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The basis of any good contract is an agreement that benefits both of the partners in the transaction. Negotiating contract terms should be a give and take process, where each party walks away feeling like they were treated fairly. Negotiating should not be an "us" versus "them" scenario. Rather, it should be a collaboration between two parties to reach a mutual goal. The Merriam-Webster's Dictionary describes negotiating as "To arrange for or bring about through conference, discussion, and compromise". This definition lays the foundation for successful negotiation strategy and process management.
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Conference- Needs vs. Wants
When you go to the negotiating table as a client or a vendor, you have to establish what your needs and wants are. Needs are the concrete requirements that must be met for you to sign your name on the line. Wants are aspects of the contract that would be beneficial to your business, but lack of these wants would not be a reason to walk away without signing. It is important to conference with other parties inside of your business that will be affected by the contract outcome. Make sure that your needs take into account what your team requires to be successful. Once you know your needs and wants, prioritize these on a scale of one to five, where one is an absolute, and five is a negotiable point.
This simple task may seem a bit redundant, but it is beneficial and provides you leverage when the negotiations get down to the fine details. The fours and fives on your priority list can often be points you can “reluctantly give up" to ensure that your ones and twos do not get overlooked. It is rare for negotiations to result in you getting 100% of your needs and wants met, and knowing ahead of time what you can live without will help keep you focused on your primary objectives being met.
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Discussion- Know Your Partner
Understand who exactly you are negotiating with before negotiations begin. Doing your research on the company can help you understand their needs and limitations. The “walk a mile in their shoes" approach is very helpful. Think about what you are asking for and if it will benefit the other party to meet your needs. The goal is to establish a partnership that will last and grow, not to walk away feeling like you took advantage of the negotiation process. If you feel that way, you can count on the fact the other party will catch on and feel the negative affect of the relationship soon enough. One of the best ways to determine the other party's needs before the nitty gritty negotiations take place is to discuss what their objectives are before hand. They will appreciate your willingness to work within their limits and you can devise a plan that hopefully will work for both of you once negotiations begin.
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Compromise- Closing the Deal
It is very easy to get caught up in the excitement of finally obtaining a deal you have been trying to close. A well planned negotiation strategy and process often creates a desire to win, and this desire to win can often overshadow negative aspects of the contract. It is important to know ahead of time what your bottom line is in regards to terms and price. When your bottom line is crossed, you have to be prepared to walk away.
Do not overlook the little details that are relevant to the successful completion of any project or agreement. Time line, liability, and legal aspects of the terms of the contract should not be overshadowed by the negotiations. Before you close the deal, read all of the fine print again and make certain the terms are clear to prevent future misunderstandings. Make sure both parties have compromised to the best of their abilities to reach a mutual feeling of satisfaction with the final contract.