Speaker 1: Hey what's up and welcome to my I think it's a fifth I Lost a Number episode on how to start freelancing. Today we're going to talk about contracts, proposals, what's the difference between them, do you need them, do you need both of them. So let me get off starting by saying that I'm not a lawyer so you should take this advice as a freelancer advice rather than a lawyer advice. So here's how I see the difference between contracts and proposals. Contracts are documents, are legal documents that are more focused on kind of like the terms of the deal. What's going to happen, who owes what, and all the legal terms. Proposal is a document that is more focused on selling, on why we should do this deal, what does it include, how much does it cost, and so it's more of a sales document with the purpose of sealing the deal. Now a proposal also outlines the terms of the deal, kind of how much money it costs and the payment terms, and so sometimes, actually a lot of times, a proposal is already kind of like the contract. And so some people, I'm included, only send a proposal and do not send a contract later on. Some people send a very simple proposal and then expand on the terms on a contract, but again for me, I usually don't have too many terms. We'll discuss that in a second in my proposal. And so for me, just a proposal with about probably 10 bullet points of terms at the end is enough. Now from my experience, I've been freelancing around maybe 15 years and I actually never had a problem, well I'm very lucky that I never had a problem with a client not paying me, but never getting to a position of having to sue somebody in court. And honestly, and I have a lot of designer friends and freelancers friends, I don't know any of them that actually had to sue a client or use a contract in kind of a legal standing. And so I don't really think that the purpose of the contract or the purpose of the proposal is to kind of protect you in court, even though that's probably what lawyers are going to tell you. I think that this document is actually kind of like to set your expectations right so that both sides know what's going to happen and that everything is going to be clear. Because when things are vague, when different sides of you and your client have different expectations or you imagine the process of the work to be different, then this kind of might lead to tension or to conflicts. And so the purpose of this document is so that everybody is going to be clear on what's going to happen. And in that sense, I think a proposal or a contract really, really helps you out and I always send them. Obviously I'm using Prosper, our product, to send the proposal online and it also serves again as a way to sell my services so it looks great and clients think that I'm professional. But the core function of that is so that everybody knows what's going to happen. And I think that by having both sides sign on something, agree to something, that makes them both much more likely to agree to those terms and to actually do this rather than if they don't do this. It's not because they're afraid that literally somebody's going to sue them in court, it's just because they've made a promise, they put their name on something, they gave their word and so they're going to actually do this. And I think that if what you're worried about and you should be worried about is getting paid, how do I make sure that I'm getting paid, then actually the most important thing that you need to do is actually get a down payment before you start the project. Because somebody who already paid you is much more invested in the project and much more likely to pay you quickly on the next time. Plus you're already in their system so it's much easier to pay you. And if somebody doesn't want to pay you up front, maybe that's a red flag that this client might be problematic. So I think if what you're looking for is to protect yourself, then the most simple thing that you should do is get a down payment. But it's got actually nothing to do with the proposal or the contract. So let's talk about the terms. My basic terms, again, they're not very complicated. They're basically the payment terms, which is usually 50% up front. And then depending on how the project is complicated, it might be at either milestone after every milestone. So after the design phase, after the development phase, the rest of the money. Or if it's a very simple project, it might be like 50% up front and then 50% on delivery. Then there's the bullet point that if I need any more assets like photos, I'm a designer so my work might include illustration and stock photos and stuff like that. Or fonts, so that is not included. IP, intellectual property, means that until they're not paying the last payment of the project, they don't own the intellectual property. I own the intellectual property of the project and then upon final payment, I transfer the intellectual property to them. Might be an idea for a different video to speak in depth about intellectual property. I'm not going to cover this right now. But basically, yeah, and one of the other terms is work after this iteration that are specific to this proposal. Let's say I've set like three iterations included in the proposal. Every work afterward will be billed hourly at whatever my rate is. So those are kind of my basic terms when I set a proposal. And again, most of the proposal is just to describe our process, our work together, our deliverables, the goals of the project, to help help them gain trust in me and help me sell the project. And then the last section of the terms is kind of, again, not really to protect me as to make it clear how those kind of financial terms will work. If you want a more in-depth video about how I'm actually structuring my proposal, and that's actually the template or format that Prospero works in, I've actually made a specific video about this topic for InVision. So I will link in the description below the full video on InVision's YouTube channel about how I write my proposals. Alright, hope you guys found this helpful and have a great day. I'll catch you guys soon.