Research Is the Key to Success in Contract Negotiations
Contract negotiation is an essential part of business. Vendors need to negotiate contracts with businesses and vice versa. Some companies need to negotiate contracts with each other for numerous reasons. However, before you can come to a legally binding agreement with another party, you must conduct ample research.
Research the Counterparty
Look online for information on the counterparty to get an idea of their company reputation and how the current economy is affecting their business. Find press releases, blog posts, and articles written by or for the other party. You may also find publicly available business details on websites of organizations, such as the Better Business Bureau. Study the information you compile. What can you surmise about the counterparty with this information?
Calculate Your Minimums
Enter contract negotiations with a clear vision of your primary objectives and minimums. Your minimums are the lowest you can go while retaining a profitable deal. Create a list of your primary objectives ranked in order of their priority. Assign a minimum to each of your top priorities. You may also find it helpful to predetermine your starting points for negotiations at this point. Make your starting points higher than your minimums, with enough room for the other party to haggle. Never negotiate a contract below your predetermined minimums because this sets you up for financial failure.
Determine What You Can Give Up
You must determine one (or a few) best-case alternatives to your objectives. Consider what you can give up to achieve your primary goals while still ensuring a profitable deal. For example, a vendor may find accepting a lower minimum delivery amount is still profitable if the price per product is higher. Conversely, a business may find they can grant purchasing exclusivity for certain products if the price is slightly lower. These alternatives are your backup plan.
Look at the Complete Picture
Once you've researched your counterparty and determined your objectives for negotiations, you can look at the complete picture. With all information in hand, do you believe the counterparty can meet your basic needs? Are there additional benefits or downsides to working with the other party? Do you feel the business relationship is likely to be a prosperous one? Answer these questions truthfully and objectively before moving forward with negotiations.
Create an Attractive Contract
The way the counterparty views the physical contract is essential but often overlooked. A sloppy, disorganized mess can end negotiations before they begin. Take the time to create an attractive contract that's accurate, organized, and easy to follow. Pay attention to detail, and try to answer all questions the counterparty may potentially have. Be sure to convert JPG to PDF to help your contract look its best.
Research Is Essential When Negotiating a Contract
Research is the key to success when you hope to enter a legally binding agreement with another business party. Only when you understand the counterparty and what you need from them can you see the complete picture.
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