7 Common Negotiating Mistakes
You’re a business owner and you need to negotiate a contract. If you find this prospect intimidating, you’re not alone.
Contract negotiation, like public speaking, can be an acutely stressful experience. As with any stressful experience, people are more prone to make mistakes. That’s why it’s helpful to be aware of some common mistakes that are made in negotiating contracts before you start.
Let’s take a look at 7 common mistakes that people makes in contract negotiations, starting with the biggest mistake of all.
Failing To Negotiate
The single biggest mistake you can make is to fail to negotiate. This may seem obvious, yet it’s all too common for business owners and individuals to be given a contract and sign it without pushing back at all.
There are a number of reasons why people don’t negotiate. Often, you’ll be given a contract and told that it’s that company’s “form” or “standard” version of that contract, the implication being that its terms are non-negotiable. But that’s rarely the case. Most companies are willing to negotiate, even if it’s just one or two terms. While you’ll need to exercise some judgment in determining which terms are up for negotiation and which are off-limits, that’s no reason to avoid negotiating altogether.
Some people don’t negotiate because they assume the terms of the proposed contract are fair. This is especially prevalent when dealing with friends or with large, reputable companies. In either scenario, you trust the other party not to take advantage of you. But that’s not always the case, and regardless of their intent, it’s ultimately your responsibility—not theirs—to ensure that you’re getting the deal you want and the protection you need.
Some people don’t negotiate because they don’t think there will be any disputes over the contract. But often the best way to avoid disputes is to go through the process of negotiating a contract. If both parties have thought through the important details of the agreement and reduced them to writing, it’s much less likely that either one of the parties will subsequently dispute the meaning of those terms or what was intended at the time they were written.
Having No Plan
To negotiate effectively, you need to have a plan. If you don’t have any plan beyond getting a contract signed, the odds are good that you’ll leave a lot on the negotiating table. At the very least, you should identify the point(s) at which you’ll walk away from the negotiation.
But a good plan won’t end there. A good plan will contain detailed negotiation scenarios and outcomes that would be acceptable to you. It will also include an overall strategy for achieving the goals you’ve set for yourself, along with negotiating tactics that can help you get what you want.
If you want to move from a good plan to a great plan, you have to spend time thinking about what the other party wants. In essence, you have to put yourself in their shoes and then repeat the steps you took to create your good plan. Only after you’ve done this will you be in a position to understand what you can give the other party in order to get them to give you what you want.
Making Unreasonable Demands
You’ve probably heard of the concept of “anchoring high”—the strategy of initially demanding more than what you’re ultimately willing to accept. There can be great value in this strategy, but it can also get you in trouble if used in service of making unreasonable demands.
Making unreasonable demands can hurt your credibility and limit your chances of the other party making concessions on terms that matter to you. If they think you’re being unreasonable, they’re less likely to trust you. They’re also more likely to mirror your approach as a protective measure, meaning you’re less likely to get them to compromise on terms that really matter to you.
Even worse, making unreasonable demands in a negotiation setting can jeopardize your relationship with the other party. If they think you’re being unreasonable in the negotiation, you’ll have given them reason to think you’ll continue being unreasonable and difficult to work with after a contract is executed. Unless you’re their only option, they’re likely to consider contracting with someone else to avoid dealing with you.
You may wonder how you’re supposed to distinguish between demands that are reasonable and those that are not. While there is a good dose of subjectivity involved here, you should have at least a general idea of what’s considered to be reasonable within your industry. If you don’t know, you should consult with someone who does. This should be part of the process of formulating a plan for the negotiation.
Doing All The Talking
Effective negotiators know when to talk and when to listen. The best ones often do more of the latter.
Why? If you spend time listening to the other party, you’ll figure out what’s important to them. By doing this, you’ll know what you can offer them that will make them inclined to compromise on terms that are important to you.
Inexperienced negotiators are prone to zero in on what they want and, in doing so, lose sight of what their counterpart hopes to get. The result is often two parties talking past each other—a missed opportunity for everyone. Talking too much can also lead to you unintentionally disclosing more than you intended to about the strengths and weaknesses of your negotiating position. That bell can’t be unrung.
Listening isn’t a sign of weakness, it’s a sign that you’re interested in the other party getting what they want. That will almost always get you where you want to go in contract negotiations.
Tip: Getting the other side talking can be difficult so it helps to come prepared with at least a few open-ended questions like “what’s important to your in these talks?” or “what’s a good outcome for you here?” or “do you have concerns?”
Bidding Against Yourself
At a basic level, negotiating is a series of exchanges. You give me that, I’ll give you this. In most instances, if you give something away without getting something in return, you’re not negotiating, you’re conceding. That’s why you should never bid against yourself.
Bidding against yourself means that rather than negotiating with the other party, you’re negotiating with yourself. Consider an example.
You’re negotiating a service agreement. Your prospective client offers to pay you $235 per hour. You counter with $275 per hour. The client doesn’t immediately make a counteroffer and so you, eager to please, say you’re willing to accept $255 per hour. Your leverage, not to mention your credibility, instantly crumbles.
The people who end up bidding against themselves tend to be the ones who failed to make a plan for the negotiation and/or failed to research the market value of their goods or services. So do your homework in advance.
Losing Your Temper
Negotiating is almost always stressful, even if the other party is reasonable and congenial. When the other party is stubborn and hostile, it can be easy to get angry. But you should do your best to avoid this. Taking things personally is a sign of immaturity and poor business acumen.
Having said that, there can be strategic reasons to show strong emotion, like anger, in a negotiation. But “it felt good to tell them off” is not a strategic reason. Nor is “they started it.” If you’re going to raise your voice or shake your fist, make sure you can produce a good reason that relates to your overall negotiating plan.
On the subject of showing emotion, don’t forget to account for body language. You could be speaking in a calm, even tone of voice throughout the negotiation, but if you’re shaking your head or raising your eyebrows or throwing your hands up in the air, the other party will trust your body language over your tone of voice. If you know your body language has betrayed you in the past, make sure to practice in front of a mirror before the negotiation.
Starting Work Before The Contract Is Signed
It can be so tempting to start working before the contract is signed. You’re probably excited about the new client or new project. And you might be getting pressure from the other party, especially if the work is time-sensitive. They may assure you that all that’s left to do is to “tie up a few loose ends” with the contract. They’ll probably tell you it will be done in a few days.
Don’t give in to this. If the other party’s concerned about time, then it’s incumbent upon them to get the contract done so that you can start work. You should make this clear to the other party in a kind but firm way. If, in spite of this, they continue to insist that you start work without a contract, it’s a big red flag.
Once you’ve started work, the other party has much less incentive to make concessions, leaving you in a much worse bargaining position. Don’t cede your leverage because of the other party’s impatience or your own misplaced eagerness. Get an agreement in place. Then get it in writing. Then you can start working.
Of all 7 of the common mistakes, usually the worst one you can make is the first one—failing to negotiate. So, if you’re reading this to prepare for a negotiation, you’ve already avoided the biggest pitfall. Take heart in that, and then come up with a plan for what you want to achieve. The rest is up to you.