:
Most of the work we do on your behalf is front-loaded, which simply means we do the lion’s share of the work on the front end of the project and recoup that investment throughout the billing milestones. We know it would put a strain on your budget to require you to pay us the bulk of our fee/outside expenses upfront so we only require 50% and then build in payment milestones to help you budget and manage cash flow.
That being said, if you cancel this work before it is completed/we’ve been fully paid, you are still responsible for the time/work we’ve done to date, even if that does not line up with the payments made up to that point. We will issue a final invoice to cover everything done up to the date that you canceled the project and that invoice will be due within 15 days.
Setting the Right Expectations
You can’t anticipate which client or which project is going to go according to plan. You also can’t always guess which projects are at risk of having your client pull the plug before you get it off the ground. But let’s be honest — it’s not all that often that our work runs smoothly from start to finish. Sooner or later, there’s a surprise waiting for us.
Why not anticipate what those surprises might be and build in safety nets for yourself/your agency upfront? That way, when a client throws you a curveball, you’re ready for the pitch.