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Common contract negotiation tips



Common contract negotiation tips

Negotiating contracts is an integral part of most business transactions when you’re selling B2B or selling a big ticket item. Whether you’ve been selling for a decade or new to the game, mastering the art of negotiation can most definitely help you close more deals. In this write up, we’ll explore some common contract negotiation tips that can help you get through the process with confidence and close as many of those deals as possible.

Why Contract Negotiation Matters

Contract negotiation is more than just haggling over terms and conditions; it’s about finding mutual benefits and ensuring that both parties are satisfied with the agreement. If you’re going to build a relationship with a customer this is the first part of that. Effective negotiation can lead to better relationships, improved outcomes, and long-term success. That’s one of the core reasons that sales people who are the best at contract negotiation are the best at closing – it’s all part of building the relationship.

Before entering into any negotiation, proper preparation is crucial. How many times have you turned up to a sales meeting with a person who is just scrapping things together as they join the call, it’s not a good look. Here are some essential steps to take:

Research and Gather Information

Knowledge is power in negotiation. Research the market, industry standards, and the background of the person you are selling to so you can understand their needs, preferences, and constraints. Knowing something about them, no matter how small will help you create a shared topic to talk about but knowing what their core problems are is where you get them on the hook to buy. This information will give you leverage and help you make informed decisions during the negotiation process.

Set Clear Objectives

Outline your goals and priorities for the negotiation. What are the must-have terms for you? What are you willing to compromise on? Setting clear objectives will keep you focused and prevent you from getting sidetracked during the negotiation. Having a negotiation playbook from your legal team or sales leader will help you here. It will give you a guide of what you can and can’t agree to on the call. Just because you can’t agree to something doesn’t mean it’s bad, use this as a ‘next steps’ in the negotiation, bring in another person to close.

Identify Your BATNA (Best Alternative to a Negotiated Agreement)

Knowing your BATNA gives you a fallback option if the negotiation doesn’t go as planned. It provides leverage and allows you to negotiate from a position of strength. Evaluate your alternatives carefully and be prepared to walk away if necessary. For a sales person this might be ‘no commission’ but if you’re company is smart enough they’ve created a commission plan that will encourage you to close good customers that will stick around.

Maintain a Positive Attitude

Negotiation can be stressful, but maintaining a positive attitude can make a significant difference. Stay optimistic, respectful, and open-minded throughout the process. A positive attitude fosters goodwill and promotes constructive dialogue. This is particularly hard when you’re trying to negotiation with someone that’s trying to wring a deal out of you. Take it with a grain of salt, hold the discounts for those that will reward you in the long run.

Listen and Communicate Effectively

Effective communication is essential for successful negotiation. It sounds super simple but it’s something a lot of sales people don’t do. Listen actively to your counterpart’s concerns, interests, and priorities. Ask clarifying questions and paraphrase to ensure understanding. Clearly articulate your own needs and objectives to facilitate mutual understanding and find common ground.

Be Flexible and Creative

Flexibility is key to reaching mutually beneficial agreements. Be open to alternative solutions and creative compromises that meet both parties’ interests. Avoid rigid positions and focus on problem-solving rather than winning concessions. This is especially true if your business is early stage, look to be flexible with your options, as you grow this will change.

Focus on Interests, Not Positions

Instead of focusing solely on your own positions, strive to understand the underlying interests behind each party’s demands. By identifying shared interests and exploring creative solutions, you can find win-win outcomes that satisfy both parties. Always ask why someone has a certain opinion or need.

Strategies for Overcoming Obstacles

Negotiation often presents challenges that require careful navigation. Here are some strategies for overcoming common obstacles that don’t involve things breaking down.

Dealing with Deadlocks

If negotiations reach a deadlock, take a step back and reassess the situation. Explore alternative solutions, offer concessions, or involve a neutral third party (or even a their party on either side) to facilitate discussion and break the impasse. This is particularly true in software sales. Often two legal teams and two sales teams will be locked in an argument over something risky in the contract and a founder or head of sales will be able to break this deadlock simply by saying that it’s okay to take the risk.

Handling Difficult Personalities

Dealing with difficult personalities can escalate tensions and hinder progress. Stay calm, patient, and professional, even in challenging situations. Focus on the issues at hand and avoid personal attacks or emotional responses. If in doubt just walk away but these common contract negotiation tips should be a good start to build your confidence.

Addressing Power Imbalance

In negotiations where one party holds significantly more power, level the playing field by emphasizing shared interests, building rapport, and leveraging your strengths. Focus on creating value and demonstrating the benefits of collaboration. You always have the ability to bring in the big guns such as your startups founder or CEO if the sale is important to the company.

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Harness Tools to be More Informed

These days there are a lot of tools that you can use to get your negotiations humming. One that will help you supercharge things and just push negotiations forwards quickly is our contract comparison tool.

As negotiations near completion, it’s essential to finalize the agreement, shake hands and celebrate that you’ll be working together with your new customer.

Summarize and Recap Agreements

Review the key terms and agreements reached during the negotiation. Summarize the main points and ensure that both parties are in alignment before proceeding. This is much easier to do with a contract management tool.

Ensure Clarity in Writing

Common contract negotiation tips is after reaching consensus on the terms, it is essential to meticulously document them in clear and concise language. Ambiguity or vagueness in the contract should be avoided to prevent potential misunderstandings in the future. Crafting a well-written contract is crucial as it safeguards the interests of both parties and lays a solid groundwork for future collaborations.

Getting to the point that contract negotiation is second nature involves implementing common contract negotiation tips along with a whole lot of experience to close more deals and build stronger business relationships with your customers. By practicing these proven strategies, you can confidently get through the negotiation process and reach agreements that benefit all parties involved. Now go get selling!

1. What if the other party refuses to negotiate?

If negotiation seems impossible, consider whether your BATNA is preferable to no agreement. Sometimes, walking away is the best option.

2. How do I handle unrealistic demands from the other party?

Acknowledge their concerns and try to understand the reasoning behind their demands. Then, propose alternative solutions that meet their underlying interests while also protecting your own.

3. Is it common to use third-party mediators in contract negotiations?

Yes, especially in complex or contentious negotiations. A neutral mediator can help facilitate dialogue, manage conflicts, and find mutually acceptable solutions.

4. What if I make concessions during negotiation and the other party doesn’t reciprocate?

Negotiation is a give-and-take process. If the other party refuses to reciprocate, reassess your approach and consider whether further concessions are warranted or if it’s time to reevaluate your strategy.

5. How do I ensure that the negotiated agreement is legally binding?

Consult with legal experts to draft a comprehensive contract that clearly outlines the terms and conditions of the agreement. Ensure that all parties fully understand and consent to the terms before finalizing the agreement.

Contract Sent

A contract management system built for startups to manage, negotiate and report on their SaaS contracts.

Contract Sent is not a law firm, this post and subsequent pages on this website do not constitute or contain legal advice. To understand whether or not the ideas and guidance on the Contract Sent website is applicable to your business, you should consult with a licensed attorney. The use and accessing of any resources contained within the Contract Sent site do not create an attorney-client relationship between the user and Contract Sent.


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