Whether establishing a business agreement with a client, buying a car, or purchasing services at work, negotiating contracts is an inevitable part of life. Most negotiation advice dispensed online or in books falls far short of the mark, and some of it can actually backfire. Pretending that you have another, better potential deal in the wings or being too aggressive, for example, both shut down the possibility of forming a real connection with the other party—thereby making them less willing to cut you a good deal. In other words, a lot of the traditional tools out there are just inauthentic.
A few strategies help set the record straight when it comes to contract negotiation, allowing you to get the best deal possible:
Have a strategy
Understand what each party has to gain with the relationship and how you’d like to approach getting favorable terms. Don’t just pivot each time a vendor or potential buyer makes a demand, or counter. Instead, understand the rules of engagement, exactly what other benefits you can gain or concessions you can make, and how desperate the need is of the other party. For example, if you’re buying on the last day of a sales cycle, you’re likely to get more favorable concessions, as the other party likely wants to get a deal done.
Divide the negotiation process into parts
Don’t feel that you have to settle on an arrangement in a single sitting. Spread negotiations out over several meetings so that you can calmly and thoughtfully process the proceedings. After each meeting, write out a list of those terms that you and the other party have managed to agree on and those you haven’t. Regrouping allows you to maintain clear focus between meetings and reach effective compromises on difficult issues.
Back up your position with facts and data
Show the other party that you’re only asking for what’s fair by citing data on standard market prices for the goods or services you’re negotiating for. When you provide irrefutable facts in this way, you shift responsibility onto the other party to explain why they feel you should make an exception for them. This stops you from having to justify your position and reduces the amount of time you’ll need to spend negotiating for your terms. Understand the industry standard practices, such as cost to deliver and commission structures for an even better understanding of how much room you have to negotiate.
Take control of the negotiation process
Choose a location for the contract discussions and draft an agenda for the topics to be covered, then ask the other party if they’re willing to agree to your arrangements. By doing this, you convey an image of being in the “driver’s seat” during the negotiation process. You will impress your natural confidence upon the other party (without being overtly aggressive) and they will become more likely to follow your lead. This approach to negotiation is common among legal professionals, such as attorneys; lawyers generally feel that whoever drives the negotiation process is likely to get the better deal in the resulting contract. If you are on the purchasing side of a negotiation, keep a look out for when a vendor isn’t getting back to you consistently. Normally this means you are asking them for more than what they want to give. By driving that forward, you’re more likely to get the terms you want.
Define your top priorities before you begin negotiating
The main people fail to get what they want during contract negotiations is that they go into discussions without a clear idea of their goals, other than to pay less money or charge more. Avoid this trap by setting out your top priorities in writing before the negotiations process actually begins. If you have negotiating partners (business partners, spouses, etc), make sure they agree with your priorities, as well as any concessions you’re willing to make to get your priorities out of a negotiation.
Ask questions instead of making demands
Demanding people are perceived as being hostile, and this is not the kind of image you want to project, especially in the business world – where you’re likely to encounter others again and again. Remember, the more the other party likes you and feels that you’re a fair and reasonable person, the more willing they will be to compromise with you. To convey what you’re looking for out of a contract fairly, start with questions. Ask questions empathetically, keeping in mind that whichever party has the greater need will make the most concessions.
These are all positive steps meant to build relationships. There are tons of other things you should never do. These will only damage relationships and brand you as someone that others do not want to work with. Don’t intimidate others. Contracts entered into with a party who’s being intimidated. Not only is this a terrible way to do business, but you’re likely to enter into a contract that’s easily nullified. Also don’t take things personally, as contracts usually mean that things are just business. And finally, don’t dig into a position that you can’t gracefully get out of.
These strategies will increase your chances of ending each meeting on a positive note. Remember: Successful negotiation hinges on establishing a collaborative (rather than adversarial) tone. Ideally, you and the other party should work together to reach an agreement, as neither party can usually be forced to concede. By cooperating with the other party in a focused, proactive and deliberate way, you can secure the terms you want while also establishing a good business relationship. Keep in mind that you can easily counter any offer you get at each round of a negotiation and so be patient for the best possible results!