Contract negotiations can be frustrating and time-consuming. The problem? Many legal teams go into contract negotiations without a clear vision of their objectives and priorities. That lack of focus leads to unnecessary contract cycles, miscommunication with counterparties, and suboptimal outcomes.
The good news is that by beginning with the end in mind, you can turn contract negotiations from an operational weakness into a competitive advantage. If you’re not familiar with what contract negotiations are and how technology can improve your contract negotiation outcomes, start here.
After that, check out these ten tips for implementing consistent contract negotiation processes and ensuring the best possible outcome.
1. Start with a draft.
Before authoring a formal contract to negotiate, ensure you and the other party agree on the main points of a contract. Use a straightforward term sheet. If it gets too complicated at this point, go back to the beginning and start on new terms.
2. Break it down into smaller pieces.
Getting one party to agree to wide swaths of a contract isn’t realistic. Break the contract into pieces that can be agreed upon separately. These smaller agreements will make up the larger contract, and this strategy will help avoid the “all-or-nothing” approach to contract negotiations.
3. Keep your initial terms simple.
Complex contracts with lengthy detail and nuance will further complicate negotiations. Start with simple and clear terms that everyone will understand, even if it avoids some of the more nuanced advantages of complex contracts.
4. Know your “why.”
Understand why you want to do business with the other party. Go beyond the competitive or aggressive mindset of getting the most out of the contract and aim to work collaboratively. How can this relationship benefit both parties?
5. Prioritize your key objectives.
Go into a contract negotiation process with a keen understanding of your top priorities from the arrangement, as well as how other risks or rewards rank after your initial needs are met.
6. Ask questions and understand your counterparty’s motives.
Get to know as much as you can about the other party’s interests and goals before starting a contract negotiation. By understanding that business’s motives and needs (or pain points), you can better align your negotiations with moves that support your company’s needs while still meeting the other party’s interests.
7. Come prepared with research.
Support your claims with appropriate data or testimonials from similar clients.
8. Don’t let emotions get in the way of a win-win outcome.
Business negotiations are just that — business. Avoid complicating the process with personal feelings. Eliminate “I think” or “I feel” statements and focus on facts.
9. Take a positive approach.
Express appreciation for the other party and what they bring to the table. Find points you can agree on. Set the tone for a contract negotiation process that will best serve both parties’ interests.
10. Take your time early on; don’t rush the process.
Take your time before, during and after the negotiations. Plan to complete research and required documents well in advance of any meetings or negotiations. Avoid making hasty decisions during the process. After negotiations wrap up, follow through on any questions or deliverables.
Becoming a Better Contract Negotiator
Interested in seeing how contract negotiations break down in the real world? Check out how Kenneth Carter, GC of BitMovin, thinks about the biggest contract negotiation hurdles for NDAs and how lawyers can work together to reduce them.
Negotiation processes can help you drive better outcomes, but they don’t address the process inefficiencies of contract. Contract management software can help streamline the redlining process. All parties can access a secure document and view changes in real-time. Learn more about how Ironclad’s contract negotiation and collaboration technology simplifies contract negotiations.
Ironclad is the #1 contract lifecycle management platform for innovative companies. L’Oréal, Staples, Mastercard, and other leading innovators use Ironclad to collaborate and negotiate on contracts, accelerate contracting while maintaining compliance, and turn contracts into critical carriers of operational business intelligence. It’s the only platform flexible enough to handle every type of contract workflow, whether a sales agreement, an HR agreement or a complex NDA. The company was named one of the 20 Rising Stars on the Forbes 2019 Cloud 100 list, and is backed by leading investors like Accel, Y Combinator, Sequoia, and BOND. For more information, visit www.ironcladapp.com or follow us on LinkedIn and Twitter.
More stories from our team.