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In this SOP video for Managed Service Providers, Karl emphasizes the importance of having everyone sign a contract. He clarifies that the service agreement is key to defining the client-provider relationship, encompassing billing frequency, rates, and essential details beyond just the statement of work. The service agreement serves as a comprehensive overview that not only outlines financial terms but also addresses legal aspects related to insurance and tax entities. Ultimately, having a contract is vital for clarity and protection for both parties involved.