Freelancer’s Survival Guide: Negotiation Part Four

The Freelancer’s Survival Guide: Negotiation Part Four

Kristine Kathryn Rusch

Last week, as I posted notification of the new Freelancer’s Guide Section on one of my writer e-mail lists, another writer asked for help with a business ethics question.  Turned out her question wasn’t about ethics at all. It was about a contractual relationship, a relationship defined by the contract. The answer to her question was in that contract, and negated the ethical dilemma entirely.

What was fascinating to me—and a bit appalling—was how many people answered her question as she posed it, without first wondering if she had some sort of document or contract in place.  These people answered very firmly about their opinion of the ethics of the situation, when they didn’t understand the situation at all.

They put me in mind of those old Holiday Inn Express commercials, in which some person steps up, gives authoritative advice that’s often wrong, and then is asked if they’re an expert on the situation.  “Nope,” they would say, “but I did stay at a Holiday Inn Express last night.”

(I always wondered why the Holiday Inn Express people wanted us to stay in a place that proudly knocked off a few IQ points each time someone slept there.  But hey, what do I know?)

I was rather stunned by the discussion on the list, since everyone on the list is a bright and educated person.  But only one person (besides me) out of at least a dozen respondents even considered the contract, which makes me worry.  These are folks who are supposed to know their freelance business, and they all made rookie mistakes that would have hurt them terribly if that “ethical” question had been theirs.  The person who asked the question thought she had gone to a knowledgeable group—and it should have been—but instead she got a cross-section of America.

Most people in this country believe that business and financial matters are better dealt with by someone else, someone who is not them.  Eventually that willful ignorance catches up with everyone—and not in a pretty way.

I’ll deal with the “someone elses” next week.  This week, I’m going to, in very vague terms, tell you the things to consider in negotiating your contract.

Before I do, I want you to do two things. If you haven’t read last week’s post, read it now.  And I want you to remember that I am not a lawyer and I am not giving legal advice.  I’m tell you how I think the average person should think about contracts, but I’m not guaranteeing results nor am I saying that I’m always right.  Essentially, I’m trying to give you a few tools so that you can go out and learn this stuff yourself.

And, if you’ll note, I’ve often used that disclaimer or a similar one in the financial and legal sections of the Guide.  Because I’m protecting myself here.

Some people believe that Guides like this are an implied contract.  If these people follow what they believe is my advice and the result bites them in the ass, then their first response would be to sue me. My disclaimer, here and in the other sections, is there not for those people but for any attorney that they might hire.  Essentially I’m putting the world on notice that I am not qualified to give bona fide legal advice.  You’re taking my advice at your own peril.

Got it?

In other words, I just did a quasi-legal document—a disclaimer—to protect me in a worst-case scenario.  I’ve done it before, not just in the Guide, but also in teaching situations.  If you want an expert on contracts and contract law, take classes from real attorneys.  Read books written by real attorneys.  Go to websites hosted by—you guessed it—real attorneys.

But I’m giving a layman’s guide to negotiation, trying to give you some broad strokes and ways to think about negotiating which is (I know) something  most of you have done your very best to avoid up until now.

And that’s your first mistake.

Because contracts are negotiable.  In fact, most anyone who offers a contract expects negotiation.  And not just any negotiation, but informed and intelligent negotiation.

I’ve known many writers who’ve signed horrendous contracts because the writer didn’t understand that the contract should be negotiated.  The writers were afraid that if they tried to negotiate, the other party would take the contract away from them, and they’d lose the deal.  So they signed.

After they signed, all of those writers had two experiences with the contract. First, the editor for the publishing house made a veiled reference to the contract, telling the writer that they “didn’t get the best deal.” That’s editor-speak for “Oh, crap, at some point you’re going to hate me, even though it’ll be your fault.”

Secondly, years later, those writers complained and complained and complained about being screwed.  Sadly, they never realized that they had volunteered for the screwing by failing to negotiate.

So when faced with a contract, expect to negotiate. That expectation will take some of the anxiety away from the whole contract experience.  You know—and the person you’re dealing with knows—that you both are going to discuss terms before you both sign the document.

Believe me, it’s a relief to the other party when you do negotiate.  Everyone wants the best possible deal in a negotiation. But if you want to work with that person or deal with that person again, you want the best possible deal that will result in other deals in the future.

When you sign a bad contract without negotiating, the other party thinks that you’re naïve or really inexperienced.  They hope, after you both sign, that you’re just plain stupid. Because if you’re stupid, you’ll never wise up and you will continue to work together.  If you’re naïve or inexperienced, at some point you’ll catch a clue, and rather than blaming yourself for failing to negotiate, you’ll probably blame them for “giving” you a “bad contract.”

Which means that the working relationship won’t last past that moment.

People who are really worried about the future relationship will stop you just before you sign an unnegotiated contract and tell you to change a few things in the contract.  Those things will be to your benefit.  What’s happening here is that the person you’re negotiating against has just hit you with a cluestick.  That person—who is your adversary in the negotiation—knows it’s to his best interest to have a long-term relationship with you, and is trying to protect that relationship, since you don’t know enough to do it yourself.

As I write these words, I realize that a bunch of you who are reading this section have just realized that once upon a time, you were hit with that very cluestick.  And most of you never caught the clue.  You just thought the other person was being nice when really that person was protecting their business interests.  If that person screwed you too badly—and early stage contracts are always balanced heavily toward the person issuing the contract—then that person knows you’d never work with them again.

If you’ve been hit with this particular cluestick and only just now realized it, get thee to books on contracts and negotiations and develop some backbone.  Seriously.  Because the only person you’re hurting is yourself.

Not everyone you negotiate with will take care of you in a negotiation. In a one-time negotiation, where you know you don’t want to or never will work with the other person again, the contract can be hideously one-sided.  I watched Dean be utterly ruthless in such situations, to the point where I have to leave the room (that damn politeness again) because I really want to tell the other person that they’re being screwed.

Dean is a much harder businessman than I am in these situations.  He figures if the person he’s negotiating against is utterly clueless, then he’ll get what he wants at their expense.  I once asked him why he’s willing to do that.  His answer? “They came to me.”

And in each case that I observed, the other person had come to him. They initiated the relationship, they brought the product/service/idea to him, and expected him to pay them for it.  The fact that they did not negotiate in that situation wasn’t his problem.  It was theirs.

As an aside, lest you think the man is heartless, let me tell you that he never approaches someone and demands that they do business with him.  And I’ve watched him over the years pay out much more money than he ever should to keep people in their homes, help with medical bills, and make sure they get fed.

But if someone tries to do business with him and initiates the relationship expecting to be paid, he will be ruthless. He expects the other person to be the same. If they’re not, that’s not his responsibility.

I’m not that person.  But I’ve let him be that person as my proxy.  More on this next week.

So, now you’ve decided to negotiate. But how do you do it?

Let’s go back to our tips from Negotiation Part One.  They are:

1. Know What You Want.

2. Ask.

3. Be Prepared to Walk Away.

4. Stay Calm.

5. Never Reveal Your Entire Hand.

6. Don’t Flip-Flop.

Those tips all apply to long-term negotiation as well as short-term negotiation.

But here are some things that make negotiations over a contract different from any other kind of negotiation.

1. The contract will bind you for a certain period of time. That might be one week; it might be ten years with the possibility of renewal.

When you negotiate, that time limit needs to be first and foremost in your mind.  You need to understand all the implications of it—good and bad.

Let me give you two examples.  Dean, who is a great negotiator, didn’t trust my experience back in 1990 or so.  I knew rental agreements and the pitfalls therein.  He signed an agreement for Pulphouse Publishing for a long-term lease (five years, I believe), thinking it protected him by keeping the rent at a low, low price.

I had seen too many cases where long-term rental  had hurt the business in question.  I got my start in real estate in 1979, when the rental market became quite competitive.  Rental places offered long-term leases, but no real deals.  By 1981, as the recession deepened, many places forfeited their leases, and the rental companies lowered their rates for commercial properties. Sometimes they gave months away for free just for signing up.  The companies that signed the agreement in 1979 paid five times what a company did in 1981.

That was part of my argument to Dean. He said he could live with that risk.  But the other part of my argument was we might go out of business, and if we did, we would still be on the hook for that five-year lease.  At the time, our business was going gangbusters. He did not believe that we would be gone within two years.

We were.  And we were stuck with that lease. Fortunately for us, the landlord never fixed up the property and a friend got injured because of his negligence. That allowed Dean to negotiate a settlement, negating the rental agreement.  But he wouldn’t have had to do that  if he had negotiated the term of the agreement down to a year or so, renewable on the same terms.

Who was right in this instance? Neither of us, really. Because had the business remained successful, then Dean’s gamble would have paid off.  Commercial real estate rental rates in Eugene, Oregon climbed in that five-year period, and if we had to renew every year, we ran the risk of having our rent hiked dramatically.

The time limit on a contract can benefit you and it can hurt you.  What looks like a good deal now might be a bad deal in the future.

It’s up to you to imagine all the scenarios outlined in that contract, and decide if you can live with them ten, twenty, fifty years from  now.

I deal with this a lot with writer friends.  At various points in the career, writers can be short of money. Early on, writers are often broke, and that’s when they sign bad contacts—particularly with Hollywood.

“Small Hollywood money” as one of my ex-agents called it can run anywhere from $10,000 to $150,000.  Those figures sound like a lot to most people, but to the suits in Hollywood, that’s pocket change.  I’ve had friends get “mediocre” Hollywood deals that ran from $200,000 to $700,000.  And of course, the “good” deals go higher than that.

The key to Hollywood deals isn’t the money.  It’s the terms of the contract.  Often those $50,000 contracts have some nasty, nasty clauses. Clauses that say no matter what, the 50K is all the writer will ever get. (There are other nasty clauses not relevant here, but man, could I tell you stories…)

I’ve known a lot of writers who are really, really broke who need that $50,000 desperately.  And before they sign that contract, I ask them this question, “Will you be happy twenty years from now after that project you got paid 50K for has become a blockbuster movie?  Everyone else on the project will have made millions and will continue to make millions.  You will have 50K that probably disappeared within the first two years you had it.  If you can live with that scenario, then sign the contract.”

Because, folks, the worst case scenario in a contract like that is success.  Most people step back, think about it, and decide to negotiate—trying to get some fees from later parts of that pie.  But I have known a handful who either gambled that the 50K was all the project would ever make or who needed the money so badly that they knew, even twenty years hence, that they could live with the decision.

All of those factors influence negotiation.

You need a lot of imagination when faced with a contract.  You have to imagine the worst-case and best-case scenarios for you. And you need to know how you’ll feel about them for the duration of that contract.

In other words, you need to know yourself very, very well.

In most instances, I could walk away from that 50K no matter how desperate I was, because I know I’d be angry about it (with myself) twenty years from now.  But in a circumstance that’s life or death—paying for a surgery, for example—I’d accept that 50K in a heartbeat, and deal with the consequences later.

It’s all very fluid.

What you need to figure is where you’re at now, where you hope to be in the future, and what impact the decisions you make today will have on that future.

Because once you sign the contract, it’s binding. And if you think negotiation is hard at this stage, imagine doing it—as Dean did—after the contract was signed and agreed to and your circumstances changed for the worse.  Then the negotiation is really, really, really hard—and might even take you to court.  If you do go to court, and you have a valid contract signed by both parties, then you’ll lose the case, guaranteed.

Negotiate up front when it’s expected and it’s relatively easy.

2. Focus on what you want.  When you enter into a contractual negotiation, know what you want and protect it.  Don’t get sidelined by other things.

For example, I want control over my work.  I will walk away from contracts that take the control away from me—unless I’m asked to work in someone else’s universe, like Star Trek or Star Wars.  In those cases, I know that I’m entering a world that someone else controls, and I’ll forfeit rights that I’ll fight to the death for over my original work.

I’ve walked away from very lucrative contracts because I would lose control over my original work.  I’ve accepted financially small contracts that have given me a lot of creative control.  Control of my own work matters the most to me.

Other writers want publication more than anything.  I watched a writer sign one of the worst contracts I’d ever seen because he was desperate to be published. When told how bad the contract was, he claimed he knew, but didn’t care. Publication was the only thing that mattered to him.

Know what you want out of that agreement. Know how far you will go to protect what you want as you negotiate that agreement.  Make sure you protect what you want throughout the term (time limit) of the agreement.

Everything else in the agreement is gravy, then.

3. Make sure you have a way to terminate the contract.  Often the termination clause benefits whoever drew up the contract.  I’ve seen rental agreements in which the landlord can terminate the agreement with 24 hours  notice, while the renter had to give six months notice. (Those agreements were so egregious that the State of Wisconsin stepped in and mandated a 30 day termination in all rental agreements, but each state is different.)

I’ve seen publishing contracts where the publisher can easily cancel the contract but the writer has to jump through so many hoops to cancel it that it would take months to even try.

Make sure the termination clause is clear and equitable. By equitable I mean that it’s either very hard for both sides to terminate or very easy for both sides to terminate.  But it shouldn’t be easy for one side and hard for the other.

4. Money.  Most people mistakenly think that contracts are all about money. But remember what I said last week. Contracts are about control.

So…

5. Make sure you know how you’ll get paid or how you will make the payments.

That sounds so elementary, but it’s not.  Many contracts may promise a lot of money, but if you read the fine print, you’ll realize that certain payments will get made if and only if other conditions are met.  Some of those conditions might be extremely unlikely to ever occur.

For example, Hollywood contracts often promise to pay a percentage of “net profits.”  But anyone peripherally attached to Hollywood knows that “net profits” never happen.  Creative bookkeeping will make certain that even the highest earning films make no net profit, although they’ll have a gross profit.  (And if you don’t understand the difference between those terms, go back to the sections on finances.)

So the contract promising to pay x% of net profit really promises nothing.

Publishing has its own accounting tricks which I could spend the next several weeks enumerating for you, everything from basket accounting to high discount rates.

Yet there are reasons to sign such contracts and often those reasons have more to do with what you want than what you’ll get paid.  You might get other clauses in the contract that will make you feel better about dodgy payment practices.

6. Control As Much of the Contract As Possible.  Remember that’s what you and the other party are negotiating—who controls what.  Try to keep as much of that control in your court as you possibly can.  But realize where you stand and who you’re negotiating with.  For example, if you’re negotiating a contract to sell your work to the movies, realize that you don’t have the deep pockets to make the film yourself. You will have to relinquish some control in those areas so that the film will get made.  Just like they’ll have to reimburse you for your property if they really, really want it. (And want to control it.)

7. Once you both sign, negotiation is over.  It’s your signature on that document.  That means you agreed to the terms therein.  You agreed.  The time to change the terms is before you sign.  If you complain afterwards, you won’t get any sympathy from me or anyone else who understands contracts.  Because understanding that document is your responsibility and you must understand it before you sign it.

Even more important, you must know you can live with the contract’s terms for the duration of that contract, be it six months or sixty years.

If you sign it, you’re responsible for every word in it.  You’ve made your bed, as my mother used to say—and the contract is proof of that.

I’m at my usual stopping word limit, and I could go on and on and on forever.  Contracts are exceedingly complicated.  But, in short, here are some of the basics of contract negotiation (covered above):

1. Expect to Negotiate A Contract.

2. Imagine How the Terms of the Contract Will Impact You Over the Lifetime of the Contract.

3. Focus on What You Want.

4. Make Sure You Have An Equitable Way to Terminate The Contract.

5. Make Sure You Know How You’ll Get Paid or How You Will Make Payments.

6. Control As Much of the Contract As Possible.

7. Once You Both Sign, Negotiation Is Over.

Good contracts, bad contracts, beautifully negotiated contracts, unnegotiated contracts—ultimately what happens with those is all up to you.

Expect no help with contracts.  Learn it all yourself.  I’ll deal with this aspect more next week, but remember this: You are responsible for your own career—the good and the bad.  Just you.  And that responsibility extends to the agreement you make, and the contracts you sign.

“Freelancer Writer’s Survival Guide: Negotiation Part Four” copyright 2009 by Kristine Kathryn Rusch.

You can now order either an e-book copy of the Guide or a trade paper copy of the Guide. It’s in slightly different format and has been organized, so that related topics are in an easily accessible place.