[tptacek]

Contracts are such a basic fact of business life, universally understood by good-faith vendors and customers, that recalcitrance about signing one should be taken as a "run don't walk" signal. By working without a contract, you doubly imperil yourself: you lose significant legal protections, and also select a client base that is particularly likely to cause you problems down the road.

Matasano has many clients we've maintained since the formation of the company in 2005, and many more where our counterparts in those companies are friends. The idea of doing business with any of them sans contract is unthinkable. It just doesn't happen.

Working without a contract is unprofessional. Don't do it.

[larrys]

A few points. I'm not stating you are wrong but simply would like anyone reading to see that in business, the way I see it, it's art and not science. "Don't do it" sounds more like science to me. Business to me is art.

1) The dollar amount of the dealings greatly matters as well as the product or service being sold (and who it is being sold to and past history [1]). Matasano is a "real" grown up company. I would imagine the dollar amounts of the charges for what you do are not trivial or small in any way. "not freelance". And what you do has liability consequences as well if you screw up. And you have deep pockets to go after and a liability policy with pockets. [2] A contract of course is called for. Our accounting firm (been dealing with for many years) was just bought out by BDO. They sent a contract or rather a letter of understanding "whatever" that absolves them from any and all liability no matter what. This is after many many years of dealing with the firm they acquired. The legacy firm sent the same letter. Totally ignored it and never sent it back year after year. (Almost as a dare "ok we'll replace you!". They didn't take it personally at all. And if they did who cares?

2) Title of article appears to be targeted toward freelancers. Hence my comments. I'm not directing my thoughts toward Boeing (or Matasano). In other businesses I've dealt with freelancers (non computer, graphics basically) for many years. They do work you pay them. They give a quotation for the work and tell you if you exceed any limits and that it will cost more.

3) Using contracts puts friction in the process and gives people (on certain things, once again, smaller things) a chance to back out and think and delay. So to me there is a certain balance of risk that a freelancer takes (relative to the situation) vs. losing the sale that has to be weighed. Each situation is different. What's the up vs. the downside?

4) Unprofessional is relative to who you are and what you are selling of course. There are many business relationships that are done on a handshake in certain industries. I've been involved in many of them.

5) If you do (for whatever reason) use a contract and the other side doesn't want to sign it I agree that can be a red flag. In general. Once again, depending on the dollar amount. I had a domain broker come to me with a buyer for a domain name that I owned and they sent me a 10 page contract. I said "I'm not reading and reviewing that if you have a buyer I will pay you commission". They said "ok sounds good". And the deal was done and I have the money in the bank. Otoh I sold a domain to a very well known attorney (someone I knew that is well known in the business and everyone loves and even went to the same college) and I waited like 3 months to get the money. Go know.

I will end with a funny story. When I sold my first company a long time ago I asked both the accountant and the lawyer for an estimate of the legal and accounting charges. They both shot me numbers verbally over the phone. After the deal was done I got the bill and it was 2 to 3 times as high as the quote. So I said "you quoted $x what's the story?". They said "oh it was more work". I said "well you should have told me that, how would I know?". The accountant stayed with the quote and is the firm I've referenced above that I am still with to this day. The lawyer thanked me (he had just gone out on his own and left a big firm and had no clue about smaller clients or billing or people using their own money) and told me I had taught him a valuable lesson [3]. He then bought some computer gear from me (to give you an idea of how long ago this was it was a $4500 laser printer). Just to show you that he really was cool with it.

So it wasn't lack of a contract as much as lack of communication possibly that sunk them. And of course had they billed as the work was going on as opposed to all at the end they would have put me on notice despite the original quote (which by the way was stated like a firm quote..)

[1] Which of course is tricky because people and companies change their spots.

[2] As opposed to Dave, out of his house, living from hand to mouth. Nobody is taking "Dave" to court if he screws up.

[3] So in other words he wasn't used to anything but a larger company using someone else's money not an entrepreneur spending his own money.

[fat0wl]

Yes this is the business world exactly as I've experienced it. Specifically, #2-4. Handshake deals are great for people who are generally sane and trying to pick up momentum. People advise you lock everything down 100% but they don't realize what a time/energy drain it is on both parties.

A quote sets up a reasonable negotiating point and then any deviation from that can be discussed. The client eats it or the worker eats it. You win some you lose some -- at least things are moving.

[larrys]

I'll tell you an interesting thing that I learned in a past business where we were given many rush jobs.

Let's see how you view this.

a) Client comes with a rush job and asks you to quote the job and you do. You give them a price.

b) Same clients comes to you and says "just get the job done and bill me whatever it is. I need to get this done."

My question to you (or anyone else) is "under which situation did we end up making more money, "a" or "b" usually"?

[fat0wl]

Hmmm my gut says A. When you give a quote it sets up a reasonable expectation and even if you go over-budget clients usually understand if you don't deviate by too much.

With B you have to pull the trigger on it all-at-once so I feel like it leaves you more inclined to bring the price down to avoid sticker shock.

"A" probably has a better "return customer" conversion rate too, no? Because they weren't on as much of an emotional-financial roller-coaster, it was just the execution of a process understood by both parties. So I'd guess with A you have a better shot both at short term money and future endeavors.

How did it work out really?

[larrys]

You are correct it is "a".

Reason was simple.

Customer was under duress and needed to get a job done. You stated a price and they accepted that price. That agreement was important.

With "b" - "whatever it costs is ok!" they could come back and say "Wow I didn't know it would be that much". So even though most people would go for "b" my experience was "a" was better.

Of course now if I wanted to argue the other side I could say if you really were trying to jack up the price than "b" might be better. Why? Because you are jacking up the price so if the customer say "I didn't know it would be so much!" you have some flexibility to throw them a bone and lower the price and make them happy.

My attorney on bills typically puts in all the hours he spends as "time spent, time billed" giving you some idea that you are actually saving money. As if he is cutting you a break.

"and future endeavors"

Right because you managed expectations successfully. Same reason perhaps paying $35 for parking is not the same as getting a $35 parking ticket.

[fat0wl]

Heh right on I actually thought of that flexibility / throw them a bone bit after I already posted. I think that's the abstract bit, is that these things need to be negotiated in real-time for it to make any sense. If you find you're doing too much work or it's something that requires a lot of specialized knowledge, you need to get that level of pay while having it make sense to the client. I know some people try to whine that this amorphous rate idea is sketchy but then I hear stories about freelancers & small web ventures trying to do psychotic shit like quoting 2k/month for "site maintenace" or getting a 5k contract for "SEO". I deliver MUCH better quality of service to my clients than these "professionals" who are trying to set up bunk service contracts as sources of recurring income. The reality is you need to have your client's trust. I do the best work I can & if I feel I deserve extra for a job and can justify it, by all means I say so and negotiate it. And I do something similar to your lawyer in that I don't bill for email/communications unless we have time blocked for a longer meeting, so it's hard for the client to ever feel as if they've overpaid. 15 minutes on the phone every day or so on the job I let slide. Then I log most of my hours by task. What I want is to deliver them value so they can succeed and give me more work. Most clients can appreciate that.

Man I like your attitude larrys. Business really is an art, & I think my role model is kindof like "Better Call Saul" but without the illegal activities. He starts off as a sketchy, unlikable guy but then you notice that his clients are always satisfied and they are all well-paid. :D

It seems much easier to reach that type of relationship by doing some high-velocity business rather than dragging the process down &, as you said, letting everyone dwell too much on $$ signs.