Getting started on the right foot with a new client often begins with the contract negotiation process.
It’s all part of ensuring a great customer experience (CX) throughout the entire client progression—from pre-sales conversations, discovery, bidding and contract negotiations, to project planning, implementation and go-live, to billing and engagement close-out.
But negotiating contracts isn’t a one-size-fits-all kind of a game. The techniques and tactics can differ every time.
The key to a successful negotiation is to conclude it with both parties feeling like they “won.” You don’t want one party starting off with a sense of defeat or an adversarial stance because that can affect the project, relationship and prospects for future work.
As a result, sales teams and organizations as a whole should be adept at managing expectations throughout each step of the contract negotiation process. This means not just understanding a prospective client’s business and needs, but also being aware of industry best practices, and their own organization’s capabilities, requirements, and hot button items.
Technologies such as Customer Relationship Management CRM and Configure Price Quote (CPQ) systems or other applications that track clients’ or prospective customers’ information and history, can help sales managers with insights for an easier time negotiating contracts.
Here’s a few tips and strategies we use at Emtec for ensuring success during each step of the contract negotiation process:
Prepare a contract negotiation template and research
It’s current industry norm to exchange redlined documents with prospective clients during contract negotiations. So, ensure everyone involved at your organization is adept at using the software that will be used in the exchange process. Consider having an administrative assistant make a first round of simple edits to the document, such as for company information or payment terms. Having a set list of simple edits can drastically cut down on legal time and costs for reviewing and editing.
Also, do your research before you enter the formal contract negotiation process. Check Dunn & Bradstreet or other similar business background websites to learn about the prospective client’s:
• Financial Stability,
• C-suite, decision makers and legal team, and
• Business areas that will be using the service or product.
Further, research the individual you are going to negotiate with for the deal. Check LinkedIn or the prospective client’s website for information on your counterpart. If not already known, you can find areas of common ground first (shared alma mater, previous employers, etc.) that can make for a friendlier exchange and both sides are usually more open to give ground when they perceive commonalities.
Plan for what really matters during contract negotiationIf you start a negotiation with a hot-button item it might save time, but it also can sour the air and kill the deal from the start. Consider easing into a contract negotiation by giving in on a few items first, but still bear in mind what is really a deal breaker. If you’ve already conceded on a few items when you get to the deal breaker it is much easier to get what you want there or at least get some movement on an otherwise sticky topic.
Also, know when to table a dispute so you are not fighting an issue on principal. Often when those not intimately involved in the deal become involved, the discussion can get lost in abstract rather than real concrete project possibilities. If you are disputing a point that is essentially moot, consider omitting that clause altogether. Consider whether you think the prospective client really needs the change or if it just seems fair to approve it; if the risk is low to you, offer the option that feels fair – for example, go with mutual clauses even if both sides don’t really need a certain protection or right.
Consider the risk of some disputed items by measuring the probability of the occurrence multiplied by the value of its risk. Develop some trade-off clauses to mitigate or account for these risk dollars and anticipate meeting in the middle. Remember, what a client considers a win is not always the same was what you do.
Negotiation management and contract executionWhile your organization should be the one to craft changes to the language in contract documents, resist the urge to fix things that aren’t broken in the prospective client’s suggestions. If you agree to the change, only fix the language if it impacts the intended meaning. The more red marks in the document, the more your organization looks like a barrier to the deal.
Know the approval limits of the decision makers working on the contract negotiation. If they have reached those limits, be prepared to escalate the negotiations or documents to another approval authority, such as moving discussions with sales and business staff to legal personnel. Consider having two-tiered terms and guidelines based on that negotiating power. Often you can table a few of the high-level items for escalated review and still get through the rest of the contract.
Finally, always run a document compare before the final version is signed. When various redlines go back and forth, things can get lost in the shuffle and version control issues may arise. If that happens make sure to handle it professionally, as its most likely an unintentional mistake.
These are just a few tips and strategies organizations should consider for a successful contract negotiation—and ultimately a successful project, CX and future relationship.
Emtec has built long standing relationships with our clients over the years through successful contract negotiations and projects that have delivered meaningful and lasting business value. Our “Client for Life” approach is built upon over 20 years of delivering results.
Contact us to discover how we can help you improve your CX through advanced CRM toolsets as well as a wealth of application development and user interface design.