HOW TO NEGOTIATE A CONTRACT

by Joelle Steele

When someone buys a contract template from me, they have to customize it to meet their business needs. But that's not the end of it. Once they submit that customized contract to their client for signature, it's usually time to negotiate. And it doesn't matter who presents the contract. Negotiation is part of the process whenever you are establishing a work relationship with someone.

Negotiation is not and should not be an intimidating process. And, it's a lot easier than it seems. It's all about reaching a compromise by being ethical, fair, and reasonable; by setting your emotions aside; by asking questions and listening carefully; and by putting yourself in the other person's position to better understand their needs. That how you will both ultimately get what you want. Remember, you are entering into an agreement with someone, and trying to play it heavy-handed is hardly the way to ensure success or longevity in any business relationship.

What's negotiable in a contract? Almost everything. But some things are more negotiable than others and make a bigger difference overall to both parties. Here are a few of the things that are important to negotiate in any contract.

MONEY

Before you start talking how much, talk about what the money represents. Break down prices into their smallest components so that both of you can see how the price was determined. Once you see that it is not just some random number plucked out of a hat, you can negotiate it better. And remember to think long and hard about things like taxes, delivery fees, and reimbursable expenses. They can really add up. When you want to ask for more money, be sure that you can explain why you should have more, that what you're selling is worth what you're asking for. And once you ask for that amount, be prepared for the other person to either agree to it, or to counter with a lesser amount or different offer altogether. You can counter that amount too. This "haggling" is what negotiating is about when you're talking dollars and cents.

PAYMENT

Hand-in-hand with money is negotiating how payment is to be made. There is not a right or wrong to how payment is made. It is usually a matter of who needs money and when. If one person needs money for materials up front for a project, then they may ask for a deposit to purchase those materials. If the project is going to take place over a period of a couple months, then they may need progress payments, monthly or semi-monthly payments as they perform the work. If payment is about delivery of goods, the payment could be on delivery or within 10 or 30 days. How the payment is negotiated could be cash only, cashier's check, business check, credit card, installment plan, etc. And remember what I said about breaking down prices? This helps when you're determining something such as who pays for shipping, or if it is included in the pricing.

RESPONSIBILITIES

Who's in charge of what? Seems like it should be a no-brainer in many cases, but you'd be surprised how many times one person assumes the other is doing "it," whatever "it" is. Spell out all the responsibilities so that you can both see what they are from each other's perspective, and determine who is the best person to handle each of them. For example, if you don't have a truck and the other party does, perhaps they should pick up something from you rather than have you hire a common carrier to make delivery. If you have some office equipment that the other person needs, maybe they should do the work at your place and use your equipment rather than charging you additional because they have to go pay to use that equipment elsewhere.

DURATION OF CONTRACT

Is this a contract that will be entered into for a predetermined period of time, say for a year? Or is this a one-time contract for a specific one-time service or product purchase? Or should it be left open-ended? Maybe one other party won't go for open-ended without a paragraph that says they can adjust their pricing after a certain period of time. Maybe one party needs more than 30 days written notice to terminate the contract.

SUMMARY

Before you sign any contract, read it all again, start to finish. Think about it. Sleep on it. And whatever you do, don't rush and sign it just to get it over with or to get the job started sooner. And never, ever, ever, ever sign anything unless you understand it fully and agree with it 100 percent.

Contracts are written agreements that outline who does what in a business, and you want your business relationship to be pleasant and professional at all times. Contracts help you achieve that goal. But in addition to being very detailed, a contract has to be acceptable to everyone who enters into it. Negotiation is what makes that happen. So negotiate your contract carefully and enjoy a business relationship that is smooth and profitable for everyone concerned.