Contract negotiation shouldn’t be something feared by businesses. Instead, it could be viewed as an opportunity to create a business scenario where the parties involved are treated in a fair manner while also building on what hopefully becomes a long-standing, positive professional relationship. In this article, you’ll learn 7 valuable tips that help you better understand the process of business contract negotiation.
Related: Why You Should Review and Update Your Contracts
Contract Negotiation Is About Creating a Mutually Beneficial Relationship
In contract negotiation, businesses should never come to the table with a “versus” mindset. What does this mean? It means that you shouldn’t consider contract negotiation is a way for one of you to get the upper hand over the other. Positive professional relationships matter. The best way to encourage great relationships is to look at the contract as what it is: a team effort to fulfill a specific goal.
To create a mutually beneficial agreement, keep the idea of collaboration at the front of your mind. The parties should also remember why they’ve chosen to do business together. This doesn’t necessarily mean that no problems will arise. It means that the parties focus on why they want to do business together and what they can do to make that happen.
And if you do experience a situation involving a party who seems to be overly aggressive or manipulative, understand that they may not have been exposed to contract negotiation as a tool to build agreements that work together to benefit both parties. Don’t take that sort of behavior personally. One strategy you can use to avoid these sorts of scenarios is to hire a business contract attorney who can review the contract and work directly with the other party on your behalf.
Know Their Needs Before Contract Negotiation Begins
One of the most valuable tips we can give you is how important it is for you to know the needs of the other party before negotiation happens. The needs, or pain points, of the other party are the reasons why they are entering into a contract with your business. There’s something your business provides that solves at least one problem that they have.
Generally, you learn about their needs from your key contact. However, it is important to keep in mind that sometimes the key contact only has the job of finding a provider to meet a specific need. They may not have a lot of detailed information about it. In this instance, it’s important to learn everything you can. You could ask to set up a meeting involving your key contact as well as at least one other person who will directly benefit from what your business offers.
Be a Good Listener
Active listening is an important concept in every stage of business. Contract negotiation is no exception. You should listen to the other party to really understand their needs. Ask clarifying questions and give a summary of what you believe they said to you and ask if you understood them. This provides the other party with the opportunity to clarify what they said as well as to ensure you truly understand what they need.
Being a good listener allows you to gather all of the pertinent information you need. It also helps prepare you to answer any concerns or objections they may have about what your business offers or about the terms of the contract.
Be Generous in the Terms and Conditions
There’s a lot that you can offer during contract negotiation that make the other party feel special and that won’t be a burden on your business. For example, if you’re offering an exclusive licensing agreement for certain technology, consider providing them with free on-going training or help desk support. To help with budgeting, you could offer to adjust the contract. This could include creating a longer or shorter contract, offering to change the time period to match their fiscal year, or offering a discount for entering into a multi-year contract. Think back to what you know about the other party. What little things could you offer to include in the contract that customize it to better meet their needs and that lets them know that you really appreciate the relationship?
Don’t Rush the Process
No one likes to be rushed. The parties involved should have ample time to consider the contract and its terms and whether it reflects the sort of relationship that they want to be part of for the foreseeable future. When each party takes their time to consider whether they approve of the terms or what they need changed before they would sign, the contract ends up being better.
If You Have Questions, Ask
If you have questions or even concerns about the contract presented, ask. Talking in person or even over the phone is one of the best ways to get clarity, but make sure that you also summarize their answer in an email and send it to them. This helps ensure that both of you are on the same page. If you’re not, the email thread can help document the conversation as well as the final explanation.
So, if we’re telling you to email a summary, why are we suggesting you call first? Email has a lack of tone. When email messages are read, it’s very easy for someone to imply a tone that wasn’t intended/ Picking up the phone and having a conversation first allows a bit of humanity to be highlighted in the conversation. It helps the other party understand that you’re not upset. You’re just interested in getting the information you need.
Getting Help with Contract Negotiation
You don’t have to struggle with contract negotiation. Larsen Law Offices, LLC is here to help. With more than 30 years of contract experience, Susan Larsen can help your business create and negotiate a contract that benefits you and the other party. To schedule your consultation, call Larsen Law now at 303-520-6030.