Freelancer’s Survival Guide: Negotiation Part Three
The Freelancer’s Survival Guide: Negotiation Part Three
Kristine Kathryn Rusch
I knew negotiation was going to be a tough topic. But I thought it would be tough for me, not for you guys. Instead, I’m seeing a lot of private comments and some great blogging on the topic, and I’m realizing that negotiation is hard for most of us.
On one of my e-mail lists, we’re discussing taming your inner 12-year-old in a business situation. You know what I mean: the core you, the scared or angry or shy person hidden behind your adult façade.
Too many of us let our inner twelve-year-olds rule our life. My inner twelve-year-old is very shy. When I was twelve, I had switched schools from a pampered elitist school for the children of college professors to a public junior high school where the students occasionally carried knives. I was the victim of a horrible crime right after my twelfth birthday and was both traumatized and terrified throughout much of the year. For the first half of that school year, I came home from school and watched television until I went to bed; I didn’t interact with anyone at all. People threatened me by their very existence. I survived by trying to predict their behavior.
And by being polite, very, very, very polite.
Extreme politeness is my default mode when I’m panicked. I’m very polite.
Fortunately, extreme politeness plus a need to predict behavior made me a good negotiator. I would plot out my moves and the other person’s responses as if I were plotting a Chose-Your-Own-Adventure novel. If other person does A, then I’ll do A. If they do B, then I’ll still do A. If they do C, I’ll do B or K.
I rarely got surprised.
The problem for me in early negotiation—and in current negotiation if I’m not careful—isn’t my inner twelve-year-old. It’s my dreams. And this one catches everyone unaware.
If you’re freelancing or thinking about freelancing, you love what you do. (If you don’t love it, after reading this guide so far, I have to ask you: why freelance?) In fact, you love what you do so much you’ve probably done it for free.
Money is rarely the freelancer’s prime motivation. If it were, then people like Stephen Spielberg and Stephen King would retire after making their early millions. Even Donald Trump, who claims he’s interested in money, is only interested in money as a way of keeping score. He would have quit long ago if getting rich was his only motivation.
When you are doing something as a living and you would do that something for free, you have a conflict in the area of money. More often than not, you’re willing to undervalue your product. And that’s something you need to watch out for.
The flipside, however, is that when you get paid a lot of money for doing what you love, you’ll continue doing that something. You won’t be a rich, idle person, because you’re not doing that something for the money. You’re doing it for the love.
While this all may seem like a tangent to negotiation, it really isn’t for several reasons. First, you need to know what your dreams for your business are and were, so that no one that you’re negotiating can hook you in those dreams. Second, you need to keep what you value the most about your work firmly in mind. And third, you have to know what your minimum nut is for your business.
Go back and read the money sections of the Guide. There are too many to list here; the link I’ve attached to this paragraph takes you to the Guide’s table of contents. Read about finances so that you know how to compute what you need to keep your business running and to continue to make a living at it.
Once you have those numbers, you’re still not ready to enter into the kinds of negotiation I’m going to talk about in this section. You’ll also need to be completely aware of your inner 12-year-old and her tendencies. (My inner 12-year-old, when uncomfortable, either retreats entirely, gets very polite, or becomes unbelievably (and uncontrollably) rude.) You’ll need to know your dreams. And you need to know what you want to accomplish in this particular negotiation.
I ran you through some of that last week, with the short-term negotiation. That was a relatively simple negotiation with very little on the line. The cost of making a mistake in that negotiation was no more than a weekend’s worth of headache.
This post will deal with contractual negotiations.
Every freelancer will deal with contracts at some point or another. If you have a storefront, you’ll make a contract for rent. If you provide product on a regular basis to other businesses, chances are you’ll enter into a contract with them. If you hire independent contractors, you’ll enter into a contract with them.
Most of us have gotten used to scanning the legalese we see online. We download something, we check “agree” at the bottom to expedite the process. But we’ve just agreed to something, and really, we should know what it is. Online, there generally is no negotiation. Either you agree or you don’t get the service you want. But saying no is a viable option, one many of us don’t take enough.
Contracts are negotiable. Sometimes you have a take-it-or-leave-it contract, like those agreements online, but that still means you have a choice. You don’t have to sign.
In the past year, as I’ve read more and more articles about the foreclosure crisis, I’ve been struck by some similarities in the stories of borrowers who ended up underwater in their mortgages or who couldn’t make their payments. Many of them thought that they had to sign the contract for the house purchase when they were presented with it. Several of them, particularly people dealing with some companies that specialized in fraud, didn’t even know the terms of the contract until they’d signed it.
Most of these people in these articles were blue collar workers, many of them without a high school education. But a large number were college graduates who had somehow never got the message that you shouldn’t sign something you don’t understand.
I’m assuming you guys know that.
But how many of you, when faced with pages and pages of contractual agreements, signed anyway? The day Dean and I completed a refinance on our house, we annoyed the people at the title company something awful. We refinanced in the middle of the housing boom, taking advantage of loose credit because as freelancers we hadn’t been able to receive a bank-funded mortgage in periods of tight credit. (The previous owner carried our contract initially.)
Dean and I both insisted on reading the documents before us. We’re good at scanning contracts—Dean went to law school and I’ve been reading these puppies for years—and we went through them relatively quickly. Still, the woman with the title company kept looking at her watch and hurrying us along, telling us that some of the documents weren’t very important.
We refused to sign one document because it changed the terms of our loan, the terms we had agreed to when we made the deal. In fact, it changed our loan from a fixed-rate mortgage to an adjustable rate mortgage.
We made her draw up the paperwork all over again.
That document was slipped into the middle of about 100 pages of material.
I wonder how many other people that happened to, people who hadn’t read the terms of their mortgage contracts.
There’s nothing wrong with an adjustable rate mortgage—if you know you’re signing for it, and you plan for the adjustment when it occurs. Or if you believe you can sell the house before that adjustment occurs (in today’s market? Yeah, right).
But so many people got caught unaware—which is as much their fault as the fault of the lender. Know what you’re signing.
And know that you can walk away from any deal, so long as the contract is not signed by both parties. It’s not a valid contract until both parties have afixed their legal signatures to the document.
Here are some quick and dirty things about contracts that will make your life easier in dealing with them. And before I get to them, this is the point where I must remind you that I am not an attorney and I am not giving you legal advice. I’m writing from my experience here, and I’m giving you advice, friend to friend. Realize that my advice could be wrong (hell, all of the advice in the Guide could be wrong. Take everything I say with a grain of salt).
So, here goes:
1. Contracts are complex legal documents. Some are complex and incomprehensible by design. The harder it is for the layman to understand the contract, the more chances there are for that layman to get screwed. There is nothing simple about a contract. Even simple two- and three-line contracts have pitfalls in them—usually through something that’s been omitted. Just because a contract looks simple doesn’t mean that it is.
2. Every word in the contract is important. Each section is there for a reason. Dean and I get into fascinating arguments about publishing contracts over this very point. Dean went to law school. He knows that some clauses in publishing contracts are completely unenforceable, so he sees no problem in signing a contract with the illegal, unenforceable clause.
I always remember the second part of 2) Each section is there for a reason. So if the lawyers who drew up the contract knew that the clause was unenforceable (and if a guy who went to law school but never became a practicing attorney knows that a certain clause is unenforceable, then guaranteed the lawyer who put the clause in knew it as well), the question becomes: Why did the lawyers put the clause into the contract?
Usually, in publishing (and I can’t say this about other industry’s contracts with certainty), those clauses are there to make the ignorant do something. In the publishing contract, the ignorant one is the writer. So the clause is often to the publishing company’s benefit and it demands that the writer do something that isn’t in the writer’s best interest. The writer doesn’t have to do that thing, because the clause is unenforceable under the contract. But I can guarantee you that if that clause is in the contract, then some writer followed “the rules” set forth by the contract, even to the writer’s detriment.
So remember, everything in the contract is there for a reason—even if that reason is only to force compliance on someone who doesn’t know any better.
3. Each clause in the contract has an impact on the other clauses in that contract. An attorney friend of mine once described a contract as a story. You don’t know what it all means until you get to the end.
The upside of this is that often you’ll run into “dealbreakers” in the negotiation: a negotiator on the other side won’t change clause A no matter what. But if you change parts of clause C & D, you’ll negate A.
I learned this early on negotiating a short story contract. The contracts person told me that Clause A was unbreakable, but he said coyly, other writers have changed Clauses C & D. I read C&D and realized he was doing me a favor. He essentially gave me a way around clause A without causing him grief with his bosses and which led to me signing a much better contract.
4. Contracts bind you and the other party to a certain series of actions over time. Contracts without a strict time limit aren’t valid. In perpetuity is not a time limit. However, the time limit can be a moving target. In publishing, that moving target is often tied to the number of copies of a book sold. So if fewer than 100 copies are being sold per year, then the ticking clock of the contract sets in. In other words, the agreement between the parties may end if the book sells fewer than 100 copies for two years running. (Or some such thing.)
5. Contracts happen over a period of time. Why did I stress that twice? Because most people look at contracts as a short-term thing, and they’re usually a long-term thing.
Let’s look at our torch singer from last week. Let’s say she signed a contract with that blues club, one that guaranteed her five performance weekends per year at the club at $200 per appearance. Let’s say the contract is a five-year contract.
All well and good. If she’s a mediocre musician or a hobbyist, she should have no problem with that.
But what happens if her career takes off in year two? She’s filling concert halls and making $20,000 appearance fees wherever she goes.
Except for that tiny blues club, which still pays her $200 per appearance, and will do so for three more years. Because she signed a bad contract. One that probably seemed good at the time.
(There are ways that a contract like that can be broken, but I’m not going to deal with them here. Generally speaking, though, if you signed a contract and so did the other party, the contract is a binding legal agreement, even if you don’t like the terms two years in. In other words, you’re stuck.)
6. Contracts are about control. Control of money, control of a person’s time, control of a particular property. The best contracts define the limits of that control in all areas. You may not like the definitions, but the fact that they’re spelled out makes the contract understandable and negotiable. It’s the simple contracts with only a few lines that get litigated most when there’s a dispute over control.
7. Contracts are about the best- and worst-case scenarios. I remember the first time I read a publishing contract. It mentions fire, flood, bankruptcy. It defines Acts of God. It discusses what to do if the publishing house goes out of business, if the writer dies, or if we all get sued. All the worst-case scenarios are there, including some I never thought of.
But so are the best-case scenarios: payouts if the book sells better than expected, things the publisher is obligated to do when success happens; things the writer is obligated to do.
Those lines excite writers. They think those lines mean that the publisher has changed his mind and committed to a better program for the book than initially promised. Nope. Those lines are there so that it’s clear who is in control of what should the book succeed beyond anyone’s wildest dreams.
8. Make sure you understand the contract you’re signing. It sounds so basic. I even mentioned that in the section above. But don’t sign something you do not understand. Ask stupid questions. Repeatedly. Refuse to put your name on the document—even if there’s a time crunch—until you understand every word. Better yet, don’t sign unless you understand the contract’s story, what the entire document means as a whole, not just as a sum of its parts.
Yes, I know. You didn’t go to law school. Me either. But I was a reporter. And the one thing that being a reporter taught me is to question, question, question.
Contracts aren’t set in stone. They can be redrafted, rewritten, redrawn. And sometimes they should be.
Whom should you ask for help with that contract? Well, that depends. Generally, you shouldn’t ask the person you’re negotiating with. But you shouldn’t always ask your local attorney either. Because every industry has its own jargon. Publishing contracts use words that mean something different than the same words in a real estate contract.
Lawyers have specialties for a reason, and that reason is often to understand the intricacies of that specialty. I would never hire a real estate attorney to negotiate a book contract. Nor would I hire an intellectual properties attorney (who can handle a book contract) to negotiate a car loan agreement.
And even then, no matter who I hire, I have to know that person is doing a good job. So I need to know something of what I’m signing. The more educated I am about the contracts I sign, the better off I am. (See the section on employees in the Guide.)
It just so happens that I love contracts and contract negotiation. I’m fascinated by it, and I collect tons of information about publishing contracts. I knew more about publishing contracts than the agent I fired a few years ago—and he’d been in the business as long as I have.
I like publishing contracts because they’re a means to an end. That end, for me, is to get my work in print. But I’m wary of contracts too, because I’ve seen bad ones ruin careers.
Right now, if you’re paying attention, you’re watching bad contracts ruin lives. The foreclosure crisis is built on terrible deals enshrined in bad contracts.
Contracts are central to our business lives. Yet most of us know nothing about them, and certainly don’t know how to negotiate them.
Now that you’ve read this section, you need to start familiarizing yourself with the contracts that are essential to your business. Start walking through the business sections of bookstores, look for trade journals in your field, become a devotee of places like Nolo.com Read the free legal advice that floats around the web. Go to places where people discuss the business of doing business. Start collecting information on your specialty. It’ll benefit you more than you realize.
As I’m winding up Part Three of negotiation, you’ll note that I didn’t discuss negotiation much. Because I had to explain contracts in such a basic way that I didn’t have room to get to the negotiation part. That’s next week. And the following week will be about hiring help for your negotiations.
Most of us think “I can’t understand this” when it comes to contracts. Yet we have to understand it. Let me give you a tip from Colonel Tom Parker, who managed Elvis Presley—first to Elvis’s benefit (in the early years) and then, when it became clear that Elvis knew nothing about money, to Parker’s benefit (in the later years). Parker acknowledged that he made mistakes in negotiating contracts. He would find the clause that caused the mistake, tape it to his refrigerator, memorize it, and vow never to make that mistake again. (In later years, he put those clauses in his own contracts, and used those clauses to his own benefit.)
You will make many mistakes negotiating contracts. You won’t understand all of what you sign early on. Expect to make the mistakes. Learn from them. Make sure you don’t make those mistakes twice.
“Freelancer Writer’s Survival Guide: Negotiation Part Three” copyright 2009 by Kristine Kathryn Rusch.
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