Before coming to any type of business arrangement, the parties involved really need to negotiate the details of a written agreement or contract. Knowing how to negotiate contracts to protect your best interests is essential to a positive outcome.
There's much to discuss about this complex “dance” more than we can cover here. But we can give you some key concepts to get you started.
Rule number one of “Getting to Yes” is to separate the parties involved from the issues being discussed – take the emotion out of it. This minimizes conflict and improves your chances of sticking to your objective and realizing your goals.
How to Prepare for Contract Negotiations
Don't underestimate the importance of doing your homework before negotiating any type of contract. The more information you have, the better your chances of coming to a final agreement that meets your needs and protects your interests. Whether you're negotiating a business merger or the sale price on a house, doing preliminary research is always a best practice. If you are buying a home, for example, knowing that the current homeowners have to sell quickly can be immensely helpful. There's a good possibility they will accept a lower offer than if they had all the time in the world to get top price. Similar results occur in business contexts.
Understanding your goals – and the goals of the other party – is an essential part of any successful negotiation. The next step is to prioritize the goals you have for the negotiation. It's prudent to prioritize the goals by importance. This will prevent you from getting distracted by less important issues and will ensure that you keep your priority goals in mind throughout negotiations.
Thinking about – and probing to understand the goals of your counter-party – is important as well. In many cases, goals that are a high priority for you may be low cost to the counter-part – and vice versa. Working to understand the counter-party's needs can result in negotiations that provide optimal benefits for each party.
One Negotiation at a Time
Start by breaking the negotiation into sections; the all-or-nothing approach is rarely effective. Prepare questions for each section, and make sure to ask the right questions. If properly framed, this will help you better understand the importance of various issues to your counter-party. Further, the party that frames the issues with the right questions, asked at the right time, typically takes the reins and maintains more control over the negotiations as a whole.
Here are some examples:
- Help me understand why you believe the current structure for our arrangement is optimal?
- Are there other ways we could configure our arrangement to provide benefits for you that may not be costly for me to provide – and vice versa?
Questions also provide the opportunity for a more open discussion, whereas demands and arguments tend to shut it down.
I Win, You Win
Take a collaborative approach. Regardless of what you are negotiating, there are almost always a few points of agreement early in every contract negotiation. Identify these points of agreement and leverage each as opportunities for a positive discussion, “I see your point,” or “I agree with you about that.” Even if these positive comments follow relatively insignificant points, they can help to set a collaborative tone, keeping overall negotiations more constructive and focused. A positive tone is more likely to result in an outcome beneficial to you and your organization.