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Negotiating a Contract: Defining Your Needs

It's a simple fact of human life that people negotiate with each other on an almost daily basis. The process is so normal that most don't realize they're doing it. Some examples include deciding which movie to watch with the family or picking out the neighborhood where you prefer to buy a house. Negotiating a sales contract is just a more involved version of this process than most people encounter in daily life. It's a process that makes it necessary to understand how to get what your business needs and when walking away can be a win in itself.

Preparation and the Realities of Cost

Knowing what your business needs out of a negotiation—in both the short and the long term—is one of the most fundamental steps in reaching a final deal that provides value for everyone involved. One of the most concrete details of that kind of value is simple cost.

Always come to the negotiation table with a full understanding of what it costs to provide the service or create the product you're buying. Knowing the real costs of these fundamentals makes it possible to set realistic parameters for the value you can hope to get from the seller. It gives you a feel for how far they may be tempted to push on the price point and how much you can realistically afford to give.

This kind of negotiation is usually at its most productive if both parties are coming to it in a collaborative spirit. However, a realistic approach to integrative negotiation also means knowing you can't always hammer out the deal you want.

Knowing Your Walk-Away Point

Keep in mind that you haven't necessarily failed if a mutually beneficial deal proves elusive. The timing may simply be wrong. Plenty of external factors that are simply out of the control of either party can influence the cost of production and services or other elements of the contract. You may not always find that a counterparty is willing to engage in a collaborative negotiation process in good faith. There may be other reasons a negotiation fails that neither party is able to fully quantify or put into words.

Whenever these things happen, it's important to know when the time has come to walk away from a negotiation. Having a clear understanding of the fundamental costs and long-term effects on your bottom line helps you recognize the most basic walk-away points. There may well be other terms and conditions of a potential agreement that aren't in step with your goals. Knowing those parameters, and observing them, is a win in itself.

Keeping the Details in View

Effective negotiation is all about attention to detail, whether it's the underlying realities of the market or the final details of the contract itself. When presenting the contract, ensure it spells out concrete benefits for both parties and is as clear and attractive as possible. It's best to convert JPG to PDF online for electronic documents.

Your local business community can be a key resource for gaining insights into negotiation. It's always a good idea to join your local chamber of commerce for these and other benefits.


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