Contracts & MSAs: What You Need to Know as a Solopreneur Consultant

Read time: 3 minutes

This email is sent to you and 3,952 others

Hi there!

I’m a big fan of yours.

Here’s why: you want the details.

“Wantrepreneurs” focus on how much money they can make. They don’t even think about details.

You are a solopreneur, either now or in the future. You want the details.

And it’s why you voted last week, overwhelmingly, for today’s newsletter to be about contracts and MSA’s.

We’re going to cover the following:

1. What Contracts and MSAs are

2. How to draft them (or not!)

3. Contract Elements I always negotiate

Quick disclaimer: I am not an attorney, and this is solely based on my experience.

We’ve got three minutes to cover this: here we go!

1. What Contracts & MSA’s are

A contract outlines the parameters of a specific consulting engagement with a client. Things like:

• Deliverables

• Timeline

• Cost

These items will vary with each individual project. You and the client both opt into it these specific terms each time.

However, there are lots of terms that will not vary with each contract.

For example:

• Confidentiality

• Non-disclosure

• Payment methodology (e.g: who to invoice)

Since these terms don’t change, they could be kept in a separate document called an MSA (Master Service Agreement).

You would then have one MSA that covers everything that will not vary, and then a unique contract for each project.

This can get confusing because the MSA is not required. If there is no MSA, those terms will be in the contract.

It is very important to know this because you will encounter contracts, MSAs, and a mixture of the two during your solopreneur consulting career. 

In my experience, you’ll see the following:

• If you work for a $1B+ revenue business or mega PE fund directly: expect both an MSA and a contract

• If you work for a $1B+ revenue business or mega PE fund through a platform like Catalant: expect a contract

• If you work for a venture-backed startup: expect both an MSA and a contract

• If you work for all else: expect a contract with MSA terms

2. How to draft them (or not!)

My guess is you’re not a lawyer! So, many solopreneurs think they must hire one to draft their contracts.

Good news: you won’t have to.

There are three reasons why.

Reason #1: Most companies will insist on you using their contract

This is especially true for large companies. One of my clients this year had an in-house legal team of 500+ lawyers.

Those lawyers are not being paid to read someone else’s contract. They write their own.

In my experience, the contracts written by a company’s in-house team are typically reasonable to all parties.

The company uses it because a dozen internal lawyers have already signed off.

Reason #2: If your lawyer marks up the company’s contract, you’ll spend the entire project budget on legal fees, and you won’t get the project

If you hire a lawyer to review the company’s contract, your lawyer needs to “add value” to you. They’ll do so by marking up the contract.

Their legal team will despise this. You’ll quickly get to a legal fight. You can spend $10K in legal fees.

You’ll also not get the project and never hear from the client again.

Not worth the expense and losing the client because your lawyer wanted to “add value” to you.

Reason #3: Templates exist

Templates exist, and they work!

Many new freelancers like Bonsai’s very basic template.

More experienced consultants like Pandadoc since they have more complex & specific contract templates available.

(I have no affiliation with either of these companies.)

3. Contract elements to negotiate

There are some items you can negotiate. You can identify them because they typically have a blank space to fill in within a contract.

The four I care about are:

1. Price

2. Project Duration

3. Payment terms

4. Sub-contracting

Let’s talk about each.

Price

Price obviously matters, and it should be the first item you discuss.

It’s not worth negotiating anything else if the client cannot pay your rate.

Project Duration

If you can, push for a slightly-longer project duration.

This gives you a bit of a time buffer in case anything goes wrong. It also spreads out the project hours over more days, which makes your days more sustainable.

More sustainable days could also enable you to take on multiple projects simultaneously.

Payment Terms

The goal is to send an invoice every two weeks, with payment due on receipt.

In practice, that’s hard to do. Almost every big company will insist on Net 60 payment terms. Catalant is also Net 60.

In that case, a good back “backup” is to push for an upfront invoice and the remainder due at project completion.

Sub-contracting

Most established solo consultants have a network of freelancers who help perform research, design slides, build models, etc.

Most will not take a project where they cannot use their team.

Most companies are receptive to this, however. After all, they don’t want to pay a consultant a few hundred bucks an hour to re-arrange boxes on a PowerPoint slide.

(The exception here is highly confidential work; you can’t do this for any code-name diligence projects or anything in aerospace & defense)

How can I help?

If you reply to this email, it will come directly to me & I’ll personally respond early next week.

What am I up to these days?

This newsletter isn’t about me; it’s about you. However, I keep getting asked, so I’ve added this little blurb.

I’ve got one traditional consulting client and a couple of “unique” clients for whom I become a consultant/business partner in exchange for equity. I like this model since it means I’ve got skin in the game.

I also am spending a significant time building Scholastic Capital (see below!) Our biggest priorities are data collection, vendor selection, and finalizing our raise documents.

Scholastic Capital

A rockstar and I are teaming up to start a real estate fund that invests in single-family homes in elite school districts. 

If you are interested in investing or want to watch a fund creation process, please follow along here!