The Executive Suite: How to Negotiate a Business Contract

Tuesday, September 24, 2013

How to Negotiate a Business Contract

A contract is, essentially, a meeting of the minds recorded on paper. Since most parties in a contract enter into the agreement with their own ideas of what it should be, the only way to achieve a meeting of the minds is through negotiation. A contract is only as good as the negotiations that preceded it, so knowing how to negotiate a business contract is vital to ending up with a document that is a win-win for both parties.

Suggestions

Decide what your objectives are. Write them down and prioritize, placing the "must haves" first and the "like to haves" last. Determine ahead of time what you are willing to compromise on.
Do your homework and try to discover what their corresponding list will be. You may save yourself a battle by finding out before hand that what you must have is not very important to them and save fights for the essentials.
Approach the negotiations with a spirit of trust, respect and cooperation. If you assume things will be adversarial, then your unspoken attitude will create an adversarial atmosphere where one may not have existed.
Be frank and have integrity. Follow through with any pre-negotiation obligations in a way that allows the other side to feel confidence in you and set proper expectations for what will be achieved in the negotiations.
Prepare an agenda presenting discussion topics at the negotiation meeting and present it ahead of time so there is time for feedback and changes. If there is an agenda and you are stuck on an issue, you have other topics to discuss while tabling the contentious issue, so that talks can continue in a constructive way
Make sure both sides have a common understanding of and definition for basic terms. If vague descriptions are given, have them reworded so that there is no chance for misunderstanding. Be specific.
Start from a realistic and reasonable position--a "winner takes all" attitude will not get you anywhere. A contract has to work for both parties or the business relationship will be full of resentment and mistrust. Leave your ego at home.
Focus on each party getting their "must haves" covered. Everything else is extra. If you get that accomplished, you have had a successful negotiation.
Do not threaten to walk away unless you are willing to do it. Walking away should be a last resort because it signals the end of negotiations. If you threaten to walk, but then do not, you just made your word void and put everything on the table for negotiation.
Stay silent after making a strong statement or request during a negotiation, such as saying something is non-negotiable, no matter how difficult it is. The first person to talk loses.
Listen. You cannot create a win-win scenario if you do not know what a "win" for the other side is. If you clear your mind, remove your ego and really listen to what the other party is saying, you will be amazed at how many places there are for agreement.
Be willing to be creative in order to create the perfect solution to a concern or a compromise. Sometimes it is the small concession or the willingness to go out of your way that can be the turning point in a negotiation. These moments can be the ones that make the other side more willing to give you what you need.