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Should My Startup Use Service Level Agreements?

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A service level agreement is an agreement a business shares with its customers. It is a contract that specifies what services that business offers and the standards they will uphold to deliver those services. Businesses can use these agreements to set customers’ expectations. This article explains service level agreements and how they could be helpful in your startup business’s operations. 

What is a Service Level Agreement? 

A service level agreement (SLA) is a contract that service providers and customers share. It can form part of the relationship between a business and a customer. The contract defines what services the provider will deliver and the standards they will adhere to. It sets out responsibilities and clear expectations between the contracting parties, ensuring that both parties can measure performance. 

SLAs are widely applicable across various industries. They can be essential to the success of any startup business aiming to manage customer expectations and ensure the delivery of quality services.

For example, in a customer support SLA, you might stipulate that your startup’s customer response team aims to respond to customer inquiries and issues within 48 hours of receipt, excluding weekends and bank holidays. This term sets a specific timeframe for acknowledging customer requests and issues, setting a clear and measurable target for a customer’s expectations. 

Another example would be a software company stipulating a maximum amount of time to resolve a technical issue. The SLA could specify that they will address critical issues impacting business operations within 2 hours and non-critical matters within 24 hours. 

What are the Benefits of Service Level Agreements?

1. Set Clear Expectations

SLAs can be instrumental for startups as they establish expectations and responsibilities between the service provider (your startup) and the customer in clear, measurable terms.

2. Customer Satisfaction 

SLAs help businesses manage customer’s expectations. SLAs can enhance customer satisfaction by explicitly outlining service quality and response times. Meeting or exceeding these agreed-upon standards can build customer trust and loyalty, which are qualities that are essential for a startup’s growth. 

3. Risk Mitigation 

Having SLAs in place can mitigate risk by addressing potential issues in advance. For example, for a tech company, these might include contingency plans for:

4. Scalability 

As your startup grows, SLAs provide a framework for scaling services. Clear service-related guidelines can facilitate a growing customer base and the implementation of new services while maintaining consistent service quality. 

5. Competitive Advantage 

Well-crafted SLAs can be a competitive differentiator. Demonstrating reliability and a commitment to service excellence can attract customers, especially in industries where reliability is paramount. 

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What Should Service Level Agreements Include? 

The contents of your SLA can vary depending on their specific purpose. However, SLAs generally include the following: 

  • duration of the agreement; 
  • services the business provides; 
  • standards the services provider will adhere to; and
  • consequences should the service provider fall short of their obligations. 

How to Draft a Service Level Agreement

When drafting an SLA, the key is to specify the services you will provide in a realistic, specific, and somewhat flexible manner. While SLAs should be firm, leaving room for flexibility during unforeseen circumstances can be beneficial to maintaining customer satisfaction. 

Customers also need to understand the SLA. This means you should:

  • define service parameters in precise terms;
  • avoid jargon and be clear about what they can expect; and
  • ensure your outlined metrics are attainable based on your startup’s resources and previous capabilities. 

You should regularly review and update SLAs to reflect changes to your service offerings, capabilities, or customer requirements. On that note, you may seek legal advice relating to your SLAs. A lawyer can review your draft of a service agreement or draft one on your behalf. You should prepare this document carefully. 

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Key Takeaways

SLAs are legal agreements that set out your business’ service offerings and the quality of those services. A service provider and the recipients of that service can share an SLA. Some companies use SLAs internally, for example, between their IT helpdesk and other departments. Benefits of implementing SLAs within your startup include:

  • setting clear expectations; 
  • mitigating risk; and
  • establishing a competitive advantage. 

If you need help drafting service level agreements for your startup, our experienced startup lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.

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