SmallBizResource Blog -- Business Know-How

Don't Let Contract Negotiations Throw You

Posted by Janet Attard, Courtesy of Business Know-How Thursday, Aug 21, 2008, 05:28 PM ET

Getting a company to agree to use your products or services may be only half of your job.

Once you have convinced them you can do the job they want done, you may still have to negotiate the deal. And that chore may be more difficult than convincing the company in the first place that they need what you are selling. Conflicts may arise over price, delivery terms, quantities, or even the length of the contract.

Depending on the company, the size of the contract and the negotiator, tactics that may be used may include anything from low-balling you on prices, to insulting you, to taking weeks to respond to your inquiries or counter-offers on price, to demanding control or rights you don't want to give up.

To avoid coming out on the short end of the deal, or losing it altogether, determine in advance exactly what you want out of the deal. How much money do you want? What's the minimum you could accept and make it profitable? What do others get for similar work? If intellectual property is involved -- copyrights, trademarks or patents -- which rights, if any are you willing to give up? How long are you willing to license those rights for?

When you get an initial offer, look it over carefully. If you are presented with an offer in person, or one is faxed to you while the client is on the phone, don't be pressured into making any kind of decision or definitive answer. Tell the client you will have to read the offer carefully and will get back to them.

If the customer is a large corporation or a company that regularly buy goods or services through negotiated contracts, the contract you are initially shown is likely to be a boilerplate contract. Prices and terms are likely to be negotiable. The initial price offer may be just that -- a first, low price, made in expectation that no matter what price is offered, you'll try to bargain up.

Take the time to carefully look at all the terms, not just the price. There may be some terms included that are unacceptable, and some that you don't like but which you could live with if you had to. Have your attorney look over the offer and alert you to issues he or she thinks are important. Then go back to the client. Go over all of the issues you have with the offer and settle what you can. Focus on the most important issues to you. If the price is too low, try to negotiate the highest price you think the company's budget will allow. Don't start near or at your drop-dead minimum. Don't be greedy, but do expect to make a fair profit for your work. And do keep your overall objectives in mind.

When necessary, trade off the less important issues to win concessions on the items that are more important. If you sense tempers are beginning to wear thin (yours or the customer's), hand off negotiations to your attorney to distance yourself from the negotiations. (Be sure the attorney knows which issues you insist on and which to trade off so your legal bill doesn't run up unnecessarily.)

While all of this is going on, stay in touch with any people in the company you will actually be interacting with after the contract is settled. If they recommended you, they have a strong interest in seeing your contract settled and, whether they admit to it or not, are likely doing what they can behind the scenes to speed things along.

Business Know-How