How To Set Out Your Fixed Price Agreement

Sometimes referred to as an FPA, a Fixed Price Agreement is essentially a document that sets out in writing what has been agreed regarding the scope of the work, the price, and the payment terms.

I’m going to share with you some of the key elements you should have in all of your FPAs.

You can watch the video here.

#1 - Set out the price

Obviously, your FPA should set out what the price is. This price should be agreed on during your price conversation with the client.

It should also outline when the price is due to be paid. There needs to be a deadline set.

You may also need to include specific details to do with how the payment will be received, if it will be split into multiple payments, and so on.

#2 - Set the scope of work

It should be very clearly stated what the scope of the work is going to be.

State exactly what work needs to be done, how much there is and what you are going to be doing to tackle that work.

There should be no dispute over the scope.

#3 - Give the client choices

It’s important that the client is involved in the pricing process. Give them choices to pick from, then make sure those choices are recorded in the FPA.

This confirms the options they have chosen, but it also shows which services they have declined.

That way, if they come to you later in the project and request something outside the scope of work you can easily explain that it was offered to them and they didn’t want it so it will be an additional price.

#4 - Reduce the client’s risk

You need to make it easy for the client to sign. You can reduce their risk in many ways.

You could have guarantees. Or a ‘cancel at anytime’ policy - that would be a good one if you are selling an ongoing service with a recurring fee and the client isn’t sure if it’s totally right for them.

An example might be business advisory services.

The client may not have experienced it or bought it before, so they might have some doubt in their mind about whether to buy. They may think if they sign on for a 12-month, or 2 or 3 year commitment, it’s harder to confidently say yes.

But if you build into your Fixed Price Agreement some wording that explains that the client can cancel at any time, it takes away some of the risk making it easier for the client to say yes.

#5 - End date

Make sure you consider having an end date in your Fixed Price Agreement. This is particularly important if you are looking at ongoing services like bookkeeping or payroll.

One of the mistakes I see commonly in the profession is someone agreeing to a price with their client and still charging the same price 5 years later because they haven’t revisited their FPA. They find it easier to just let it carry on.

Make it clear to your client that this contract is for a year, and at the end date it will be revisited and the prices will be reviewed.

If you found this valuable and would like to learn more about value pricing, I run a free live online training session every month with a topic chosen by you. Attend live and you can ask me any questions you have. Click here to register and I will send you an invitation to the next session.

Wishing you every success on your pricing journey

Mark Wickersham

Chartered Accountant, Public Speaker and Author of Amazon No.1 Best Seller “Effective Pricing for Accountants”