Guide To Running A Business

9. 10 Tips for Successful Contract Negotiation

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Running A Business

10 Tips for Successful Contract Negotiation

May 04, 2023 • 9 min read
Banker working with businessman to sign contract
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      Before making an agreement in the business world, you will likely have to negotiate a business contract. That will require you to sit down with other people or companies, called “parties,” and use your contract negotiation skills to determine the details of your agreement. 

      Whether you’re new to business contract processes or have years of experience, it doesn’t hurt to review some strategies for successful contract negotiation.

      1. Break down negotiation into sections.

      Many negotiations are unsuccessful because the parties take an “all or nothing” approach. Instead, discuss each part of your contract separately. You might find that the sections can be improved upon individually as you move through the agreement. Approaching your contract one part at a time can help you tackle what really matters, while allowing for change in the sections where you can be more flexible. 

      2. Ask for what is fair and reasonable.

      There are standards in all industries. If you ask for the industry standard, you will not have to justify excessive terms of the agreement. Instead, if the other party does not agree with your terms, they will be pressured to convince you there should be an exception. In most cases, such exceptions would require concessions to be made elsewhere. 

      3. Remove emotion from the process.

      The issues you’re negotiating should not be personal. You should remove emotion from your negotiation tactics. Instead, review facts reasonably and in a balanced manner. This will allow you to see what is being offered clearly. Problem solving is much easier when emotions are not heated, and parties stick to an objective of fairness. 

      4. Take control of the negotiations.

      Business relationships thrive on leadership. You should take the proverbial bull by the horns during business negotiations and draft the agreement, schedule the meeting, and present your arguments strongly. When you’re in the driver’s seat, you’re more likely to get the outcome that you desire in a negotiation situation. 

      5. Prioritize what is important.

      If you wrote the contract, you likely want all of the parts in the final contract just as they’ve been presented initially. However, that’s unlikely when the other party wants to see change. Instead, go into negotiations with specific parts in mind that you want to prioritize. Allow change to those that are not as important. When you’re willing to be flexible, the other party is also more likely to concede to your desired outcome. 

      6. Ask questions that lead to discussion.

      If the other party is resistant to change, don’t be demanding. Instead, ask questions to determine why they have certain issues. Presenting arguments can close down deals and make the other party less open to negotiation. When you give the other party an opportunity to speak, they will feel like you are listening to their side and may be more willing to be flexible. 

      7. Try to agree whenever possible.

      There will always be points in a contract that are controversial. However, there should also be sections that benefit both parties and can be easily agreed upon. If negotiations are breaking down, try to skip to a section that you can both agree on. This may resonate positively with the other party and spur a desire to reach an agreement on other sections as well. 

      8. Gain leverage through research.

      Before you ever meet to negotiate the business contract, you should research the issues you will be discussing, as well as the parties involved. The more you know about the other parties, the better you will understand their needs and wants. You can appeal to them with compliments and understanding in an attempt to persuade them to buy into your contract details. 

      9. Try to avoid ultimatums.

      While there will likely be parts of the business contract that you need to see through to the end, the more strict you are with the wording and terms, the less likely you will be to get a positive outcome. If the other party wants to alter something slightly, you should do your best to make a concession. Don’t present them with an “all or nothing” position about any of the terms or the entire contract. Be willing to be flexible and they’ll be more likely to do the same. 

      10. Allow the other party to make changes.

      It’s best for you to present your draft of the potential business contract, but allow the other party to make changes as they wish. Then, you can review their changes and determine if it will work for you. This allows you to take the lead, but also lets the other party feel as if they have significant input into the construction of the contract. An agreement will be formed when you can both find middle grounds amongst your needs. 

      Successful contract negotiation is possible with dedication.

      Contract negotiation can be used to reach agreements between two or more parties who need to have a positive relationship in the business world. While negotiation can be complex, it is not impossible to achieve an outcome that benefits everyone. Dedicate yourself to using the above-mentioned tactics to reach a successful business contract. 

      Once your business contract is prepared, you may be ready for a small business loan. Apply for a small business loan through Lendio

      About the author
      Brandy Abalos

      Brandy Abalos is a licensed attorney, content strategist, and marketing consultant for small businesses. She uses SEO tools to develop strong digital content for audiences who are learning how to navigate complex topics in law and business. When she is not writing, she seeks adventures with her three children, partner, and two corgis in Ohio.

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