Effective Contract Negotiation for Small Businesses

Negotiations are happening every day throughout our lives, whether it is business or personal. It is imperative for small businesses to be able to negotiate when entering into a contractual agreement effectively. You will be negotiating everything from terms, pricing, and deadlines, meaning that you will have to communicate precisely your end goals for that specific issue with a vendor, distributor, or another business. The initial perception of having to negotiate can sound harsh, aggressive and can sometimes breed intimidation. However, one key in this process is never going into it with the attitude of wanting to "beat the other '' person. It exudes that you are negotiating with your emotions, which is not the purpose. As a small business owner, you will have to make critical decisions. Every move being made will affect the overall business.

Below are some tips that will be helpful not only when you are in the negotiating but also to be prepared for the day:

Preparations Leading up to Negotiations

Do Your Research: A very important step that should be done in the early stages and continued until the time of negotiations. Researching the other party’s metrics, numbers, products, and the market you are in is critical in understanding how you will be able to leverage what you are asking for and how you can compete.

Past Performance: In addition to researching the company in general, it is imperative that you understand the company’s history, which can explain their ultimate interests and will better assist you in communication.

Self-Assess Your Business: Going into a negotiation, you should always ensure you know all your resources before going into negotiations to leverage what you are looking to accomplish.

Goal Setting: As a business, it is important to review your goals (short-term and long-term) for your business, which will better help to facilitate what you are trying to accomplish during the negotiation ultimately. Make sure to also rank your goals in order of importance.

Prepare to Give Up Something: Whether paying a higher price for an item or not being able to negotiate an objective within a contract, make sure to think through what you are willing to give up, whether financially or substantively.

Know When to Walk Away: While the goal is not to run the conversation to where it's one-sided, you should always set boundaries for what you will not settle for. Walking away from a deal to protect your business moving forward is better than sacrificing that could impact your business severely.

Common Ground: Trying to foresee a common ground amongst both sides where you both walk away with something from the table could equate to a positive and smooth negotiation experience.

During Negotiations

Be Professional: While this may sound trivial, sometimes people in negotiations automatically assume that you must be brash to get what you want. It's the complete opposite. Remember, you are building relationships with other businesses through this. Your reputation matters and is important if you are looking to do continuous deals with the other party.

Timing is Key: Long negotiations can be tedious and non-effective for both parties. More than likely, nothing will get resolved nor decided. That doesn’t mean you should rush through it either. Keep track of timing and how long it takes to give an answer or consult about a decision.

First Offer Does Not Mean Best Offer: Just because the first offer sounds good does not mean it is the best. Make sure to counter-offer. Having back and forth conversation is healthy to where both parties may be able to get what they are looking for or something better.

Ask Questions: Is this the best deal that you can offer? Can you add anything additional to the deal? What benefit are you looking to get out of this negotiation? Some of these questions can help you understand what the other party is asking for and how you can move forward with what you really need.

Don’t Stay on an Issue: If an issue arises, don’t dwell on it for too long. Remember, timing is essential in a negotiation. Put the issue aside and keep moving through the other needs. Over time, the original issue may not be an issue anymore.

Seek Counsel or Advice if Needed: You don’t have to go into a negotiation alone. If available, seek out the advice of a lawyer in your specialty field to get the maximum understanding of how you should move forward.

 The S.J.S. Law Firm can help your small business comply with the upcoming reporting requirements of the Corporate Transparency Act. For a complimentary consultation, please contact us at (202) 505-5309.

Sources:

Richard Harroch. A Guide to Succeeding in Business Negotiations. Forbes. 2020.

Goldman Sachs: 10,000 Small Businesses Articles for Small Business Owners - 7 Negotiation Techniques Every Business Owner Should Know.