When it comes to negotiating contracts, there are several different approaches you can use. Learn more about different negotiation styles and tactics to help you prepare for a successful negotiation.
Depending on the type of contract you’re negotiating, you can adjust your strategy to best meet your needs. Here are a few strategies to help you approach your next contract negotiation with confidence.
Identifying negotiation styles
In the world of negotiations, there is no one size fits all. There are many different negotiation styles you can consider depending on the situation. Here are a few different styles you can employ when you negotiate a contract:
- Collaborative Negotiation: This negotiation style is all about collaborating to reach a mutually beneficial outcome. Focus on problem-solving, open communication, and building relationships so both sides are gaining the maximum value from the contract.
- Competitive Negotiation: Each party takes a more confrontational approach, focusing on gaining advantages and maximizing their benefits. Using leverage is an example of competitive negotiation to secure the best possible deal.
- Compromising Negotiation: This style results in both parties compromising to meet each other halfway. The main goal is coming to a mutually acceptable agreement which often results in some wins and losses on each side of the negotiation.
- Accommodating Negotiation: If your main focus is on maintaining relationships, then an accommodating negotiation may be the best option. In this style, the outcome isn't as important as the relationship so you are willing to lose for the other party to win and continue business.
Choosing the right tactics
Negotiating parties need to choose the right tactics depending on a variety of factors. Understanding the context of the negotiation process is the first step to help you choose appropriate tactics.
If you understand the industry, terms, and relationship between the parties you can determine which direction to take the contract negotiation. You should also clearly define your own goals and desired outcomes so you know when to push and when to compromise.
Another important aspect of your approach is understanding the other party. Evaluating the other company's priorities will help you tailor your tactics for each contract negotiation.
Consider the dynamics of your working relationship and assess the power dynamics between both groups. Your tactics might differ if you are negotiating a contract with a prospective employer as compared to negotiating a new contract with a long-term client.
The more you know about the other party, the more leverage you have. Based on all of the information you've gathered, decide which style is most appropriate for the negotiation to reach your desired outcome. Keep in mind that flexibility and adaptability are important attributes to exercise throughout the negotiation process.
Identifying when to walk away
Unfortunately, not all contract negotiations result in successful partnerships. It's not always easy to realize when to walk away from a negotiation, but here are a few indicators that may help:
- Lack of trust: Trust is a necessary aspect of every working relationship. If you encounter dishonesty or broken promises throughout the negotiation process, it may indicate a lack of good faith and a poor outlook on future collaboration.
- Unreasonable demands: If the other party consistently makes demands that are unrealistic or unacceptable for your business, you won't likely reach a mutually beneficial agreement in the end and may need to cut your losses.
- Deadlock: Some negotiations take longer than others, but if both parties reach a point where further progress is not being made, then it might be time to move on.
- Exhausted resources: When the contract negotiation process becomes too costly and time-consuming, reconsider how much effort you want to invest compared to the potential risks.
Contract pitfalls to avoid
In the end, everyone wants a successful contract negotiation. However, several pitfalls often prevent contracts from coming to fruition. One common pitfall is ambiguity in the contract language.
Ambiguity while negotiating contracts leads to misunderstanding and confusion. Use clear language to ensure all parties clearly understand the defined rights and obligations of the contract.
Another common contract negotiation pitfall is over-relying on oral agreements. Proper documentation of agreements is key to enforcing contract terms and understanding the responsibilities and obligations of each person.
Relying solely on oral agreements makes it difficult to track contract negotiations and leads to disputes about what was agreed upon.
Additionally, a lack of clarity on deliverables can lead to disruption and dissatisfaction. Defining deliverables is key to ensuring each party is satisfied and on the same page regarding what needs to be done.
Make sure the scope of work, quality standards, timelines, and expectations are clearly defined in the contract negotiation. Clarifying deliverables upfront ensures both parties are held accountable.
Timing is another vital aspect of any given business agreement.
Ignoring the importance of timing will set you up for failure. Detailing deadlines, timelines, and project milestones creates certainty and trust in your working relationship. Making sure timing is an important aspect of the negotiated agreement allows for all parties to properly plan and execute the project.
Understand contract laws
Navigating the legal framework of contract negotiation is crucial for getting the best deal. Understanding contract laws ensure legal compliance and the validity of your contract. It also helps protect your rights and interests along with avoiding ambiguity and misinterpretation of the contractual terms.
By understanding contract laws, you create a solid foundation for negotiating fair contracts, assessing risks and remedies, and enforcing terms. Make sure legal teams aid the contract negotiation so you are completely prepared at the bargaining table.
Ultimately, gaining a deep understanding of the dos and don'ts of contract negotiation helps you navigate the intricacies of negotiations. Follow the best practices outlined above to secure favorable outcomes, build beneficial business relationships, foster trust, and forge lasting contractual agreements.
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