How to Negotiate a Contract as a Freelancer

The freelancing economy is changing the way we work. Freelance work in the United States has grown by 22% since 2019 and accounts for over $1.2 trillion in the U.S. economy*. With demand for increased flexibility and autonomy, freelancing seems like a logical choice for many competent professionals. However, with this freedom comes responsibility. There is obviously the responsibility to do a good job for the client and maintain honest business practices. But, perhaps equally important, freelancers have a responsibility to value their business needs, especially when negotiating a contract with a new client. In this article, I discuss how to negotiate a contract as a freelancer. Please keep in mind that this is an overview and not legal advice. Every contract negotiation has unique facts and circumstances and requires individual analysis by a competent attorney.

Value Your Time

Whether you’re being paid hourly or on a flat fee basis, it is critical to value your time appropriately. Your rate should reflect the required time and energy to service your client, time away from other projects, and your industry experience. You should work with prospective clients to come up with a reasonable rate for their project, but not devalue your business in the process. Your work product likely adds long term value to your client’s business that far surpasses the time that your client pays for. So if they aren’t willing to value your business appropriately, consider referring them to another company.

Control the Scope

It is important to control the scope of work for the project, especially if it is a flat fee engagement. You should work with the client to define very clear deliverables and deadlines in the contract. However, there are times when the client doesn’t know what they need until they need it. If it is a flat fee engagement with a defined scope of work, you might consider including an hourly rate for any additional work in the contract. This allows flexibility for the client, while making sure you are fairly compensated for additional services.

Define the Compensation Structure

Once you determine a rate for your project, it’s important to define how and when you will get paid. Some freelancers prefer lump sum payments up front and upon completion of the project. Others prefer installment payments at specific time intervals or upon meeting certain benchmarks. The compensation structure is largely up to you and the client, but make sure you put it in writing so everyone understands their obligations.

Identify Additional Personnel

You may require additional help when servicing the client. It is important to identify or at least discuss the possibility of using subcontractors for a new project. This transparency lets the client know who they are working with and allows the parties to adjust the terms of the contract to account for these third parties.

Intellectual Property Assignments

Make sure you understand what happens to any intellectual property created during the project. Most times freelancers assign the rights, title, and interest to all intellectual property and must assist the client in obtaining any intellectual property rights. Common intellectual property rights include copyrights, patents, trademarks, trade secrets, and moral rights. Assigning intellectual property rights also means you cannot reuse the work product for any purpose other than what is authorized by the client. If you do not fully understand the consequences of assigning your intellectual property rights, then you should retain a lawyer to review the contract before signing.

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