Contract negotiation is one of the cornerstones of business. Some refer to it as an art form. Top entrepreneurs like Sir Alan Sugar attribute much of their success to hard uncompromising negotiation. It obviously pays to have a game plan when entering into such discussions. Over the years I have noted some simple rules, which have placed me in good stead during some quite tense negotiations. I hope you find them of use.
- First of all relax, as with an interview, allow plenty of time to get to the meeting. If possible arrive an hour before you are required and catch up with your colleagues to run through things.
- Do whatever you can to understand the position of the person you are negotiating with; what is the customer/client trying to achieve?
- Make them very aware of what you have already given. This might include highlighting services provided for free on the quotation, but with a £0.00 next to it. They can then see that you are trying to deliver them a good deal.
- Be concise and explicit with your requirements and understand your rationale for your chosen decision. This will make it easier to talk your point when you are justifying your stance.
- Aim for a ‘win-win’ scenario where possible. Understand that both parties have to come out of the negotiation in a good position. Both parties have to report their progress to their boss and no one wants to walk away the overall looser. My suggestion would be to build in some ground that you are willing to let go at the pitch stage. This makes the process far more flexible and less emotive.
- Personality! It’s great if you get on with the people you are negotiating with, if not then try and find a common ground and avoid confrontation during the process. Sounds obvious, but I have witnessed epic fails due to poorly judged comments leading to personality clashes.
- Understand your ‘fall-back’ and ‘walk-away’ position, the position where you are comfortable negotiating and the point at which you are prepared to walk away. During a negotiation, you can draw confidence from this thought knowing that you are in control of the parameters, if not the process.
- That said, don’t blag a ‘walk-away’ position. Only use it if you are prepared to walk away from the table. In my experience, a false ‘walk-away’ threat will destroy the negotiation if you don’t stand up to your statement. Whereas a physical ‘walk-away’ can put you in a stronger position; in future the negotiator will know you’re as good as your word.
- If you don’t think you are getting anywhere be direct; ask them what they need to close the deal. If they can’t answer then they don’t know it themselves.
- One thing to keep centre stage at all times is ‘keep the relationship professional’ whether it is with the procurement or account management; it is wise to remember that the negotiating parties are present to get the best deal for their organisation.
- Don’t fall foul of the ‘third party’ comment: I have yet to be in a tender negotiation process where I was the only agency pitching; even if I actually was. If you know what I mean? The old statement “we have back to back agencies to see today” is rarely true.
- Think hard about the deal you are putting on the table, what are the implications of the deal to your organisation? How might this deal impact on your time? What does this deal mean to the shareholders? Etc. I find it useful to memory map out the deal showing the impact and implications of each commitment; especially the likes of payment terms and use of human resource. These are very fluid and can easily get out of control costing you percentage points on your net margin.
- Don’t be persuaded to talk another deal after the agreement, especially at the 11th hour. Just be reminded that they don’t want to start the process again either, my suggestion is to stick to your guns where possible.
- Get the deal T&Cs looked at by a solicitor; it can be costly to get things wrong.
- One last point, think about the long term, agreeing to something now makes it difficult to change during your next negotiation in two years’ time. The natural start point is where you currently are, unless you have a mutual reason to start from scratch. So, when committing to a deal add time elements that expire before the period end if they are not needed. This creates discussion and avoids the assumption that the current deal is the starting point.
There you go some insight from what I have learned negotiating with corporate organisations. The thing I try to remember is that they want to do ‘the right deal’ as well; however, I am always aware that the wrong deal is worse than no Deal. The ‘opportunity cost’ of agreeing to a wrong deal takes away the chances of you gaining the right deal with someone else. Good luck.
*All comments are based on my personal experiences and given freely. That said, you need to make your own choices. I can’t and won’t accept liability for you employing any recommendations. Business is all about risk. It’s your choice.
Nigel stone has, over the last fifteen years, started, led, consulted and nurtured both UK and European businesses to achieve quite outstanding results.