3 reasons you shouldn't negotiate every agreement

There is a common belief that every contract should be negotiated to protect yourself and your business from legal risk. This is simply not true for many types of contracts. Not every contract is worth negotiating. When you negotiate an agreement, you spend a great deal of time and effort on its terms. This is time-consuming and expends significant company resources on what may be a contract with low ROI.

Effective contract management can help you negotiate contracts more effectively and create form agreements to limit future negotiations. You can let your legal team members focus on negotiating agreements with a high ROI. Understanding why you shouldn’t negotiate every contract can help you make informed business decisions that save time and increase revenue for your business. Empower your sales team to lose less time negotiating low-value contracts.

When to negotiate an agreement

When you negotiate an agreement, there are several steps from offer to acceptance.

Business leaders, managers, and sales team members often fall victim to the common misconception that you must individually negotiate every contract. They think this will lower legal risk and prevent them from losing a slightly better deal, but depending on the return on investment that the individual contract will realize, it may not be worth it.

You can avoid unnecessary negotiation when you know when it’s actually needed:

  • The individual contract is very high value and will see a high ROI.
  • Substantially new or different terms are introduced to the agreement.

3 reasons you shouldn't negotiate every contract

Negotiation is important, but this isn’t necessary every time. This is a common misbelief that costs businesses millions of dollars every year. They spend countless employee hours negotiating low-value agreements that could easily be standardized, slowing them down and depriving them of potential revenue.

 

1. Negotiating low-value contracts wastes time and money

Many contracts will not create a high return on investment. When you analyze an individual contract, you should ask:

  • Does it require new or additional terms?
  • Can I standardize this agreement for multiple users?
  • Is this a high-volume acceptance agreement? (i.e., Terms and Conditions updates)

Standardized terms usually do not require substantial revision and tend to be lower in value than personalized agreements. A website’s standard Terms and Conditions page, for example, is the same for every signer. The terms are “take it or leave it” for the user.

These minor alterations can be handled by automating contract terms. You can create custom workflows that automate low-value contracts and save you time. These workflows help your sales team self-service contracts without sending them to legal. They can also help counterparties agree to non-negotiable agreements without little to no sales staff involvement. Automation can make a significant difference in the effectiveness of your business.

The legal department and saving costs

When the legal department has to get involved, the costs of negotiating an agreement go up. This is inevitable even with highly efficient departments, so contracts below a certain amount—as determined by the business—should be standardized to reduce costs significantly. Using templates can make this process easy and save Legal from getting involved.

The legal department can even empower sales teams with pre-approved clauses for low-value contracts that require minor tweaking. That way, sales and other departments can self-service contracts and expedite contract negotiation. This saves substantial time and lets these departments focus on revenue-generating work instead.

 

2. Negotiation every contract creates bottlenecks

Negotiating a contract takes a lot of time. Two or more parties are trying to protect their interests and may even be in direct competition. This can lead to significant redlining, tedious back and forth, and lengthy delays, creating contract bottlenecks for your sales team.

Common bottlenecks are made worse when negotiating low-value agreements that simply don’t need to be negotiated. These bottlenecks often include:

  • Waiting on counterparties: One of the biggest time killers is waiting on counterparties to sign the agreement. Negotiation can take a long time, even weeks or months, especially with unsophisticated contract management software.
  • Legal takes too long:As a sales team, you want to keep agreements in your own department. Legal can take a long time to get things done because of the complicated tasks they’re responsible for.
  • Manual contracts: Manual contracts require in-line editing by an employee. They may have to revise a Word or PDF document and ensure the whole document is correct even after making minor changes.
  • Weak storage methods: Many companies still use outdated contract storage methods like file cabinets or servers. A digital contract repository can store contracts efficiently and make them easy to find. They are also searchable and provide advanced data metrics a sales team can use to make informed business decisions.

Your sales team can avoid many of these contract bottlenecks by limiting the number of contracts you negotiate. You should be strategic about the contracts you choose to negotiate and those you don’t.

3. Not every contract requires negotiation

Identifying contracts that do not require negotiation can help you streamline your contract lifecycle management and vastly improve internal efficiency. Just because you can negotiate a contract does not mean that you need to or should. Certain agreements are better utilized by automated contracts, including:

  • Terms of service: Terms of service are legal agreements between a service provider and a person that wants to use the service. These agreements do not change terms for every customer. Negotiating with individual customers would create inconsistent standards and liabilities. It is not in your company’s best interest to negotiate your terms of service for every single customer. These are “take it or leave it” situations for the signer.
  • NDAs: Nondisclosure agreements are typically standard for everyone, meaning you do not want to negotiate them individually.
  • Website privacy policies: Every company is working hard to protect online data. Website privacy policies obligate signers to your terms, but these terms won’t need to be negotiated often. Standardizing a template agreement can save time and the bottlenecks caused by contract negotiation.

These are just a couple of contracts that benefit from automation rather than negotiation. You can take other steps to create enforceable form agreements that work for your sales team.

How to host these contracts

Automating contract agreements can make a big difference, and so can how you present them. Sending a Word doc or PDF contract can lead your signers to think you are open to negotiation.

Instead, you can host these kinds of contracts at a dedicated URL, as with Public Workflows. This type of presentation lets the reader know that these are the terms, and they must agree if they want to proceed. This will simplify the signing process.

Automate contracts you don't want to negotiate

You can and should automate any contract you don’t want to negotiate. Low-value contracts can eat up time and money if you make them negotiable, and they are prone to common contract bottlenecks that can slow your sales and approval processes. With public workflows, you can encourage self-service agreements to save time. You can streamline how you do business and commit more time to revenue-generating parts of your business.

By negotiating less and automating more, you can target higher sales objectives, improve the sales funnel, and increase your overall efficiency. Effective contract management software can automate agreements with fillable fields, automatic reminders, and more. Advanced contract lifecycle management software can help your sales team streamline your contract processes and save time.

By negotiating less and automating more, you can target higher sales objectives, improve the sales funnel, and increase your overall efficiency. Effective contract management software can automate agreements with fillable fields, automatic reminders, and more. Advanced contract lifecycle management software can help your sales team streamline your contract processes and save time.

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Use Public Workflows to collect acceptance quickly on your non-negotiated agreements

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