20 Jan The Devil IS In The Details
The 7 Most Important Things You Can Do When Negotiating a Business Agreement
Crafting written agreements with strategic partners and vendors can be time-consuming.
As a result, in an effort to move quickly, it can be tempting to focus on terms such as pricing and give minimal attention to seemingly less critical items.
You may have heard the following things being said in your own organization with respect to negotiating business agreements:
“It’s good enough”
“We know what we meant”
“We will worry about that later”
This lack of attention to detail, no matter how tempting it may be, can lead to, “What happened?”
It is critical that all terms of an agreement get the required attention.
Agreements are never just about price. Other things can cost you just as much or more.
Keep the following 7 things in mind as you negotiate business agreements:
1) Think about the future. If an IPO or acquisition is in the cards for your organization carefully examine any clauses that may have an impact (i.e. an inability to assign the agreement without written consent from the other party)
2) Identify terms that could pose a real problem if they were imposed. Don’t downplay them or assume the likelihood of them happening is small. (i.e. right to cancel by the other party if certain conditions are not met, especially if those conditions are vague)
3) Don’t assume that if you are the smaller of the two companies that you simply have to accept undesirable terms. Seek to understand the intent of the terms and see if there is room for compromise.
4) Have open conversations and set clear expectations. Unclear or misaligned expectations (things that are not necessarily spelled out in the agreement but assumed) can cause significant conflict between the parties.
5) The scope of work should be explicit about what is being provided by both parties. If it seems vague or is incomplete, fix it. Never put yourself in the position of negotiating the scope of work after the agreement is signed.
6) Be wary of customer non-solicitation clauses. They may seem harmless but could be a real limitation. As an example, if you are referring your customers to a partner, you don’t want to have your hands tied should your business model change and you wish to sell these customers the same services at some point in the future.
7) Clearly articulate what happens when the contract is terminated.
By taking the time to craft explicit agreements your organization will be well served now and into the future.