February 18 by Patrick Wolf

contract negotiation tips

There is a saying that goes, “You know its a negotiation when both sides leave angry.” Although it is true that some negotiations end in anger, it should be expected going into it. What should be strived for, on the other hand, is a scenario in which both party’s main priorities have been met so that they both can leave satisfied, if not happy. There are many strategies and tips available that can be used to help produce successful negotiations, ranging from giving the opposite party caffeine to scheduling the meeting time early in the day. This article, however, will contribute nine tips that will help produce an effective overall process of creating successful negotiations.

preparation is key for contract negotiation

1. Always Prepare and Know Which Direction To Take

It may be common sense, but the importance of preparation going into a negotiation cannot be overstated. When both parties come into the negotiation properly prepared, the conversations are more comfortable and more natural. Successful negotiators understand their priorities before they begin and know which direction they would like to take. Along with this, they have devised alternatives paths if the negotiations should hit roadblocks.

In addition to creating a better overall environment, proper research into the other party can give you an advantage. The more you know, the better you can take advantage of your strengths and their weaknesses. Information is power.

2. Rank Your Priorities

Take the time to rank which aspects of the contract you can’t do with out and which are just small bumps in the road. It is important to have a strong grasp on which points you can give up ground and which you cannot. Some points will inevitably be points of contention, however one must always keep the big picture in mind. Negotiation cannot be an all or nothing approach. Try to avoid getting bogged down on issues that are not important to you so that more time can be spent on those that are.

More specifically, when you’re entering negotiations it is best to have your biggest priorities discussed first before moving on to less important topics. This allows the parties to have more control over the time spent on the most important issues.

3. Know Where You Have Leverage

Understand what leverage is available to you and use it to promote favorable terms. Where do you have an advantage? What can only your product or service provide? What are their weaknesses? Don’t be afraid to take advantage of your strengths. Keep in mind, though, that you are building a relationship with the other party. If you push too hard and are too aggressive with a certain weakness, the relationship could fall apart.

Related:How to Properly Manage Your Contract Obligations to Gain a Strategic Advantage

4. Understand the Other Party’s Perspective

It is important to always look at the negotiation from the the point of view of the party sitting opposite. Understand their priorities, what leverage they have, their time constraints, etc. Ask plenty of questions. Try to determine what would be an acceptable outcome for the other party and compare that to yours. They might be different than your own. Attempt to satisfy their priorities if it doesn’t hurt your overall position. By understanding your opposite, you will be more able to craft a win-win scenario.

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5. Don’t Be Afraid to Walk Away

Every negotiator must understand that there is always a line at which to break off negotiations. There are many reasons to walk away from a deal including, but not limited to: you do not trust the other party, there is a high level of riskiness, or the other party is making unrealistic demands and ultimatums. If the opposite party does not agree with one of the top priorities that you feel are non negotiable, it might just be best to walk away. Although it is counterintuitive, there is a point at which everybody needs to throw in the towel. This will save you from future pains and wasting time on a staled deal.

In terms of the deal itself, make sure the milestones and penalties for missing them are chiseled in stone. Along with this it is important to have an exit clause. You do not want to be contractually obligated to remain with a client that can’t provide what was originally agreed upon.

contract negotiation tip budget

6. Don’t Disclose Limitations or Budget

It is best not reveal to another party your budget or other limitations. These could be leveraged against you during the negotiation process. For example, if you reveal the upper limit of what you are willing to spend, you will most likely end up paying that price. In contract negotiations, both parties should always try to get the most and best of the product for less than what was originally planned.

See Also:Contract Management How to Mitigate Legal Risks in a Digitally Disrupted World

7. Be Aware of Cultural Differences

This is pretty self-explanatory. Different cultures handle negotiations differently. This can be classified as part of preparation, but its importance can’t be understated. Do your research. It makes the negotiation process much smoother.

8. Use Facts, Not Emotion

The best negotiation is the one in which emotions have no presence. The parties are both rational and practical. Make the negotiation less personal and more practical, so as to avoid ignoring basic instinct. Try to prevent unpleasant personalities creating problems. If the two negotiating parties are not working well together, the negotiation will most likely end badly. Sometimes it is better to just replace the team and move on from there.

9. Nothing is Set in Stone Without a Signature

Once the negotiation seems to be finished, it is natural to become relaxed and assume that it is a done deal. This can lead to many problems if the other party decides to bring up last minute points. What happens if your team has already been disassembled, or has members that have gone on a holiday (or mental) vacation? It is easy for small points at the end of a negotiation to be overlooked and cause problems in the future. Stay focus throughout the process until the final signature is on paper.

contract signature

In the end, don’t pound the other side into submission. If they feel abused they probably won’t be quick to enter negotiations again. Remember, you are going to have to work with them in the future. You are creating a business relationship so it’s best to end under the best possible terms. The goal needs to be to create a win-win contract. Negotiations are not a zero sum game; so don’t think of the people opposite the table as enemies.

Although the above nine tips are not all encompassing in scope, they will help set you on the right path for successful negotiations.

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