By Brett Derricott. Brett is the founder and CEO of Agency Fusion, a web development company built especially for agencies and designers. Brett blogs about technology as it relates to design and advertising at agencybyte.com.

They say that all is fair in love and war. I’m confident there are also some who would add that all is fair in business too. Defining what is “ethical” in business is difficult at best, especially such that everyone else will agree, but creating a code of ethics to define what you will and will not do in the name of business is a more manageable task.

Establishing your own code of ethics and adhering to it strictly has at least 5 benefits.

1. Customers Will Respect You
If you plan on being a freelancer for the long haul, establishing long-term relationships with key customers is critical to your success and happiness. Fostering these relationships requires that you make decisions with a long-term perspective rather than a project-specific or short-run perspective.

Being honest and upfront with your customers is an absolute requirement in establishing these types of relationships. There are at least three common subjects that are easier to avoid than to discuss upfront:

• Pricing. Avoid the temptation to create low cost bids to win projects when you know that your actual cost will be higher in the end.
• Payment terms. If you require a down payment or have other special payment terms make sure the client is aware from the beginning.
• Legal matters. Make sure you clearly explain all contract terms. Address intellectual property issues if you intend to enforce copyright to creative works you produce. Many clients don’t understand the law in these matters.

Here’s a quick litmus test to help you determine if you need to make extra effort to be upfront about an issue with your client: Will your client be surprised or disappointed when they find out later? If so, bring it up now. Sooner is better.

2. Competitors Will Respect You
It may seem strange to consider your competitors in a discussion like this but you never know when you may need your competitor’s good will. Being fair and just when speaking about or interacting with your competitors has several benefits:

• Referrals. It may not happen often, but competitors can sometimes refer business to you that does not meet their specific criteria. Likewise, if a competitor has more business than he or she can handle they will refer new projects to the competitor they hold in highest esteem.
• Perception. Potential customers will perceive you as a better vendor if you appear confident and secure in your position relative to your competitors. Speaking negatively about your competitors reflects more poorly upon you then upon your competitor in customers’ eyes.
• Competitor respect. By engendering respect among your competitors you may decrease the likelihood that they will use underhanded business tactics of their own. You can set a tone of mutual respect that will benefit both of you.

3. You’ll Respect Yourself

Clearly, this point is only valid if you feel that ethics are important.

There is tremendous value in being able to sleep at night knowing that you’ve been fair and honest with those you’ve done business with. To succeed by unethical means is unlikely to produce the same level of happiness as to succeed by fair play.

4. Difficult Situations Are Avoided

When working with clients it’s tempting to avoid uncomfortable topics like accounting or legal concerns especially during the sales process. We fear that a client may be “turned off” by discussing our accounts receivable policy or asking them to sign a legal agreement that protects our interests.

One of the key differences between inexperienced freelancers and those who have been professionally freelancing for years is the understanding that it is better to address difficult topics before the project begins than it is at the end of the project.

Many difficult situations involving money or legal concerns can be avoided by discussing your terms upfront. By the end of a project, your client has had far too much time to assume how things will work and getting them to accept what appears to be a change in terms will be difficult.

5. Good Goes Around

Finally, the least tangible reason of all but perhaps one of the best reasons is that “good goes around.” When you do business on-the-level you are placing your customers’ happiness on the same plane or a higher plane than your own. Somehow, life seems to have a way of paying back those who adopt this philosophy.

What do you think? How important are ethics in business? What scenarios do you frequently encounter that challenge your sense of ethics?