Legal/Payment Glossary for Freelancers and Copywriters
With a few tips snuck in there as well :-)
Have you ever been on a call when a client asks about the new trendiest marketing buzzword. “Do you have any experience with the POS Formula? [IM guru] presented at the [Expensive Exclusive Mastermind] meeting last week and added another 7-figure revenue stream! We should run it. What do you know about it?”
And it’s even worse if you’re new to this game! Sometimes talking with potential clients feels like going to Catholic Church for the first time. There seems to be a script that was handed out that you missed. (or is that just me that feels that way?)
With my FOCVS™ Coaching students through the Freelance Co-op, we frequently discuss “common” terms found in contracts and discussed during negotiations.
It’s critical to understand these terms while negotiating freelancing agreements.
NOTE BEFORE WE DIVE IN: Information we share is not a substitute for professional, legal, tax, or financial advice from a professional in any field. We are professionals and we’re sharing information related to our expertise. With that said, we are not substitutes for professionals that are up-to-date on legal and financial matters and who know your specific situation.
We also always recommend working with and seeking advice from professionals who are educated about the specifics of your industry, state, country, and other circumstances. See our complete Earnings Disclaimer for more details.
Ok, now that’s out of the way, let’s do this:
General Terms
Campaign
This is a generic term which usually includes all parts of a marketing project with one central “Big Idea.” A campaign could include ads, letters, and emails across multiple channels and the term may be used to describe all parts of the project, not just creative needs.
Control
Many publishers and marketers measure the success or failure of a campaign or package by the “control.” This term is used to describe the current successful promotion. Often the goal of a copy package, particularly for large publishers is to “beat the control.” This means achieving better conversions in a test run than the current control is getting. When a package beats the control, it becomes the new control. Royalties are paid to the writer of the current running control. Therefore, it is beneficial to the writer to update or “refresh” a control periodically (often yearly) in order to keep the control running for as long as possible.
Package
Similar to “campaign,” this is a generic term to describe a project. The package usually includes a specific list of deliverables. For a copywriter, the “package” will include all items the copywriter is responsible for. During the negotiation phase, it is important to get clear on what the client means by “package” including a list of specific deliverables.
Promotion
This is another generic term that could be used interchangeably with either “campaign” or “package”
Payment Structures
Bonus
Rather than offer a royalty on each and every sale, an option is a bonus structure which includes additional payment upon reaching certain sales goals. Could be a one-time bonus or multiple bonuses at different levels of sales. Sample language: “If the promotion hits the revenue goals outlined below, we will set up a bonus structure as follows:
- Do not meet objectives: No bonus
- Meet Revenue Objectives: Bonus of $50,000
- Exceed Revenue Objectives by 50% or more: Bonus of $75,000
- Exceed Revenue Objectives by 100% or more: Bonus equal to 10% of net revenue (less course/program refunds)”
Flat Fee
This is a single, project-based fee that is not dependent on results nor on the amount of time it takes to complete. Many clients prefer a flat fee over a royalty structure because it helps them to predict and budget payments. It is also useful for freelancers as results can depend on many factors outside the freelancer’s control.
Retainer
A retainer is a regularly-scheduled payment for a consistent, specified amount of work in a time period, often monthly. For freelancers, retainer agreements help predict monthly income and workload. Sample language for a retainer agreement: “Contractor base fee will be [MONTHLY FEE] per month for an ongoing retainer agreement. This retainer locks Client into Contractor’s schedule as outlined below.
The base fee per month is for Contractor to fill the role of [YOUR JOB TITLE] as defined in Appendix A. Payment is due by the client on or before the 1st day of each month. Projects begin when Contractor receives payment and this signed agreement.”
Royalty
A performance-based fee that is calculated as a percentage of sales made from the package as long as it is the control. Royalty agreements are usually paid monthly, quarterly, or annually and accompanied by detailed sales reports. This is a common arrangement for large publishers, particularly in the health or finance niche. While making income less predictable than a flat fee, royalties have the opportunity to pay out much more over the long term for successful promotions with trusted clients.
Payment Schedules
Kill Fee
A percentage of the total project fee that is charged to the client if the client cancels the project before the project is completed. Sample language: “If you cancel or put the project on hold once we have begun work, a kill fee will be applied. Our kill fee schedule is as follows:
- 10% if you’ve given a go-ahead and then cancel before we have started work
- 25% if you cancel and we have done research but haven’t submitted creative
- 50% if we have submitted outline or ideas but have not submitted a draft yet
- 100% of bill due if you cancel and we have already submitted a draft”
Refund Schedule
This is the sister to the kill fee. The freelancer explains under what circumstances a refund will be given. Sample language: “If either party cancels or puts the project on hold once payment has been made, the following prorated refund schedule shall apply:
- 90% refunded to you if you’ve given a go-ahead and cancel before we have started work (100% refunded if contractor cancels at this stage)
- 75% refunded if you cancel and we have done research but haven’t submitted work (100% refunded if contractor cancels at this stage)
- 50% refunded if we have submitted an outline or product framework but haven’t yet submitted a draft
- 25% refunded if we have submitted first draft but not done a revision
- No refund shall be offered if the project is cancelled and we have already submitted a draft and done one or more rewrites”
Performance-based schedule
This is when payments are made at different project milestones. Sample language from a client email: “Generally how we work with freelancers for our group we make a $1,000 deposit with you that covers the delivery of a Headline/Lead and general outline of where the copy will go. Once the headline/lead are accepted… we then make the first 50% deposit and when the project is completed with pay out the final payment.”
Time-based schedule
This is when payments are made on specific dates regardless of project progress. Sample language: “We will require 50% payment upon signing of this agreement and the remaining balance will be due in 30 days.”
Upfront Payment
This is a partial or total payment that is due before work starts, also called a deposit. We at the Freelance Co-op recommend that freelancers always ask for an upfront payment to cover the cost of starting work. This also protects freelancers from clients who do not pay.
Client KPIs
COGS
COGS stands for Cost of Goods Sold and is the amount that it costs to produce a product. For example, if it costs $5.17 in materials and $4.83 in labor to make a widget, the COGS is $10. Often royalties are calculated as a percent of Gross Sales minus COGS. In this example, if the product sells for $25 and the freelancer gets a 1 percent royalty, it would be calculated as ($25 — $10) x .01, a royalty of 15 cents per unit.
Gross Sales
This is the total sales without subtracting COGS, refunds, or any other expenses. This is also called Gross Revenue or “Top Line” revenue.
LTV
LTV stands for “Life Time Value” and is the average value of a customer over time with your company. For example, if a customer who buys a $7 product is likely to also buy a $27 product afterwards, the lifetime value would be $34. A formula for this is Gross Sales divided by total number of customers.
Net Sales
Net sales is Gross Sales minus COGS. Often also included in Net Sales is refunds. When negotiating royalties or bonuses it is important to know whether the royalty will be calculated from gross or net sales and how net sales is being calculated.
Refund Rate
The refund rate is what percentage of buyers request a refund for a product. It is calculated as units refunded divided by total units sold. For example, if you sell 250 units and 25 people refund, your refund rate is .1 or 10%.
Contract Clauses
Copyright
Not to be (but often) confused with copyWRITE, copyright or ownership is the section of the contract which explains who owns the work produced, when/how that might and the rights each person has to use the work. Sample language: “Upon Product Launch, title to the work product described in this Agreement shall vest in you. However, [COMPANY NAME] shall retain a limited perpetual license in the work product for use in our portfolio. If this Agreement is terminated prior to Product Launch, title to and all interest in, including any license or other right to use, shall remain in [COMPANY NAME] and you shall forever refrain from using the work product or any derivation thereof in any manner whatsoever.”
Indemnity
This clause explains who is responsible and/or liable for any legal requirements of the work. Sample language: “Also, although [YOUR COMPANY NAME] makes every effort to make your [copy/design/creative] comply with the law, we are not attorneys. Therefore, it is your responsibility to submit all [copy/design/creative] for legal review. You are also responsible for final proofreading of all the [copy/design/creative] .”
Revision Window
This section spells out when and how a client can request edits once the work has been submitted by the freelancer. Sample language: “All revisions must be assigned within 30 days of your receipt of the first draft of [copy/design/creative] . After that, additional revisions may be made at a fee to be negotiated separately from this agreement.”
Rounds of Revisions
An alternative to the revision window is offering a certain number of “rounds of edits” or revisions. This can sometimes get confusing unless “round of edit” is clearly defined. The Freelance Co-op recommends revision windows rather than rounds of revisions for this reason.
Scope of Work
This is the critical section of the contract, agreement, or proposal where deliverables are spelled out. Sometimes, this could be an appendix if the list is long and/or comprehensive and/or requires explanation. Often included in this section is a list of work NOT included in the scope for clarity.
Beyond the Glossary
For more detailed sample language, the Freelance Co-op has put together the Protection Pack.
The Freelance Co-op Protection Pack is 4 agreement templates that nearly every freelancer needs: a Standard Freelancing Agreement, a Retainer Agreement, a Nondisclosure Agreement (NDA), and a Collaboration/JV Agreement.
Plus, some exclusive resources for drafting your own agreements.
First, I included a detailed checklist of the 10 elements every freelance agreement needs PLUS lawyer-drafted sample language for each element that you can copy and paste right into your agreements and contracts.
(I personally spent over $10,000 for all of this language).
Then, there’s a Co-op exclusive training with attorney Gordon Firemark on legal foundations for freelancers. In this 30-minute training we cover how to draft agreements, how to save money on lawyer fees, when and how to think about your legal business entity, AND what to do when a client refuses to pay.
Plus, I have a whole section on Co-op approved lawyers (these are attorneys I’ve actually worked with) and how to get a free consultation with them!
You can get the Freelance Co-op Protection Pack here.
Here’s the summary. You get:
- TEMPLATE: Standard Freelancing Agreement
- TEMPLATE: Retainer Agreement
- TEMPLATE: Nondisclosure Agreement (NDA)
- TEMPLATE: Collaboration/JV Agreement
- CHECKLIST: 10 Elements every freelance agreement needs
- GLOSSARY: Payment and Legal Terms For Freelancers
- VIDEO: Legal Foundations for Freelancers with Attorney Gordon Firemark
- VIDEO: How to draft legally-binding plain-language agreements with Attorney Jacqueline Horani
- RECOMMENDATION: The Freelance Co-op approved attorneys and how to work with them (free consults available)
Click here to get the entire Freelance Co-op Protection Pack PLUS the Plain-Language Contract Class!