Five Contract Negotiating Tips Business Owners Should Know

August 29, 2019
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Sometimes, negotiating a business contract could prove cumbersome especially if one is ill-prepared for it. In order to put up a good negotiation and secure the contract, some things need to be known first-hand.

Five of the things you should know in your negotiation are discussed below.

1. Take Initiative

If you really want to set yourself up for success, it’s important to be proactive about your contracts even before the negotiation process begins. Start by offering to draft the contract: It’s a practical way to ensure that you’re very familiar with its language, and it’ll help you to be more aware of potential pitfalls and errors.

Drafting the initial contract isn’t just for your own good either. It’s mutually beneficial to you and your negotiation. You’re offering to lighten the workload, while also showing that you’re serious about having their business.

That said, be sure that you don’t simply make the offer and then run with whatever points you think are most important for the contract. That’s sure to quickly turn a client off to your business or vice versa.

2. Clarify Details

Make sure the terms and conditions are clear before proceeding further. Go through the responsibilities that the contract assigns to the parties and change the wording if you and your negotiating partners don’t agree on what it means. Avoid using sneaky language in your contracts, and you’ll save your business from gaining a dirty reputation. Instead, upon offering to draft a contract, send an email that clarifies the points that are important to both parties before beginning to write. Make sure the financial terms are clear, both in the amounts that are due and when the companies will make the payments. Check the dates when the contract comes into force and when it finishes. Examine what happens when one of the parties doesn’t fulfill their part of the contract.

3. Always Start With a Term Sheet.

Term sheets address big-picture items. This initial stage of the negotiation process is like dating. At this point, everyone should be happy! Make sure to stick to just the broad strokes at this stage. If you can’t agree to a term sheet, why bother trying to sign a contract? It will never work out. Don’t waste your time.

4. Know The Other Party’s Needs and Desires

Even after both sides have discussed the points that they feel are important for the contract, it’s up to you to understand the full extent of the other party’s true needs. If you try to negotiate outside of their means, you’re going to run into a lot of unnecessary roadblocks and revisions.

Do some research on your client before you begin drafting the initial contract, and you’ll have a much easier time with the negotiation.

Some basic things to research are the other party’s financial limits—spending habits, business costs, etc.—and it’s basic business model. Obviously, negotiating to fulfill an order of paper goods to a youth center will look much different than an order going to a corporate office. If you want each one’s business, your contracts will have to cater to each client’s individual means and needs.

This same rule applies if you’re seeking to secure goods for your own company. When negotiating for a company’s services, you have to draw a tactful line between asking too much of them and giving them too much wiggle room. You can’t ask a mom and pop hardware store to produce on Home Depot’s level, but that doesn’t mean they get to run the clock.

Don’t overstep your bounds. The last thing you want to do in drafting a negotiation is to intimidate the other party out of doing business with you.

5. Be Reasonable.

I mean it. To be reasonable, you need to know what is actually reasonable — so do your research. Talk to some industry experts. What can you expect? Actually listen to what they say.

Never forget to think about your end game. What are you really after? How much do you want to make this partnership work? What are you willing to give up in return?  If someone tries to rush you, that’s a big red flag. These are important considerations — considerations that may evolve over time. Plot your moves carefully.

Conclusion

Keep the ball moving towards the end zone with all parties. That means follow-up on what you promised to deliver. Follow-up on any customer questions/ideas. And keep pushing to the close.

BUT, this also means follow-up AFTER the deal is signed. Ensure the customer is happy and that they are using the product effectively. Offer them ongoing training and touchpoints. Stay involved. Keep them happy and develop them as a partner who will not only be happy with you but will tell others too.

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