Most would agree that contract negotiations can be stressful, especially when it comes to business. That's because a lot depends on a fair agreement: it can increase the company's profitability and foster better relationships and cooperation between partners.
Therefore, it is critical that you know the actual definition of contract negotiation, how contract parameters help you close more deals, and the most successful negotiation strategies.
What is a contract negotiation?
One of the most important stages in the life of a contract is negotiation. At this stage, the parties must:
- Have conversations
- Negotiating critical contract terms
- Make an agreement that benefits both parties in their business partnership.
When discussing the terms of the contract, the parties also define their responsibilities and make provisions for any risks and liabilities.
How can contract parameters help you close deals?
Contracts contain all the information that is included in a business agreement. If you know the parameters, you can better negotiate with current and potential partners and make more favorable agreements.
Failure to thoroughly evaluate and understand your contract parameters can have the following consequences:
- Unspecific clauses that do not lead to the desired results
- Lack of protection against termination consequences and liabilities
- Outdated wording that does not comply with new regulations or laws
- There is no set contract life cycle.
Uncertainty about contract parameters is at the root of some of these problems. If you don 't have immediate access to your contracts during the negotiation process, you are at a disadvantage because you can't look at previous contracts to get a sense of what a reasonable offer is.
In this article you will learn more about the definition, the most important terms and the use of contract parameters.
How to find the best interest of your counterparty?
1. understand your customer's perspective
- The best advice for contract negotiations is to make sure you and your customer are on the same page. Understanding the customer's perspective will have a significant impact on your discussion. It means going above and beyond for the customer.
2. find out about the terms and conditions of your own contracts
- Familiarize yourself with every detail of your contract, especially the more complex clauses, so you can explain to the customer why you are unwilling to negotiate or why it would be expensive to do so.
3. show more value than cost
- Although it's not always about price, a customer may ask to negotiate just to be sure of the value they will receive from you. So it would be wrong for you to continue to focus on cost instead of highlighting the important features of your offer.
How to win a negotiation
Learning the skills needed to negotiate successfully will definitely pay off, as it is a crucial part of running a business. To improve your negotiation skills, you need to consider the following:
Be transparent and honest
- The most fruitful partnerships between two independent companies occur when both parties are completely open and honest with each other. Transparency fosters mutual trust, which leads to greater confidence in working together and promoting each other's businesses.
Find or create a win-win situation
- The negotiation process encourages participants to use their negotiation skills to find a range of options that both parties can agree to, rather than settling for the first solution that both parties can accept.
- Sometimes it is best to keep quiet and pay attention. This can help you understand the other party's goals and interests during contract negotiations. To listen actively, you must take the time to absorb and understand what the other person is saying, not just listen.
Promoting long-term relationships
- Always keep the big picture in mind and aim to build long-term business relationships rather than quick wins when negotiating. By following the suggestions above, you can ensure that the other party leaves the negotiation satisfied with the outcome, creating a polite and positive tone that will foster future business relationships.
Here is an article from the Harvard Business Review that discusses strategic negotiation techniques.
How contract management software can help with contract negotiations
We've presented some tips and tricks for good negotiations in this article, but did you know there' s another step you can take to improve your negotiation skills? And that is with the help of contract management software.
The following advantages speak for the use of contract software for negotiations
1. contract software positions you for successful contract negotiations
- Shorten the time it takes to complete the first draft of the contract so that the other party can modify the contract or submit new terms during contract negotiations.
2. a contract management system automates processes and enables to accelerate growth
- The processes required before, during and after the negotiation process can be automated using top.legal contract software. This includes obtaining an eSignature via a single tool and providing automated alerts to all parties involved in contracts. In this way, companies can streamline the contract negotiation process and make it more effective.
3. real-time changes unlock more cooperative contract negotiations for their team
- If you work internally with your employees, top.legal's contract software allows you to collaborate before you finalize the draft contract. So if you need to make changes to the content, you can do this internally first.
4. contract archives allow you to centrally store data
- When two companies enter into contract negotiations, the goal should be to establish a contractual partnership. This is only possible if contract management is transparent and user-friendly. For this reason, top.legal offers a central repository that the team and other parties can access at any time. You can store, search and manage all your documents in one place.