Learning how to negotiate business contracts effectively can give your company a significant competitive advantage. Many people view negotiations as fierce competition between competing interests. However, competing interests do not have to be the focus. In fact, a contract means that you will have an ongoing relationship with another party. It makes little sense to start off with an adversarial approach.
Building a contractual relationship on mutual trust and value creation can have long-lasting benefits. Contract negotiation is a skill that requires practice, preparation, and considered execution. To start developing this skill, it is crucial to understand what is involved in negotiating a business contract.
Steps of Negotiating a Business Contract
Several steps are involved in every business contract negotiation. Mastering these steps will help foster success.
Preparing for the Negotiation
Preparation is a major key to successful negotiations. An in-depth understanding of your position and that of your counterpart will help you identify ways to create value.
Figure Out What You Want
First, know the benefits you seek to gain from the contractual relationship. Identifying the explicit benefits of the contractual relationship will help you focus on the most critical aspects of the negotiation. Determine your best-case scenario, mid-range options, and the absolute least you would be willing to agree to.
Establish and Strengthen Your Alternatives
It is essential to consider your best alternatives to a negotiated outcome. One of the most effective ways to improve the strength of an agreement is by enhancing your alternatives. For an employment contract negotiation, understand the employment market and try to negotiate with multiple candidates simultaneously. Speak with numerous suppliers. Anything you can do to improve your alternatives will strengthen your position at the negotiating table.
Research Your Counterpart
Understanding your counterpart is essential. Figure out what their best alternatives are so you can get an accurate estimation of their range of acceptable agreements. Also, try to get an in-depth understanding of everything they want out of the deal.
Conduct the Negotiation
If you have adequately prepared, you should be confident when it comes time to negotiate. Try to adopt a collaborative approach rather than being adversarial right from the start. There is always time to adjust if your counterpart is hostile from the start.
Ask and Answer Questions
The best way to figure out mutual interests is to simply ask. Asking and answering questions will help both sides better understand the other’s interests. Don’t assume you already know precisely what your counterpart wants. Also, don’t assume they know what you want.
Try to Find Win-Win Dynamics
Focus first on ways that both parties can benefit from an agreement. For example, a potential employee might prefer performance-based compensation. The employer can benefit from this type of compensation scheme as well. Working out the win-win dynamics first can build momentum to push through the inevitable distributive issues when they come up later.
Use a Variety of Techniques to Push Through an Impasse
Impasses can destroy deals quickly. Sometimes our first instinct is to walk away as soon as we don’t think an agreement can be reached. Don’t succumb to this instinct. Strategies to push through an impasse include taking a break, setting an issue aside to discuss later, restating the areas of agreement, and role reversal exercises. No one solution works in every case, so be creative.
Come to a Final Agreement
At the end of the negotiation process, review the final agreement. Ensure that both parties are satisfied with the outcome, especially if you desire an ongoing relationship. An agreement where one party feels ripped off will run into problems down the road.
Also, ensure that the written contract fully captures all the terms discussed at the negotiation table.
Follow Through with the Deal
The negotiation is not over once the contract is signed. Implement your part of the agreement as effectively as possible and ensure your counterpart is doing the same. Gaining a good reputation will help you when negotiating future business contracts.
Further, review the negotiation process after you finish. Identify strengths and weaknesses. Figure out what worked best and strategies that could have worked better. Change your approach accordingly in future negotiations.
Tips for Negotiating Business Contracts
There are many ways to improve your skill in negotiating business contracts. Effective techniques include:
- Breaking complicated problems down into smaller pieces,
- Prioritizing key objectives
- Focusing on facts rather than emotions,
- Remaining positive,
- Taking breaks when needed,
- Calling out counterproductive behaviors, and
- Trying to end things on a positive note.
Working on these techniques will lead to better outcomes for your business negotiations.
The Curley Law Firm Can Help
Bringing in experience can be one of the most effective ways to improve your business contracts. The Curley Law Firm knows how to negotiate business contracts. We bring the experience of a big law attorney to a boutique firm that focuses on small and medium-sized businesses. Contact the Curley Law Firm today and raise your business contract negotiations to the next level.