Neil Patel

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How to negotiate business contracts?

The negotiation process is where two or more parties with different needs and interests negotiate an issue.

The objective is an attempt to come to a mutually beneficial agreement.

Negotiation skills are an essential part of business for both informal daily interactions and formal transactions such as contract negotiations.

In this article, we will look at some of the most important things to remember whilst negotiating a business contract.

By the end of this article, you will have more confidence in your ability to negotiate.

You will also have improved your likelihood of achieving the result that you want.

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Know Exactly Where You Stand

Before you start negotiating, you should have a good sense of what you’re willing to give.

This may change as the negotiations progress. But not having a good notion of what you’re willing to offer beforehand might lead to rash judgments that you later regret.

When you’re negotiating a business contract, you should know your strengths before you begin.

As well as what will likely happen if you don’t reach an agreement.

It’s impossible to make an educated judgment of what makes a decent settlement without a thorough grasp of these issues.

A skilled lawyer can advise you on these issues before you begin negotiating.

That’s because what might seem to be a normal settlement, might take on a darker hue. That’s when compared against the expenses, risks, and stresses of a court battle should one occur.

A legal professional can also act as a third-party negotiator, insulating you from poor decisions.

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Research is Critical

Are you aware of what motivates the other side and where their weaknesses lay? Gather as much information as possible.

Such as:

  • What kind of pressures are they likely to face?
  • Where are they most vulnerable?
  • What are their motives and needs?
  • What is the extent of your negotiating power?

Prepare your mind for these issues before the negotiations begin, and keep them in mind while the negotiations progress.

Concentrate on the pressure spots of the other side.

When framing offerings, it’s important to try to accommodate the other side’s needs while also noting their weaknesses.

Negotiating the business contract is only one of the nuances of how to prepare for an investor meeting. When you’re ready for more information, check out this video I have created.

The Strategy of Making Offers

There are many opinions when it comes to the best strategy for making offers.

Here are some of the most crucial points to remember. Keep them in mind when learning how to negotiate business contracts.

Use facts

Using facts to challenge an offer has a lot more weight than just saying you don’t like it or that it’s too low.

As a result, when disputing proposals, utilize facts wherever possible to demonstrate how the offer is unreasonable or based on inaccurate information.

Alternatively, provide justifiable reasons why you are unable to accept the offer.

This might include describing why the offer’s terms are impractical. Provide proof to back up your facts wherever possible.

Your first offer is important

The first offer is crucial since it often serves as a benchmark for future proposals.

Begin high and gradually give in, and don’t be hesitant to express your thoughts.

Try to figure out what the other side wants, and you could be pleasantly surprised.

Don’t set the bar so high that you upset the other side or make them believe that there’s no chance of a deal.

The ideal first offer is generally one that is on the very edge of what is reasonable.

Think outside the box and look for a win-win situation

Be sure to figure out what motivates the opposing side and what matters to them.

Money is generally the most important factor, but there are many key factors to consider.

When framing an offer, think outside the box and look for a deal that benefits both parties.

Try to understand where the other person is coming from; inquire about their wants and major worries.

And, if possible, create an offer that meets both parties’ requirements. This may often help you get out of a financial bind.

Prepping for the discussion helps when figuring out how to negotiate business contracts.

Don’t make lots of offers

Making too many offers might be counterproductive. You run the risk of looking unduly eager or desperate to achieve an agreement if you make too many offers.

Every situation is different, but making more than three, maybe four offers is generally not a good idea.

Any more than that, and you risk coming out as excessively eager to reach an agreement.

Always question the other side’s offers

Even if the other side’s offer is greater than you expected, you should always challenge it.

Otherwise, they may believe they’ve been too kind, or that you’re likely to accept the offer.

Don’t start with the most complicated issues

If you anticipate a particularly challenging discussion, start with the simpler points and save the most difficult for last.

If the parties have previously agreed on a number of issues, it might help to build momentum and goodwill.

It may also lead to the parties putting in more effort to clinch an agreement rather than risk losing what they’ve already agreed on.

Reverse engineer the process

After you’ve made your first offer on the outskirts of what’s sensible, it’s a good idea to base your subsequent proposals on where you want to finish up.

To put it another way, if you want to end up at a certain price, base your offers on numbers that will allow you to make compromises down (or up) to that amount.

Keeping these pointers in mind will help you learn better how to negotiate business contracts.

Control Your Emotions

When potential buyers become intractable as a result of high levels of emotion, negotiations often fail.

Successful negotiators aim to keep the parties from getting emotionally involved or hostile.

And instead, concentrate on establishing a set of terms that everyone can agree on.

It might be difficult to remain silent in the face of disrespectful or hostile behavior.

However, keep your focus on the end goal, which is to clinch a deal.

Responding to harsh or aggressive words with the same level of emotion rarely helps accomplish that goal.

When everyone has their ‘back up,’ it’s far more difficult to reach an agreement.

If individuals give in to their emotions and release their rage on the other side, negotiations may soon break down.

It might make you feel better for a moment, but it usually aggravates the situation which can lead to the end of the negotiation. Or at the very least make it much more difficult.

To avoid seeming weak, respond to hostile or aggressive statements in a forceful, decisive, and confident way.

In the face of hostility or aggressiveness, being cool yet resolute and confident can be extremely effective.

That’s because it sends a message to the other side that you will not be bullied or frightened by their actions.

You should:

  • Remain silent whilst the other party is venting
  • Keep strong eye contact
  • Have a neutral expression
  • Keep a positive mindset

Words & Tone

Typically, you should use a quiet and assertive communication style during a negotiation.

Using an assertive style can help you improve the likelihood of achieving successful business outcomes.

Passive communicators are more likely to use imprecise language, display insecure body language, and quickly give in to requests.

Aggressive communicators have a combative style of communication, which tends to alienate others and derail negotiations.

Conversely, assertive communicators are both confident and compassionate.

These communicators are more likely to keep the conversation continuing and reach mutually beneficial conclusions.

They speak in a firm, steady tone. They are neither emotive nor critical, but simply factual.

They express their opinions by beginning sentences with “I,” rather than “you,” which might look combative and be misinterpreted as an accusation.

It’s far more difficult to agree with someone who is angry, upset, or dislikes you.

Conversely, if the opposing side believes you are a genuine, fair-minded person, it is simpler to win and achieve an agreement.

Learning all these skills will help you understand how to negotiate business contracts.

Only Talk As Much As You Need To

It is critical to communicate your position and point of view to the other party.

However, some of us have a tendency to speak excessively. Keep in mind that you should only speak as much as you need to.

When you speak too much, you risk providing the other side more insight into your thoughts or making them feel like they didn’t have a say.

You also run the risk of giving the impression that you are unduly eager to reach a deal.

Conversely, by limiting what you say, you can convey a subtle message to the other side that it won’t be the end of the world if an agreement isn’t reached.

That may encourage them to try harder to make compromises.

Listen More Than You Speak

Many of us are so concerned with ensuring that others hear what we have to say that we forget to listen.

We miss a lot when we speak a lot. Good negotiators keep a steady eye on the situation, listen carefully, and gather as much information as possible.

Allow the other person to do the most of the talking, encouraging them to do so might help them vent or feel like they’ve had their say.

You can often gain insight into their thoughts, demeanor, and goals by closely observing and listening.

Paying careful attention to what is being said is an essential facet of how to negotiate business contracts.

Silence Can Be Powerful

When in the company of others, most people dislike silence.

As a consequence, silence at important moments may be effective since it can agitate individuals and influence their decisions.

When you keep eye contact but don’t speak, your opponent will typically start talking to fill the hole, which might lead to compromises.

When there is silence, the other person will often fill it with vital information that you would not have learned if you were speaking.

Assess Your Opponent

Analyze the other party at the start of the discussion, and then revisit that judgment when more information becomes available as the negotiations progress.

Understanding what motivates the other side, what they want, and what is essential to them is crucial.

If you’re uncertain, just ask. If you can accommodate other things people desire, you can sometimes overcome a pricing standoff.

It’s also crucial to have a sense of the other person’s personality and what will appeal to them.

A kind or empathic tone will be more effective than a severe one.

Threatening legal action or canceling an agreement may, in turn, make the other party even more angry or determined.

Body Language.

Communication is heavily influenced by body language and facial expressions.

Your body language, eye contact, and word choice can all influence how you are perceived. And how the discussion unfolds from the time you sit down to negotiate.

As a result, it’s critical to be conscious of your body language and to project confidence and determination while still being ready to speak.

Maintaining eye contact, maintaining a straight physical posture, nodding your head, and avoiding hostile facial expressions are all examples of how to achieve this.

By doing so, you’re signaling to the opposing party that you’re confident in your stance and won’t back down easily.

Avoid displaying arrogant, dismissive, or harsh body language, since it is likely to alienate the other party.

Inhibit fruitful communication and make completing a deal more difficult.

Likewise, keep an eye out for the other side’s body language, since it might provide insight into their thoughts.

If their body language indicates that they are unsure of their position or that they do not believe what they are saying, it may be best to stick to your original offer.

Identifying these cues will help you learn better how to negotiate business contracts.

Patience is a Virtue

Patience is a valuable asset in negotiations. The process of negotiation could take some time depending on who you’re dealing with.

When you rush the process, the other party may feel too pressurized and dig their heels in.

The opposite party may need some time to absorb an unfavorable conclusion or a tough choice.

Moving someone from a strongly held stance might also take time.

When someone has a strong opinion about something, it might be difficult to persuade them to change their minds.

Rushing through the process could well backfire.

As a result, it is best to avoid setting unreasonable timelines for the opposing side unless there is a compelling reason to do so.

It could be tactically beneficial to establish a short deadline in the last phases of negotiations to apply pressure to seal an agreement.

However, this should be done with caution since many people dislike being pressed, which may lead to them becoming irritated and quitting further negotiations.

The longer a negotiation takes, the more time people have invested in it (and most people don’t want to lose an investment).

Therefore, the more time people devote to a discussion, the more eager they are to reach an agreement.

And the more willing they are to make compromises late in the day if necessary.

These are only some of the nuances of how to negotiate business contracts.

Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

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Maintain Your Credibility

Bluffing is not a good idea.

Bluffing is a bad idea that often backfires.

For example, people use the phrase “best offer,” but then go on to make additional offers.

They aren’t believed by others when they arrive at their final offer and present it as their “best offer.”

The ideal way is to use the phrases “best offer” only when they are truly applicable.

If the offer is turned down, make another one with the lines “I said this was my best offer and I meant it.”

Follow through on your promises

In a similar spirit, if you claim you’re going to do something during negotiations, do it.

Otherwise, the other side may see your words as empty bluffs, and you’ll lose your negotiating strength.

This notion holds true in the majority of court battles.

If you threaten to take a specific action if the other party does not comply with a request and don’t follow through, your threat will lose its punch.

Conversely, if you follow through on what you say, the other side will be more likely to take future threats seriously, which might help you get the upper hand.

You should avoid exaggerations and lies

In negotiations, it’s essential to be trusted and keep your credibility.

Your credibility in the eyes of the other party will be damaged if claims you make are shown to be exaggerations or lies.

It might be far more difficult to negotiate a deal if the information and numbers you present are seen as untrustworthy.

If, on the other hand, your claims and facts are seen as trustworthy and transparent, it will be extremely beneficial in sealing a positive agreement.

Being discovered lying or exaggerating might irritate the other side, making them even more determined and unwilling to make compromises.


Remember that negotiations are give and take on both sides. You should aim for a mutually beneficial and respectful relationship.

Good negotiation is one in which you are able to make compromises that are minor to you.

At the same time, you’re offering something to the other side that is substantial to them.

Regardless of the differences in party goals, your approach should create goodwill.

A successful negotiation leaves both parties happy and eager to do business again. So, take the time to learn how to negotiate business contracts.

You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.

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Neil Patel

I hope you enjoy reading this blog post.

If you want help with your fundraising or acquisition, just book a call

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