A well thought-out Statement of Work (SOW) is the first step in setting a positive client relationship. Many individuals, not to mention entire organizations, have a hard time understanding the true definition of a great SOW.
A statement of work is imperative as a baseline for establishing positive client relationships. A statement of work can be defined as the contractual version of trust between agencies and their clients.
Your SOW Is a Contract of Trust. And Today, Trust is Paramount.
Media, marketing, and PR agencies have entered into a dynamic business environment. Today, 30 percent of business is done by outside providers and contractors. In the next five years, this percentage is expected to grow to 40 percent. That means agencies have countless opportunities to grow their business, scale their productivity, and thrive in this exciting time. Yet, this is also a challenging time.
Global trends are forcing rapid business model changes. At Mavenlink, we call this changing economy the Service Level Economy (SLE) — a global ecosystem in which service providers (i.e., you) and their clients exchange services for revenue, with the aid of contractual agreements. Within this ecosystem, agencies conduct business across geographies and boundaries, amongst multiple stakeholders, in a fashion requiring a strong, digital infrastructure to govern these relationships.
Success in this ecosystem requires your top performance, transparent work, and ability to quickly tap hyperspecialized talent. Above all else, it requires trust in every relationship.
You Just Won New Business. Now What? Define Your SOW.
The first and most critical step in your new client relationship is the process by which you and your client set expectations on project outcomes and the work to be completed to get there.
Your statement of work (SOW) sets the tone for the formal work agreement between you and your clients. The SOW differs from, and is more detailed than, a sales proposal. It contains details about responsibilities, objectives, assumptions, cost estimates, deliverables, dates, and more. These inclusions clearly define the obligations and expectations of both parties, to avoid discrepancies later on.
What is the Definition of A SOW?
Your SOW establishes the clear methodology by which your organization delivers work. Your methodology is high level, while your SOW is the specific application to this client’s work. Your SOW captures the dynamic discussions you and your client have had about their needs and your services. It defines the intended outcome.
What Happens with a Poorly Scoped Project?
While a good SOW creates confidence and sets expectations that are the foundation for positive results, a bad SOW is the number one reason for project failure. Consequences from oversight when creating a SOW include budget overruns, delays, and inadequate resource scheduling. You can avoid that with a great SOW.
Nine Must-Haves for a Great SOW:
1. Align both parties’ expectations
2. Mitigate disputes
3. Include appropriate legal protections
4. Reduce fee write-offs
5. Result in a happier client
6. Create a great working relationship
7. Foster a better likelihood for repeat business
8. Result in the right to reuse the work/product
9. Increase success for both parties
Make Your Statement of Work Specific:
Your organization has a standard methodology for delivering work. This highlevel methodology influences a very specific SOW. Beware of copy-pasted SOWs. You can use a SOW template, based on your work-delivery methodology, but we advise that your SOW be specific to your client needs. Broadly defined SOWs put you at risk for three situations:
1. You may be expected to provide additional services at no additional cost.
2. You and the Client may have to meet halfway to fix a discrepancy. (Do what you need to keep a client relation in good standing.)
3. You may need to draft a second, more detailed SOW that sits atop the first.
Required Sections in Your SOW:
There are nine sections we recommend for your SOW:
3. Scope and Responsibilities
5. Approach, Organization, and Staffing
7. Fees and Expenses
8. Standard Business Practices
If you want to learn more about what to include in each section of your SOW, download our free eBook,"The Definitive SOW Template and Writing Guide for Project Managers"