Knowhow: Negotiating Table | Advice on how to make sure your business interests are protected
If you are responsible for running a business or managing a significant part of a business, sooner or later your job will require you to be involved in negotiating one or more contracts.
The terms of the contract will in large measure determine both the benefit and the risk to your organization or the business relationship that is governed by the contract’s terms. Thus, it makes sense to approach any contract negotiation in a methodical and thoughtful manner, guided in part by the following tips:
Assess your bargaining leverage. Leverage is the extent to which the other party needs what you are offering more than you need what the other party is offering. The more leverage you have, the more likely the negotiations will go your way.
Don’t confuse leverage with your size relative to the other party. Many a small company will have leverage over a larger company.
Determine your “must haves.” For example, while getting list price for your services or products might be a must have in your negotiations with some customers, you may be willing to give a significant discount with respect to a marquee customer who permits you to use their name in your marketing materials. However, you might consider some must haves as a matter of corporate policy. This might include terms that permit you to recognize revenue in the same quarter as the deal is signed.
Prioritize your “must haves.” Are there any that are so important that you would walk away from the deal if the other party did not agree to them? Are there any that you would concede only if the other party sweetened the deal in one or more respects?
Focus on obtaining your must haves during the negotiations. Don’t get so carried away by the excitement of negotiation that you seek to win points on every issue.
Expect the process to be one of give and take. It is rare for either side to have such leverage over the other that it can expect to get its way on each and every issue that arises.
Moreover, demonstrating flexibility during negotiations often goes a long way towards establishing goodwill with the other party.
Determine whose template to use as a starting point for negotiations. Typically the parties should use the template of the seller or service provider rather than that of the purchaser. If the parties agree to start with the purchaser’s standard form, recognize that this is likely to result in longer negotiations.
Assemble your negotiating team. This should include individuals who understand the legal, technological, operational and financial aspects of the deal.
Assign roles to members of the team. Who will be the primary participant during the negotiations? Who will simply need to be present or on call as needed? Will one participant play good cop to the other’s bad cop?
Make sure the contractual language is clear and jargon-free. Otherwise you cannot be confident that you and the other side have come to a meeting of the minds or that in the event a dispute a judge or jury would interpret the contract the same way you do.
Remember your ultimate objective. The end result of the negotiation process should be a signed contract that contains as many of your must haves as possible and clearly and unambiguously states the mutual intent of both parties.
Howard Novick is an attorney with Seder & Chandler LLP, a law firm with offices in Worcester and Westborough. He can be reached at hnovick@sederlaw.com.
WBJ Web Partners
Most Recent
Most Recent
0 Comments