An engagement letter is the legal foundation of every consulting relationship. It protects both the firm and the client by clearly defining expectations.
Key Components
1. Scope of Services
- Detailed description of what will be delivered
- Specific exclusions (what's NOT included)
- Assumptions underlying the scope
2. Fees and Billing
- Rate structure (hourly, fixed, retainer)
- Payment terms and schedule
- Expense reimbursement policy
- Late payment terms
3. Timeline
- Project start and end dates
- Key milestones
- Dependencies on client participation
4. Team and Responsibilities
- Key personnel assigned
- Client responsibilities and contacts
- Escalation procedures
5. Terms and Conditions
- Confidentiality obligations
- Intellectual property ownership
- Limitation of liability
- Termination clauses
- Dispute resolution
Best Practices
- Be specific: Vague scope leads to scope creep
- Include assumptions: Document what must be true for success
- Define deliverables: List every tangible output
- Address changes: Include a change order process
- Get signatures: Both parties must sign before work begins