A scope of work and a statement of work are helpful documents to manage projects and set clear expectations. Using these documents is a must when you are managing more extensive projects, projects with significant risks, or to satisfy clients. You might not be familiar with these documents, so we’ll start by defining each of these documents, when to use each one of them, benefits and much more.
In this blog, we’ll learn how to use statement of work and scope of work for your business as we discuss:
- What is a statement of work?
- What is the scope of work?
- Statement of work vs. Scope of work.
- When to use a scope of work in your business?
- Benefits of creating a scope of work.
- The most common types of SOWs
- Writing project documents effectively
- Are you overlooking payments?
1. What is a statement of work?
Commonly abbreviated as SOW, a statement of work is typically used as a legal document. For example, a business consultant and a company. A statement of work functions as a contract that describes the cost, schedule, and other critical points in the project. It is essential to take your time in writing a statement of work. If you fail to meet the cost or schedule described in the SOW, your client may be disappointed and impose penalties.
2. What is the scope of work?
A scope of work is a much more detailed document filled with project details. For example, the scope of work may describe all of the critical milestones on a project. In addition, the scope of work may include reporting obligations. Some clients may request weekly or monthly reports to understand how the project is progressing.
3. Statement of work vs. Scope of work
There are a few key differences between each of these documents. Consider a statement of work to be akin to a contract that describes the “What” of the project, like cost and schedule. In comparison, a scope of work is a more detailed document that functions like a high-level project management plan.
Using these documents will vary depending on the project and company. Some companies insist on a statement of work because it has deadlines and fees.
4. When to use a scope of work in your business?
Deciding when to use a scope of work depends on your judgment. Let’s work through a few examples to illustrate when it may be helpful to have a scope of work.
4.1. Paid Consulting Call
Some consultants offer a paid consulting calls for a set fee using CheckYa. A scope of work or statement of work is probably not necessary in this type of work. Instead, the client may simply write up a few questions and send them to the consultant to review. To find out more about adding paid consulting calls to your business, see the post How To Earn More With Paid Consulting And Coaching Calls.
4.2. Website Redesign
Developing a new website for a company is a significant undertaking. With a larger client, you may need to engage with various stakeholders like marketing, sales, IT, and customer support. If the project has a significant cost – anything over $10,000 as a rule of thumb – creating a statement of work and a scope of work is helpful.
4.3. Life Coaching
In most situations, life coaches do not use either a statement of work or scope of work. Clients may still want to define their goals and scope less formally. For example, an executive life coach focused on presentation skills might set a series of milestones to help a client gradually improve. Breaking down a significant goal into smaller milestones makes it easier for a client to progress.
The importance of formally setting goals and scope for coaching matters when you are setting larger goals
5. Benefits of creating a scope of work
There are several vital benefits to creating a scope of work for your client projects.
5.1. Clarify Client Expectations
Without crystal clear expectations, it is straightforward to misunderstand a client. For example, a large company might want their legal staff to review website copy before it is published on the website. If this review requirement is not formally described, it will likely be missed. Likewise, the consultant can use a scope of work to keep the project focused.
Tip: Use a client onboarding process to discover your client’s goals and preferences early in the relationship.
5.2. Cure Feast and Famine Syndrome With Better Cashflow
Some freelancers and consultants struggle with feast and famine in their cash flow. You finish a few projects for clients this month, send out invoices with CheckYa, and then get paid. Then, you might earn less income next month because you haven’t finished any projects yet.
There are several ways to solve this typical feast and famine challenge. If you go long periods between client projects, the root cause of your problem is likely inadequate time and effort spent on sales and marketing. You can solve that problem by creating daily sales and marketing habits.
What if your cash flow problems are caused by working on large-scale projects that take many weeks or months to complete? In that situation, waiting until the end of the project to send out an invoice is unwise. Instead, specify a schedule of milestone payments on your statement of work. For example, you might specify that a $60,000 project fee be paid evenly across the year in twelve equal installments of $5000. Alternatively, you and your client might agree to payments based on progress made in the project (e.g., first payment when the initial design is created and subsequent payments
5.3. Minimize Deadline Stress With A Project Schedule
Burning the midnight oil to complete projects for clients is a constant challenge for consultants and freelancers. If these issues are left unmanaged, you’re likely to suffer burnout from excessive work stress. It’s more than possible to reduce deadline stress by carefully creating a schedule.
Let’s say that you expect your client project to take three months to complete. That schedule may be fine if nothing goes wrong. However, what if you or the client’s key staff get sick? Or what if there are unanticipated difficulties using technology? All of these unexpected problems can strike suddenly. The best way to mitigate these problems is to add a buffer to your schedule – add a few days or weeks to important deadlines to be more likely to hit your goals.
6. The most common types of SOWs
The format, purpose and structure of a Statement of Work (SOW) varies depending on the context. Using the right type of SOW for your project is an important choice. A simple SOW is fine with smaller projects. On the other hand, a six figure project (i.e. you are earning over $100,000 in fees) will probably require a more elaborate SOW.
6.1. Level of effort SOW
This statement of work has relatively minimal detail. It is commonly used for services such as consulting and services. It may describe the hours of work estimated to complete the project. In addition, this type of SOW may list required information that the client must provide to the client. For instance, a marketing consultant using a level of effort SOW may ask for sk to a client’s analytics services to better understand their needs.
6.2. Detail or design statement of work
This type of SOW is highly detailed including how the work should be performed. This type of SOW may be used in situations where there are significant risks or legal concerns. For example, it might be used in a complex construction project where there are major safety concerns. While this type of SOW can minimize risk, it is very time intensive to create. It is best to use this type of SOW only if there are significant risks involved in the project or the client requests this approach.
6.3. Performance based or outcomes statement of work
With a performance based statement of work, you are less concerned with the how of the project. Instead, the document focuses on the deliverables, project goal and resources. This type of SOW is a good solution if you want to maximize flexibility and innovation. A consultant with deep expertise in an industry may find this type of SOW to be a good fit. Note that it still requires significant trust and collaboration from the client and consultant to succeed.
7. Writing project documents effectively
Now that you see how a scope of work and statement of work add value to your business, let’s explore the steps required to create these documents.
7.1. How to Write a Statement of Work
Use the following steps to create an effective statement of work that helps you and your client stay on the same page.
7.1.1. Assess whether a statement of work is needed
Some clients – like larger companies and governments – tend to insist on statements of work and detailed contracts. Even if the client does not insist on a statement of work, you may still want to create this document to manage the project.
7.1.2. Draft the critical points of the statement of work
Every business approaches a statement of work in its own way. That said, a few common elements appear in nearly every SOW.
7.1.3. Review each key point with the client with a draft SOW
Your next step is to review the SOW with the client in detail. Take your time to review and explain unfamiliar terms. Further, if there are doubts or uncertainties in some cases, discuss those points. You may also want to formally state that some elements of the document are an estimate and that final results may differ.
7.1.4. Finalize the statement of work
Following your meeting with the client, update the SOW based on your feedback. By factoring in your client’s input, you are less likely to have any problems getting the SOW approved. Note that some clients may ask you to format or organize your SOW in a particular manner. If these requirements do not significantly impact your income or effectiveness, adopt these requirements.
Once the SOW document is completed, get the document signed.
7.1.5. Determine if additional documents are required
Now that your statement of work has been discussed and signed by the client, the first step of this process is to choose your next step. You may be ready to jump into project implementation right away in some cases. In larger projects or when working with highly process-oriented clients, you may find it wise to create a scope of work.
7.2 How to Write A Scope of Work?
The best way to write a project scope of work is to take a collaborative approach with your client. Indeed, you can take the lead by creating a draft scope of work. Before finalizing the document, seek your client’s input. They may ask for changes to accommodate their needs, such as subject matter expert availability and other priorities.
7.2.1. Determine the purpose of the scope of work
The client may entirely drive your need for a scope of work. For example, a large corporation may have a standard process that all consultants and contractors must follow. If that process includes a scope of work, ask for checklists and sample documents before you spend any time creating the document.
7.2.2. Outline the main points of the scope of work
Generally speaking, a scope of work includes the following components:
- Deliverables.
The deliverables are the finished products or services that the client wants. To avoid misunderstandings, get very specific! For example, a client might say they want a “mobile app” built. In that case, you may want to clarify if the client expects you to get the app published in the app store.
- Timeline.
The level of detail in the timeline or project schedule will depend on a few factors. If you have worked with the client on past projects and understand how they work, creating a highly accurate schedule is easier. On the other hand, it may be more difficult to estimate how long the project will take if you are working on something new- like using innovative technologies.
When there are uncertainties in the project timeline, focus your attention on what you can control. For instance, you might commit to the client that you will assess progress every two weeks and update the project schedule accordingly.
- Milestones.
Think of milestones as “mini-projects” that make up the larger project. For example, the first milestone of a website design project might focus on market research. Your compensation may be tied to the completion of specific milestones. In that situation, make sure you understand what “done” looks like.
- Reports.
Many clients feel better about your work when you send them periodic status updates about the project. Reports can be simple – like a weekly email with half a dozen bullet points. Alternatively, reports may be highly sophisticated with detailed charts, tables of data, and analysis. In some cases, your client might like to receive a report and then schedule a meeting with you to discuss the project.
Sending regular reports and status updates can take significant work! Remember to factor in this work when you choose your project fees.
7.2.3. Draft the scope of work and seek feedback from the client
Your next step is to create the scope of work in draft form and ask the client to review it. Specific details are your friend! If something is left unclear and the client is confused, it is your responsibility as the consultant to get clarity.
7.2.4 Ask the client to sign and approve the scope of work
Keep a copy of the signed scope of work and refer back to it regularly. As the project progresses, your client may have new ideas. During a large marketing campaign, the client may suddenly ask if you can add something new like YouTube advertising. When you receive that request, assess it against the scope of work.
If YouTube advertising was not covered in the scope of work, discuss this change with your client. If the change is important, discuss with the client that the project fees and timeline will have to be adjusted accordingly. Without a formal scope of work, your project may suffer from ‘scope creep’ – the addition of unplanned changes that slow down the entire project.
7.2.5 Reference the scope of work regularly
As the project progresses, set a reminder to revisit the scope of work on a regular bais (weekly or monthly). This is important because you or your team might end up doing additional work that is not covered in the scope of work. You may decide that overdelivering on the scope of work is worthwhile in some situations, but you should fully understand when and you are doing overdelivering. Otherwise, your profitability on the project may suffer.
8. Are You Overlooking Payments?
Your scope of work or statement of work will probably have some details explaining how and when you will get paid. However, some less experienced consultants and freelancers do not think through this aspect of their agreements in enough detail. For example, if you want to use CheckYa to send invoices and receive payment into your bank account, your client should understand that requirement. If you do not cover this requirement up front, the client may pay you using a slow and expensive payment method like a check or wire transfer. Adding CheckYa to your business is easy – click here to sign up for CheckYa.
