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In this episode of Multithreaded Income, host Kevin Griffin focuses on utilizing a Master Service Agreement (MSA) for freelancers and consultants, especially when dealing with clients. Kevin shares his experience and insights on why having an MSA is crucial for outlining the scope of work, setting expectations, and protecting both parties in a professional engagement. He discusses various sections of the MSA, including the statement of work, warranties, fees and payment, intellectual property ownership, term and termination, handling disputes and governing law. Kevin emphasizes the necessity of working with a lawyer to ensure that the MSA is legally solid and tailored to specific needs. He touches on the process of negotiating terms through redlining. The episode intends to provide listeners, including those new to freelancing or consulting like his friend Sean, valuable information on creating and managing contracts effectively.
00:00 Questions from my friend, Sean
00:37 The Importance of Master Service Agreements
01:37 Breaking Down the Master Service Agreement
02:18 Key Sections of the MSA Explained
07:13 Intellectual Property and Termination Clauses
10:59 Navigating Legalities and Client Negotiations
12:48 Final Thoughts and Discord Invitation
Creators & Guests
What is Multithreaded Income Podcast?
In the "Multithreaded Income Podcast," host Kevin Griffin navigates the nuanced landscape of generating multiple income streams as a technologist. Aimed at professionals who wish to diversify their revenue while maintaining a focus on technology, this podcast dives deep into unconventional strategies, untapped opportunities, and actionable advice.
It's time for the multi
threaded income podcast.
We're like insurance for a
turbulent tech landscape.
I'm your host, Kevin Griffin.
Join me as I chat with people all around
the industry who are using their skills
to build multiple threads of income.
Let us support you in your career
by joining our discord at mti.
to slash discord.
Now let's get started.
Kevin Griffin: Hey, everyone.
Welcome back to the show.
Today is a solo show, and this is going
to be one of many episodes that I'm
calling answers from my dear friend,
Sean, because I have a friend, his name is
Sean, and he's asking some questions about
going independence for the first time.
And I feel like I could answer him
directly, but I could also just share the
information with you all in case you're in
a similar position as Sean and could find
some value from the different answers.
The question for today and Sean
asks, Kevin, do you use a master
service agreements or any other
type of contract with your clients?
Answer is absolutely.
I use a master service
agreement with all my clients.
It's a prerequisite for
Any engagement that I do.
Now let's talk about the purpose of
the master service agreement or the MSA
and why it's something that we probably
want to have for, for various reasons.
First let's caveat this with, I
haven't always used the master service
agreement for the first couple of years
of my freelancing contracting gig.
I didn't have formal agreements.
I did start that.
When I started becoming a little bit
more serious about the contracting
that I was doing, but I didn't
really have one out of the gates
because I didn't know how to get one.
And.
It's a lot of effort.
So first, let's talk about what
is the master service agreement.
It's a contract, a small contract,
hopefully that you control that
outlines how the engagement between
you and the client that you're
working for is going to work.
And this is meant to answer
questions and set expectations before
potential issues occur in the future.
A master service agreement isn't terribly
complicated from a contractual standpoint.
I'm just casually reviewing the one that I
recently just got updated with my lawyer.
And I want to talk through some
of the various sections of it.
This isn't going to be a full detail
of what goes into an MSA, but the
first section is basically saying, Hey,
uh, I'm going to do work for you, the
clients, and we're going to outline
the work that's going to be done.
On another part of the document called the
statement of work, you've probably heard
of that term before, but the statement of
work simply says, what are we going to do?
How much is it going to cost?
When will it be done by?
And you can get more broad and narrow with
that's a little bit later, but essentially
we're just setting up some expectations
that work is going to be done.
What's really cool about outlining.
A statement of work later is
that we can change the statement
of work without changing the
entire master service agreement.
And this has happened to me multiple
times previously, where I do the
work and we get to the point where
we've either finished or we want
to go off and do something else.
We can update or revise the
statement of work without having
to re agree to all the other terms.
Those are always set in stone.
I also do this for multiple engagements.
If I finish one engagement, I'll
go off and do another engagement.
No need for another MSA.
We just set up a new statement
of work and we move forward.
We also really want to dictate that in
this relationship, I am not an employee.
I'm an independent contractor
providing independent services.
I am not held to the employment
standards of whatever federal laws
or state laws that might apply.
And again, another caveat, I'm sorry.
This is primarily for us based
contractors and in pen consultants.
Um, there are still things you might
want to do if you're working with
international clients, but not really
the topic for this conversation,
there's a section in MSA
that talks about warranties.
And I think this is an
important thing to have.
And every lawyer I've talked to
says, yes, you want to have the
basically warranties and what you
will and what you won't cover.
Um, my warranty for my master
service agreement says, I am
going to do the best job possible.
I'm going to try to cover as many things
as possible, But essentially the work
that I'm doing for you is warrantied as
is, meaning what you get is what you get.
If you sign off and you approve on it,
it's what you got, and I'm not liable for
any damages that my software causes in the
future because of a mistake that I make.
Now you are fully able to
change your warranty in any way,
shape or form that you want to.
If you want to provide a warranty
for a month, a couple of months,
a couple of weeks, it's really
up to you what you support.
I personally don't provide a warranty.
Because software is a very iterative
process and there should be an
exhaustive approval process before
anything ever goes out of production.
A business should not lose money because
of something I've done if the software
has been signed off on by the client.
The next big section of MSA is
going to be fees and payment.
So this is really the most critical
one is one of the smaller sections.
I have a policy in my MSA that
says you need to pay me within 14
days of the time I invoice you.
I am not a bank.
You need to Additionally, I add in
a clause that says if you fail to
pay me within 30 days of the date
that I've invoiced you, I reserve
the right to charge you additional
fees on top of the original amounts.
So this is specifically called a fee.
It's not called a penalty.
A penalty has certain
connotations inside of a contract.
So we just call it a fee.
If you don't pay me within 30 days, I can
charge you a fee of up to 10 percent of
the amount that you owed and that's due
immediately at the time that it's charged.
This is also the section where you can
set expectations for additional expenses.
If you need to license software or pay for
different services in order to accomplish
your job, some of these expenses
that you should be able to pay for.
Immediately without prior approval,
I have a stipulation in my MSA that
says I will get approval if it's
more than a certain amount, typically
500 or more, I'll ask for approval.
If it's less than that, I'm allowed to
charge and submit for, for reimbursement.
Moving on through a typical
MSA, you have a section on
Intellectual property ownership,
who owns the code that you write?
Uh, again, pretty straightforward.
If the client pays their bills,
they own the IP that I'm writing.
You might have a use case where you want
to develop the IP yourself and, uh, you
want to lease it to a particular client.
That's a different way
to write your contract.
So again, Talk to a lawyer, but I tend
to assign all the IP to the client
who's paying me because they're paying
me a good amount of money for that IP.
And it's in the best interest of
these companies to maintain overship
of the IP that they're paying for.
There have always been cases where a.
Company will lease IP from you.
If you're going to take it over as
an owner, more down the list, let's
talk about term and termination.
And this is important for a
couple of different reasons.
Um, first I have a clause
that says, well, either party.
Can terminate the agreement
with 30 days notice.
This is really useful to me because it
means I get 30 days warning before a
contract is going to end prematurely.
Um, it also means if I want to fire the
clients, I have to give 30 days notice.
I have a horror story of having to
have done that, that we can talk about
at a different time, but it's nice
having that little bit of lead time.
So you're just not fired immediately.
And all of a sudden you
don't have any work to do.
There's also a condition in there
that says, if you don't pay, I can
terminate the contract immediately.
That's always safe to have.
And there's continuation.
So the.
Contract will run for ever until
one of the two parties decide
to terminate it completely.
There's also stuff in there that says if
it's terminated, the client owes me all
the money at the end of the contract.
They can't push it off.
They have to pay the entire bill.
So good to have these sort
of terms in your agreement.
Now quickly just going
through the rest of it.
There's stuff around confidentiality,
uh, disparagement, identification,
it's standard contract legalese
that your lawyer will put into the
contract just to make sure that
you're protected and also a level of
protection for the client as well.
Additionally, there's
some information in there.
How do you handle disputes?
So what happens if there's a
problem between the two of you?
How do you take care of that
in a reasonable legal way?
There's also some legalese
around governing law.
So, In the United States in particular,
you have to pick what jurisdiction, what
set of law are you going to abide by?
Uh, for me, I take care of governing law
in Virginia because I'm based in Virginia.
And I've had clients that have
wanted to change the governing
law to a different state.
And I leave a lot of that up to
my lawyer, whether or not it's
reasonable to make that change.
It's kind of like just choosing
which rule book you want to go by.
Because if You're going
by the rules in Virginia.
They might differ than
the rules in Nevada.
And this is also a really good reason
why you see a lot of corporations
incorporate in Delaware, because Delaware
has a very trusted and practiced.
A business law.
This is where we transition
the conversation to say,
how do you get the MSA?
You know, obviously it means
you're going to work with a lawyer.
I don't recommend just buying something
off the internet and trying to make it
legal because it might not necessarily be
legal in the state where you're trying to.
Make it legal.
So, uh, I originally started
with a boilerplate and there's
nothing wrong with that.
It has all the key things that you need.
And I took that to a lawyer and I
had a conversation with the lawyer
about what it was I was looking to do.
And they made my contract legal
for the state of Virginia.
I could then take that contract and
send it out to my various clients and
they would sign it and agree to it.
Now, sometimes a client will want
to do what's called redlining.
And that means there's parts of the
contract that they don't agree with
and that they would like to change.
That might be something
like payment terms.
So if your payment terms are net
14, they might come back and say, we
would love to do net 14, but it'd be
more reasonable for us to do net 30.
That is something you have to agree to.
And.
They'll do this in a
couple of different places.
And again, it's a really good idea
to have a lawyer to review the red
lines and to either say yes or no.
A lot of times with red lines, it's
a matter of choosing your battles.
Is this something I want to fight
over or is this something that
I really need to Just let go.
It's not a big deal.
Um, it's hit or miss this again,
while you have the lawyer, because
ultimately if there's a problem with
the contract, it's your lawyer, who's
going to be the one that you have
to go with the, to help defend it.
So it's in your best interest
to just listen to your lawyer.
So Sean, or anyone out there
listening, I hope that.
Helps answer the question of,
do you use a contract for your
consulting or freelancing work?
And how do you go about getting
the master service agreement?
I'll wrap up this conversation by
just saying, I have thankfully never
really had to test my MSA in court.
I've never had to sue anyone
and I've never been sued.
So it's more peace of mind of just
knowing that I have a legal, um, role.
Protection in case something ever
goes along with one of my clients,
use that as some motivation to
go out and get your MSA set up.
And if you have any questions about
who you talk to or where you go,
why don't you come into the multi
threaded income discord and we'll
try to direct you in the right.
Place to get some answers
to those questions.
Join us at mti.
to slash discord, and we would love the
chat, but we'll go in and cut it there.
Thank you all so much for listening.
We'll be back in a new episode
soon, where we talk about some other
questions that my friend, Sean had about
becoming an independent consultant.
Y'all take care.
I'll see you next time.
You've been listening to the
multi threaded income podcast.
I really hope that this podcast
has been useful for you.
If it has, please take a moment to leave a
review wherever you get your podcast from.
And don't forget the
conversation doesn't stop here.
Join us on our discord at mti.
to slash discord.
I've been your host Kevin Griffin
and we'll see you next week.
Cha ching!