Negotiating a favorable contract is always a tricky task especially when a bad deal could potentially turn out worse than no deal at all when you are running a small business.
There is no magic formula to the art of the deal but you can follow a set of guidelines and a checklist to improve your negotiating tactics and ensure that all of your demands and interests are taken care of as best as possible.
Here is an overview of what aspects you need to consider and what questions need to be answered when you are negotiating contracts with your customers and suppliers.
Holding your ground
Whether you are trying to negotiate a good deal on your small business insurance or pitching for a major contract with a large company there are some fundamental ground rules that don’t change much despite the obvious difference in these and other similar scenarios.
Your primary aim is to get a deal that is fair regardless of whether you are trying to secure a good rate from a supplier or win a contract that could help to secure the immediate future of your business.
One area where small business owners can sometimes feel intimidated or feel unsure of how far they can force their opponents hand is when it comes to negotiating a contract with a large government agency or a multinational corporation.
Winning a contract for your small business and securing the opportunity to supply a major player with your goods or services can be a defining moment for your business, so it is perfectly understandable that you might feel slightly uneasy when dealing with someone who is much larger than your company.
The main thing to remember is that to avoid coming out with a worse deal than you would have wanted or even lose the deal altogether, it is a good idea to create a list of exactly what you want out of the deal.
Knowing how much money you need and want from the contract to make it profitable, will help you to negotiate with big businesses with greater confidence when the talk turns to numbers.
Don’t rush in
It can often work out that most of the poor contract deals you end up signing are done in a hurry, so the obvious advice is to take your time to inspect all of the details and fine print before you commit to anything.
You might well be in a hurry to get a deal signed up but you will improve the chances of coming away with a more favorable deal when you carry out due diligence and crunch all the numbers before accepting the terms being offered.
A common reason why contract negotiations can quickly unravel is when you are not quite sure about a particular point in the terms and it leads to a misunderstanding at a more critical stage.
Always be proactive and pick up the phone or send an email to confirm exactly what the wording means if you are unsure or if there is anything that you are unsure or unhappy about.
Leaving any potential misunderstandings to fester can create problems at a later stage and might even turn out to be a deal-breaker, so always seek to clarify any points that you are not sure about.
Most things are negotiable
It is often the case that the contract you finally end up signing can look very different to the first one that you receive so it almost always pays to remember that the first draft contract is just the start of negotiations and not the end of them.
Go through all the terms as well as the key points such as price and make a note of all the things that you want to query or discuss further.
It can often speed up the process if you can open up a discussion to work through the points rather than keep going back and forth with updated contracts. Once you have thrashed out all the terms to your satisfaction you can skip to a final contract that is ready to go.
Finally, it never hurts to try and be as reasonable as possible when it comes to negotiating contracts.
You might want to play hardball and hold out for the best possible deal but it would be wise to do your research and confirm that what you ultimately want out of the contract can be considered reasonable and fair.