Without the right negotiation skills, you risk damaging relationships with clients and running into losses. With the right skills, you stand to earn more revenue and reduce your business risks.
Negotiating a profitable business deal is about creating opportunities and exchanging value. The wrong way to handle negotiations is by dominating and intimating others into accepting your terms.
For long-term positive results, try the following tips and tactics on contract negotiation.
Tips for Contract Negotiation
Identify Clear Objectives
What do your business partners and clients want to gain from the contract negotiation?
Most business negotiations include discussions on risks and revenues. When a client purchases a product, that client is taking a calculated risk. The client risks spending money on a product that may not offer enough value to them.
The best negotiation skills training courses prepare business people to identify the objectives of both sides early on. As a business person, you want to achieve acceptable risk while maximizing rewards. This starts by clarifying what each side wants to gain from the deal. Getting to grips with the objectives makes it easier to craft a value-based offer.
For example, if you’re leasing off your premises to a business, you might provide a better solution if you know the nature of your client’s business. A supermarket may need open space while a lawyer’s practice may need office cubicles, for example.
Use Diligence in Documentation
Put everything in writing.
Successful business leaders rely on proper documentation. Written records provide a clear history of the negotiation process. With clear records, you can capture and keep ideas, proposals, and other facts. You can also use your written records to correct miscommunications. Proper records can also provide a handy defence against adverse legal action.
Records that are easy to understand can build trust and integrity. During contract negotiations, prepare a letter of intent or a term sheet to reflect the terms of your deal.
Preparation is Key
Ensure all relevant paperwork is ready and prepare your offer and possible counteroffers before negotiations. Research and understand your clients by reviewing their company profiles, website, and social media.
Knowing the company and the people behind the company can lead to better deals. Review similar deals the company has made in the past.
Control the Agenda
Controlling the timing, location, and pace of negotiations can create an advantage.
Control can provide your team with a feeling of mental preparedness, so it’s important to take a firm lead during a contract negotiation.
Steer the meeting’s agenda by drawing the draft proposal. In negotiation training, people learn that drawing the first draft can allow you to frame the deal’s structure. Drawing a draft highlights the key points you would like to discuss and gathers momentum for your side. Most customers would be reluctant to make extensive changes to your draft, except if the draft is unjustifiably one-sided.
For most business people, contract negotiations are about skilfully creating lasting and profitable relationships. You want your client to feel appreciated and to provide repeat business.
One way to appreciate your client is by customizing the contract’s Terms and Conditions to suit your client’s needs. Some T&Cs concessions that may attract return business include:
- Offering premiums such as free training, extra supplies, etc.
- Using volume-based pricing to encourage buyers to buy more.
- Adjusting the contract’s period to match the buyer’s fiscal year and budgets.
Consider Viable Options
What steps can you follow if you don’t reach an agreement?
In most situations, you want to have competitive alternatives. Having viable options can boost your negotiating position. With other options, you have more leeway to bargain on unfavourable terms. Your team may also not be in a desperate rush to sign a deal and can use their time to judge the contract on its merits.
For example, if you are selling your business, it would be to your advantage to have several potential bidders. When the other side knows they may be facing competitors, you are likely to obtain better contractual terms and better pricing. If a buyer knows they are the only bidders, they may hardball you into making unfavourable concessions.
If you need legal advice or need a hand with your contracts, book a call with our legal team and we’ll guide you through every stage of your legal needs.