The Importance of Standing Firm During Contract Negotiations
If you sell services or products to other businesses, you often go through a process called contract negotiations. This is how you and the counterparty come to a detailed agreement about future transactions. These agreements include the how, what, and when of the business between the two parties. Ensuring a profitable deal involves proper planning and standing firm during this process.
Know Your Priorities
Before speaking with the counterparty, know your priorities. Most importantly, be aware of what your minimums are. The minimums you need to determine may vary based on industry.
A few examples of minimums you may need to know include:
What’s the minimum price per product or service you need to receive?
What’s the minimum order quantity you need for the deal to be profitable?
What’s the minimum delivery frequency you need the counterparty to agree upon?
Creating a list of your top priorities can be helpful. Beside each of your top priorities, make notes on your minimums. You may also find it helpful to note your starting offer. Make a starting offer that’s higher than your minimum but not so high it seems outrageous to the counterparty.
Know What You Can Give Up
Knowing your priorities is essential, but it’s far from the only consideration to make before entering the negotiation process. Consider what you’re willing to give up to achieve your top priorities. For example, you may be willing to give up exclusivity if your product price and minimums are met. What can reasonably be given up without affecting profitability is unique to each company. Take time to understand what this looks like for you.
Avoid Making the First Major Concession
By definition, a concession is an act of giving something up to reach an agreement. There are likely to be numerous concessions during the contract negotiation process. Some concessions may be small, such as giving up something you already had in mind, to achieve one of your top priorities. Other concessions may be significant, such as giving way on order minimums or product prices.
The counterparty wants to get the best deal possible, and truthfully, they don’t care if that means you lose out. That’s the way business is. Making the first concession means not only have you already given way on something, but the opposition has the upper hand. So stand firm on what you want, and never give up your priorities. It’s better to walk away from a potential deal than risk making a bad one.
Don’t Neglect Contract Presentation
The way your written contract looks can make or break a deal. A well-presented contract can garner excitement, inform the counterparty, and provide reasons for every detail. Be sure to convert a PDF to Word to make the contract shine on its own.
Your presentation skills matter, too. Be confident and friendly during your presentation.
Stand Your Ground During Contract Negotiations
Stand firm during contract negotiations to help you keep the upper hand. Remember, it’s better to walk away than agree to a bad deal if it comes down to that.
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