MSP Contracts 101: Building Client Contracts That Scale

It’s rare that a week goes by where one of the MSPs in my Peer Groups isn’t asking some sort of legal question. Questions like what do I do when a client won’t follow my advice? Or, how do I update my MSA? There are quite a few questions that come up over time and that’s what we’re talking about today. Your client contracts, structure, and how to take care of the most common questions that come up in my travels.

My name is Adam Hannemann. Welcome to Ramblings of a Geek. I’ve been in the MSP space for north of 25 years, and I’ve spent a considerable time talking about contracts with some of the legal minds in the space. I’m not a lawyer, so take this video for what it is: business owner to business owner advice. If you are looking for legal help for your MSP here are my recommendations (in no particular order):

• Brad Gross – https://bradleygross.com
• Tom Fafinski – https://virtuslaw.com
• IT Agree – https://itagree.com

I believe that you should use your contracts to be on the same page with your clients. Your goal for your contracts should be to bring clarity to your client relationships. When you do this well you greatly reduce the risk of going to court. It’s pretty clear that if you go to court and win, you still end up the loser because of the time loss and distraction from what’s really important to your business.

Today, I want to dive into some common legal questions that MSP business owners frequently ask. These are topics that come up time and time again, and I’ll cover four key areas: contract structure, master service agreements (MSAs), declination letters, and deploying contracts. Let’s get started.

1. Contract Structure: Building a Modular Foundation

A common question that gets asked is how are contracts structured? Do you just have one big contract or a bunch of smaller contracts?

Building a contract structure that allows you to scale is important. Think of this as your contract stack. I mentioned the concept behind a contract stack in a previous video. I’ll link that above, but I’m going to dive in a bit deeper on today’s video.

Most of the MSP Legal minds in the space use a modular structure similar to this for good reason. It allows you to scale your contracts with your clients as your relationship grows (or shrinks). You really don’t want a big monolithic custom contract for each client. This is like letting each of your clients have their own custom hardware/software stack. It’s harder to implement, harder to support, and when something goes sideways all bets are off on what the impact will be.

Think of building your contracts out like your technical stack. Your contract stack starts with your MSA and builds upon there. When done well, this allows you take on clients of different sizes and complexities far easier. Let’s talk about the layers of this contract stack for a few minutes.

• Start with the MSA: This is your master service agreement, the foundation of your relationship with the client. This defines how you will work together with your clients. It covers things like liability limits, payment, force majeure, non-solicitation of employees, and all of those things. This MSA is so vital that I would suggest that you don’t even do a pre-sales audit without having one in place.
• Layer in service-specific contracts: These define the services you provide—managed services, projects, security, VoIP, etc. This is where you describe WHAT you will do for your clients. These service-specific contracts tell your clients what is included in the service or project, how to get help, and generally what to expect. You have one of these for each service you provide.
• Tie it all together with a quote or proposal: This finalizes the agreement and ensures clarity. This is where you outline the price for the service or project, and put the whole agreement together.

This approach makes your contracts easier to decipher, grow, and shrink as needed. It also allows for customization without rewriting the entire document for each client.

2. Master Service Agreements: The Backbone of Your Contracts

There are all sorts of MSA related questions, but two of the most common questions are: How often do you update your MSA for your MSP and how do you update your MSA for your MSP?

Since your MSA is the document that defines your relationship with the client it’s important to understand that you don’t want to change it often. Most MSPs have a need to change it every 3-5 years often modifying some clauses here and there. So the answer to how often do I change my MSA is every 3-5 years as long as it’s implemented well.

The second question of how do you update and communicate updates to your clients requires a longer explanation.

1. When you update your MSA you should communicate the changes to your clients in a consistent method. If you had your clients use an electronic or wet signature to start I’d probably have them follow the same process when you update them. If you want to shift from wet signature to a fully online contract you will want to spell that out clearly. Mystery in the legal sense is your enemy, so be clear about this.
2. You should also tell your clients what you’re changing without them having to read the whole damn thing again. Recently I had a service I use all the time change their terms of service and they sent me an email with a clear update and what to expect moving forward. I LOVED this because it was easy to understand what changed without having to read two contracts to understand the difference. Would your clients REALLY read both? Probably not, but some might. Or, more importantly, some may ask their lawyer to review the contracts and lawyers like to get credit for their work so expect more questions than you want to deal with.
3. You should NOT just change your contract and expect your clients to “see” it at some point in the future. This is an unreasonable request and good luck handling that if you ever end up in court. Lawyers will happily argue about this at their hourly rate. You’re FAR better off to just be clear about this upfront and communicate the change to your clients.
4. If you have a client that asks you why you’re changing the contract you can blame your lawyer or your insurance agent. Heck, blame them both. You could say something to the effect that as part of your annual insurance renewal they had some language changes that you had to make, so you worked with your lawyer to integrate the changes smartly.

Ultimately, my default mode here is to opt for clarity and transparency with your clients.

3. Declination Letters: Handling Client Refusals

The next question comes up about every other week: What do I do when a client declines a key service? Usually around something security related.

When a client declines a service or recommendation, it’s crucial to document it properly. Here’s how to handle declination letters:

• Be specific: Clearly state what the client is declining (e.g., multifactor authentication, a security tool).
• Explain the risks: Outline the potential impact on their business.
• Set boundaries: Make it clear that you won’t provide the service in the future unless they request it in writing.

The key here is that you don’t ask them to respond to the email acknowledging that they’re declining the service. It’s too easy for the client to “forget” to reply. If something bad happens and you never got that acknowledgement your lawyer will probably love fighting that in court at their normal hourly rate which is almost certainly double or triple yours.

So, you have two options in my opinion: Get them to do an electronic signature or wet signature and MAKE SURE THAT THEY DO IT. Or, send them the email with the three pieces that I already mentioned: Describe the service they’re declining, the risk to their business, and that if they change their mind in the future they MUST ask you in writing to implement it.

Ambiguity is your enemy here. A well-crafted declination letter protects both you and the client. I’ll also drop a link to Brad Gross’s podcast episodes that talk about this in more detail.

4. Deploying Contracts: Getting the Legal Ducks in a Row

This often comes from the MSPs that are trying to DIY their contracts: How do I get the contracts implemented properly?

Deploying contracts effectively is just as important as drafting them. My first recommendation is to have their lawyer help them. This is something that should be part of the scope of work you agreed to with your attorney.

That said, let’s say you’re trying to do this in a DIY method. Here are a couple of strategies:

1. If you’re going the DIY route the easiest way is to do a wet or electronic signature. This will better protect you from some of the potential pitfalls of having clients agree to your MSA and whatnot via the online methods. Have the client sign each document and you countersign. This is about as straightforward as it gets. Just make sure that you have copies of the countersigned agreements and that you share those with the client as well after they’ve been signed.
2. If you really want to do the online thing the process is to have your MSA available on your website with a version number and date of service. That URL must be online and available all the time. Then, in every subordinate contract, quote, or proposal you refer back to that URL. This should be worded with the clear understanding to the client that agreeing to the contract, quote, or proposal that they’re also agreeing to the MSA that can be found at the following URL…
   1. A caveat when it comes to updating your MSA: If you change your MSA you will need to version it on your website. You should NOT just change that MSA and assume that everyone will agree to whatever the changes are. The simple way to do this is to have your original MSA URL turn into the versioning URL where the page says for agreements signed between Day X and Y here’s your MSA and for agreements signed between day Y and Z here’s your MSA.

If you’re not using a law firm to help with this, I strongly recommend it. DIY approaches can lead to costly mistakes. Seriously, a few grand upfront will save you more than that on the back end and you get to sleep more soundly at night.

Final Thoughts

Contracts are more than just legal documents—they’re tools for building strong, transparent relationships with your clients. Be clear, be consistent, and always communicate changes openly.

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