What Is a Service Level Agreement (SLA)? And How To Write One

Written by Coursera • Updated on

Discover what goes into a service level agreement (SLA), why businesses need SLAs, and how to write one.

[Featured image] A sales representative in a brown jacket meets with a vendor to finalize an SLA (service level agreement).

SLA meaning

SLA stands for service level agreement and refers to a document that outlines a commitment between a service provider and a client, including details of the service, the standards the provider must adhere to, and the metrics to measure the performance. 

What are the three types of SLA?

1. A Customer SLA is an agreement between an organization and a third-party vendor providing a service. For example, an organization might hire an office supply company or a design agency to fill specific business needs. 

2. An Internal SLA is an agreement between teams within an organization. For example, the sales team might enlist the marketing team for support in generating leads. 

Read more: Marketing vs. Sales: What's the Difference?

3. A Multi-level SLA is an agreement between multiple parties, such as an organization and multiple vendors, more than two teams within an organization, or a vendor providing services to customers with different service plans. For example, sales and marketing teams within an organization might find they need to enlist the help of a third team—customer support—to improve customer satisfaction. 

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To create the simplest version of an SLA, you need to know three things. One, the average conversion rate from lead to opportunity. Two, the average conversion rate from opportunity to closed sale, and three, the average value of a sale.

Why are SLAs important? 

SLAs are common in the technology industry but can be used in any industry. A service level agreement is an important component of business procedure with several benefits for organizations, teams, and vendors: 

  • An SLA establishes trust and peace of mind among all parties involved. 

  • In specifying the services provided, terms and conditions of the service, and the standard of performance measurement, an SLA aligns everyone’s expectations.  

  • A consistent and collaborative SLA practice can lead to new business opportunities. Vendors can offer clients transparency, address concerns, and describe a high level of service when all parties contribute to an SLA draft.   

Read more: B2B Marketing: Definition + Strategies

How to write a service level agreement in 5 steps

Although SLAs can vary across industries, vendors, and types of services rendered, there are several key components of a standard service level agreement:

  • Agreement overview

  • A list of stakeholders 

  • The goals of all stakeholders 

  • A description of services

  • Service levels

  • A list of services excluded from the agreement

  • Conditions of cancellation 

  • A plan if goals aren’t reached 

  • Service performance metrics

It’s a good idea to create a basic SLA template and keep it handy, whether you are hiring a vendor or are a vendor offering your services. That way, you can be prepared for any business situation and tailor the template to the needs of stakeholders. 

Follow the steps below to write a service level agreement: 

1. Define the service. 

Your SLA will need to define and outline the service clearly. Be sure to cover these points: 

  • List of stakeholders and points of contact, along with their roles

  • Service scope, including specific services provided, as well as services excluded 

  • Customer obligations, including the amount the customer will pay and how frequently

  • Vendor obligations, including specific actions the vendor needs to take

  • The specific conditions for canceling the agreement, such as when goals remain unmet over a specific time period. 

2. Verify service levels.

Service levels quantify the performance or output of a service. For example, a call center might define a service level as the number of calls answered every hour, while a bakery might define a service level as the number of baked goods delivered to a client per day.

Service levels look different for every SLA. Work with stakeholders to verify the deliverables and deadlines. 

3. Determine performance metrics.

Clear performance metrics mean stakeholders can determine whether a service has been rendered successfully. Here are some examples of potential SLA metrics:

  • Quality of the output

  • Error rates

  • The cost of meeting SLA goals  

  • The impact of the output on the client  

Include a statement about how metrics will be monitored, such as through different software and business tools or during regular team meetings. 

4. Prepare the service level agreement document. 

Prepare your service level agreement document using the information you gathered in the first four steps. Here’s a checklist of common items included in an SLA:

  • Agreement overview

  • A list of stakeholders 

  • The goals of all stakeholders 

  • A description of services

  • Service levels

  • A list of services excluded from the agreement

  • Conditions of cancellation 

  • A plan if goals aren’t reached 

  • Service performance metrics

5. Review the SLA with all stakeholders. 

Before finalizing the SLA, review the details and invite all stakeholders to offer feedback. After all stakeholders agree to every item, gather signatures on the final SLA and distribute.  

SLA takeaways and best practices

Remember: An SLA is an important business tool, as it can establish trust and peace of mind among stakeholders and enable everyone to expect the same outcomes. Create an SLA template that you can tailor for any business situation. 

Here are five SLA best practices to keep in mind:

1. For every SLA, ensure all stakeholders agree to everything before the service delivery begins. 

2. Design an SLA with end users in mind. Who ultimately benefits from the services rendered? How will they benefit? How can the SLA ensure that end users’ needs and desires are met?

3. Set realistic and achievable service levels. 

4. Reserve time to review the SLA, even after the service delivery begins, to make necessary adjustments. 

5. Use precise terms to define the service, service level, conditions, performance metrics, etc., so stakeholders understand the SLA. 

Get started with Coursera. 

Online courses can be a great way to learn business best practices, including service level agreements, and discover career options. 

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