New business relationships are fragile. The period between a handshake deal and a signed contract can be nerve-wracking but it’s really important that you take negotiations seriously. These four strategies for negotiating contracts will help get the best outcomes for your business and protect it from a breach.
1. Know What Your Contract Should Cover
Contracts govern a lot of your work as a small business, including employment. For the purposes of this blog, we are talking about vendor/supplier contracts. These are the ones that govern the goods and services you supply or buy.
UpCounsel lists the four main provisions a supplier contract should include:
- The items the supplier must provide
- Pricing and payments for all goods and/or services
- Expected time frames for work completion and payments
- The responsibilities and terms of the relationship
You can negotiate each one of these parameters. The goal of any contract negotiation should be to move the contract closer to an accurate description of what your company can deliver. Sometimes it’s about the type of materials used, delivery dates, or price. Sometimes it’s more about how your company will work with its partner. For the latter, it’s especially important to be clear.
For example, say your contract stipulates your company will respond in a timely manner to requests for information about the production of the contracted goods. What does respond mean? What does timely mean? And what kind of information should be forthcoming? If you’re promising intangible things, make them as specific as possible.
2. Keep Your Goals Top of Mind but Know Theirs
Many small businesses go into negotiating contracts thinking about two things: Money, and responsibility. How much are we going to make or spend, and what are we expected to do for it. That’s not a bad place to start – getting these things right is pretty important! But you and I both know business is about more than money. Companies have histories and institutional knowledge that govern how they act. Knowing your goals and the goals of the other party will help you make better decisions while negotiating and beyond.
For example, imagine you’re negotiating a contract to supply an interior design company with handcrafted wood panels for a chain of restaurants. You know the company owns contracts with multiple restaurants and hotels in your city so you think it could be an excellent partnership for your company.
Your goals are to secure a high-value contract that could turn into ongoing work. The other company has been burned by multiple suppliers in the past so their goal is reliability. They want their partner to deliver what was promised. Now that you know this, you can determine your shared goals; in this case seem to be trust, reliability, and a long-term fruitful relationship.
If you can consider their goals when negotiating the contract, you’ll be in a much better position to highlight how your business practices and the contract itself demonstrate your reliability. Likewise, sharing your desire to become long-term partners can help the other company’s representatives appreciate that you are in it for the long run. That might make them more likely to negotiate on things that matter less than the health of the business relationship.
3. Do Sweat the Small Stuff
As a small business owner, you’re constantly told – often by the business coach in your head – not to sweat the small stuff. With contracts, however, it’s often the minutiae that can get you in trouble. I can’t tell you the number of times a small business owner has told me their contract breach came from a single word or phrase that was hidden on page seven or seventeen. I’m here to tell you that at least when it comes to negotiating contracts, you or someone on your team needs to understand and accept exactly what you have promised.
Keeping track of the fine print can be tricky but these days, there are tools that can help. Contract lifecycle management platforms like Anapact give you the ability to zero in on a particular word or phrase and highlight it for your team members to assess. For example, if the contract requires fulfillment on a particular day or time, you can check with your delivery team to make sure that it is possible and to give them an early heads up that this will be required of them.
4. Plan for Efficient Redlining
The best way to speed up redlining and contract revision is to use a contract lifecycle management tool. Designed for small business teams, it pools all revisions in a single tool so none of them are lost in Google Doc comments, meeting notes, and emails. You can set role permissions so only authorized people can change and approve certain sections. And it integrates with eSignature tools and other fulfillment software to speed up the rest of the process.
Without a tool, redlining can be a nightmarish prospect with multiple versions of the contract bouncing between your company and theirs, unclear revisions captured in multiple places (or not at all). Every touch is another opportunity for error. That’s why Forrester says contract lifecycle management tools are a game-changer.
Anapact will accelerate the time it takes you to negotiate contracts along with supporting your team to tackle them more efficiently and with fewer mistakes. That ultimately reduces the risk of breach and makes your company easier to work with, so you can negotiate bigger and better contracts!