Negotiating contracts can be a daunting task for business owners, but it doesn’t have to be. Yes, most contracts are page upon page of specific and complex legalese, definitions, conditions, and so on. But before navigating through this difficult terrain, the entire process can be simplified just by knowing what you want out of the contract and what it means for you and your business. This week, our Partner Paul Skeith is sharing some tips on how you can effectively negotiate business contracts, acquired during his many years practicing business law.
Know What You Want and How the Contract Can Help You Get it
First, it’s important to understand what you want the contract to do for you. What are your goals? What are your priorities? Once you know what you want, you can negotiate from a standpoint of confidence. I would suggest writing these down – trying to negotiate a contract on the fly, without knowing what you really want, is a recipe for disaster and a waste of your time.
What Does the Other Side Want from This Contract?
Just as you have goals and priorities, so does the other party or parties in the contract. Negotiating in bad faith or starting a partnership with the goal of putting one over on your partner is not only objectionable from a moral standpoint, but again lays the foundation for failure from the outset. Once you know what the other party wants, you can start finding common ground.
Be Prepared
Know your facts, figures, and dollar amounts and have an idea what you’re willing to compromise on and what you’re not. In general, focus on the business or money-making opportunity offered by the deal and then rank your other priorities beneath that. After all, it’s a good bet that you’re in business as a means to make a living. It’s generally smart business to mobilize your contracts’ efforts towards that goal.
Be Patient
Negotiations can take time, often more time than you may have initially expected. It is important to stay focused on your goals and let the negotiation dance play out. Some contracts might be boilerplate and relatively straightforward, while others can be littered with conditions, jargon, and “if-thens” that sometimes go on for dozens, if not hundreds, of pages, depending on the situation. Contracts this complicated require extended periods of research by both sides to ensure that all the i’s are dotted and t’s are crossed to the satisfaction of all.
Lock In That First Draft
Whenever possible, I always suggest to my clients that they draft the first version of the agreement. This is useful for a couple of reasons. First, this allows both sides to lay their cards down on the table, so to speak. Everyone now has a document to refer to in order to see what the other side is hoping to accomplish. This also allows you to set the tone for negotiations. Now that the other party knows what you want, you can work on steering subsequent negotiations towards making sure you get it.
Know When to Hold ‘Em, Know When to Fold ‘Em
Finally, it’s important to be willing to walk away, if necessary. Sometimes negotiations just don’t work out. If the other party is insisting on draconian or unrealistic conditions that aren’t feasible or rational, there’s nothing wrong with thanking them for their time and declining to move forward. That’s completely okay, but it’s also surprising how often I’ve seen deals get made after someone stepped away from the table, both sides had a chance to clear their heads and think about it, and they eventually came to a fair and equitable resolution.
We hope these tips have been helpful. If you’re a business owner on the verge of negotiating a complex contract – or would just like to discuss these tips and more – Richards Rodriguez & Skeith’s business and transactional team might be able to help you! Please don’t hesitate to contact us for more information!