The contract lifecycle management process includes many steps, but perhaps one of the most important is the negotiation phase. You need to know a variety of tips for successful contract negotiations.
Negotiations are when you either walk away with the terms you want or you concede some things. Ultimately, it will probably be a little of both.
Contract negotiations are an unavoidable part of doing business, and the following are some key things to know to help you be more successful.
What Are Contract Negotiations?
First, what exactly is a contract negotiation?
Basically, it’s just the back and forth that happens so that both you and the other party can come to a position that you feel is mutually beneficial.
A business contract means that you’re forming a relationship, so your aim isn’t to make things as bad as possible for the other side. It really is to come together and create something that is going to work well for both of you.
If a contract is one-sided, it’s not good. Even if it’s leaning toward being more favorable for you, that can actually end up damaging your business relationship with the other party and perhaps your reputation.
With the basics out of the way, the following are some particular tips to keep in mind when you negotiate a contract.
Know Your Bottom Line
Before you go into any negotiations, you need to clearly have a defined bottom line. This is the very least you’re willing to walk away with. If you don’t have metrics that you can follow during negotiations, then you’re probably not going to walk away with a good contract.
Your bottom line should give you a feel for how everything else in negotiations will go because it will let you know the wiggle room you have and what you can accept as far as a counteroffer.
Before you go into negotiations, you should also know the risks and benefits of all the potential outcomes for both parties. Analyze them on both sides. Write them down if you have to.
Don’t Get Personal
One of the toughest things to remember in contract negotiations is not to get personal.
Just stick with the facts, and that will help you stay focused on your priorities.
It’s easy to get emotional when you’re dealing with negotiations, but that’s just going to be something that can be used against you.
Additionally, try to keep as much to yourself as you can. When you’re negotiating, the less the other party knows about you or your situation, the better.
The more you talk, the more potential weaknesses there are that can be identified and potentially exploited.
Do All Of Your Research Ahead-of-Time
You never want to be left scrambling when you’re facing contract negotiations or any type of negotiations, for that matter. That means you should do your research ahead of time and be well prepared.
Information is ultimately going to be your biggest strength.
Bring evidence if you think it’ll be relevant. This might include value sheets, testimonials, or usage history, just as examples.
A good way to take charge in negotiations is to make the first offer.
If you make the first offer, you’re signaling that you’re someone who is in charge, and being bold enough to take that step means that your offer anchors the rest of the process.
If you can really listen to what the other party is saying, it’s going to help you know how to negotiate with them more effectively.
Everyone has a “why” that guides their behavior and decision, so by listening, you might be able to figure out what that is.
As well as actively listening, ask questions that are open-ended.
When you’re negotiating, you want to be able to offer different alternatives, each of which can potentially solve problems for both sides.
If you lay out several options, then it’s going to be easier to come to a meeting point that’s probably somewhere in the middle.
Negotiations are about give and take, so you want to understand before you even start that you will probably have to make some concessions.
Just remember that above all you need to prioritize the benefits that you outlined before you started negotiations and reduce the risks you also identified ahead of time.
Negotiations are strategic, and the preparation and work should be done ahead of time so that you can stay on track and not get derailed by emotions or other factors that happen at the time.