You’ve already spent plenty of time searching for and vetting before you reach the contract negotiation stage. The negotiations might be either a business you’re planning to acquire, a vendor, a potential partner, a key employee, or a buyer to whom you want to sell your business.
As business contract negotiations begin, you may feel more than ready to sign on the dotted line. But, as any lawyer will tell you, the details are in the fine print. A speedy contract negotiation can put you at a disadvantage when issues aren’t appropriately addressed. This could eventually spell doom for both parties when a breach or dispute pops up.
Here are seven strategies that will ensure you maintain your competitive advantage during contract negotiations.
Go beyond the handshakes
In other words, get to know the people sitting on the other side of the table. Try to engage in a small talk and develop a connection with your counterparts. A rapport could help smooth the path toward agreement because it builds trust. And trust, research shows, often is all the other side needs to open up their own hidden interests and provide you with leverage during business contract negotiations.
Take your time
You may very well be in a hurry to get this deal done and move on to the next, but now is not the time to rush. Contract negotiations can get complicated, but it’s critical you don’t set aside the tough issues for another day. Before a Letter of Intent or other document is finalized, be ready for a period of deliberation and negotiation. You need to make sure you’ve covered even the minutiae before the deal is made. It’s often easier to consider the contract section by section, instead of as one single document, which can get overwhelming.
When you take care of every detail upfront at a time when both parties are excited about the potential of the relationship, there’s a better chance everybody will be willing to listen to each other’s needs and compromise.
Letters of intent and Initial Contract Drafts
You’ve probably mapped out your long-range plans and strategy and know exactly why this deal is critical for the success and growth of your business. Now, tell your lawyer and any other team members who are supporting you during negotiations. When they understand your ambitions and motives, they’ll be better able to provide more nuanced advice during the deliberations. This way you can get what you need out of the deal and into the initial draft, whether it’s a Letter of Intent (LOI), master services agreement, or the initial draft of a commercial lease.
Listen to the other side
While you’ll certainly want to map out your views at the bargaining table, it’s just as important that you spend as much time, if not more, listening to what the other party has to say to understand what they truly need. When you’ve figured out the other party’s priorities, you’re in a better place to address them and achieve your own goals with the finished contract. As the other party talks, listen actively, don’t interrupt and only ask for clarifications once they’ve explained their side.
Plan for road blocks
You both might be the best of friends now, or, at least, business owners who are eager to collaborate. But business relationships, as just about anybody knows, can sour. So even if everything is copacetic right now, remember it may not always be that way. Build clauses into every contract that address contract breaches and how any disputes will be solved.
Call the shots
Be the first party to set the location, schedule and agenda for meetings and create the original version of the contract. Your lawyer will advise you that they prefer to draft the contract – and this is because the contract terms will then be more favorable to you. It won’t always be possible to have your side draft the agreement, so when the other sides draft it, make sure your lawyer is carefully reviewing the contract.
This might seem unnecessary to you, but it will pay off during negotiations because you’ve put yourself in control, setting the tone and building a document that includes all your priorities from the very beginning.
Get legal counsel
Don’t go it alone. Contract negotiations can be complex, requiring deep knowledge and expertise in the laws and regulations that govern the transaction and your industry. You need knowledgeable advisors, such as a financial advisor and lawyer. They regularly support clients as they launch into new business relationships, which will provide the expert advice you need to ensure you get the very best deal in contract negotiations.