Research Is Crucial Before Contract Negotiations
Many businesses sit down to negotiate a contract blindly. However, not understanding your counterparty or your own needs can set you up for failure. It's impossible to compromise without a complete understanding of both parties, their needs, and what outside factors are currently affecting their business.
Research Your Vendor
Before diving into what your own company needs, research your potential vendor. You want to develop a complete understanding of their business (or as close to it as possible). You can find information for nearly every business online. Look for:
Vendor's social media sites.
If you can find some other businesses the counterparty supplies goods or services for, do a little research on them, too. You may even want to reach out and ask about their experience with the vendor. Ask if they're willing to tell you what the vendor supplies for them and how satisfied they are with their contracts.
Research your counterparty's industry and how the current economy is affecting it overall. When the economy has a positive effect on an industry, their prices may be slightly higher, but their business thrives. If the economy is negatively impacting the counterparty's industry, their prices may be lower, but their business may be struggling.
Know Your Needs
Figure out what you need from your potential vendor for the deal to be profitable. For example:
Do you require a specific brand or type of product?
Is there a minimum or maximum order amount you need the contract to include?
What price per product do you need to maintain profits at your predetermined selling rate?
Create a ranked priority list of your needs. Your primary objectives go at the top of the list. At the bottom of the list, rank a few things you can give up to achieve your top priorities. If a vendor can't meet the minimums for your primary objectives, it's better to walk away from the deal and find a different option.
Have a Backup Plan
You must consider best-case alternative solutions to your objectives. These backup plans must ensure the deal is still profitable. For example, you may be able to have a higher minimum order amount if you can achieve a lower price per product. Or, you can grant exclusivity for ordering certain products if it means you're given certain privileges. Alternative solutions look different for every company and unique situation.
Contract Presentation Matters
A sloppy contract can ruin negotiations. Be sure you're presenting a contract that's accurate, appealing, detailed, and easy to follow. It’s important to convert a PDF to Word in order to make any last minute adjustments.
Consider using colorology principles in your contract. According to colorology, each color can invoke specific emotions in someone who views them. Learn more about what each color means or the feelings it invokes.
Research Thoroughly Before Negotiating Your Contract
You must fully understand both parties (yourself and the counterparty) to compromise during contract negotiations effectively.
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