Young business owner and client in smart casual wear shaking hands and smiling while working in the office. Concept: How to negotiate a contract.
Maja Mirosavljevic
By: mmirosavljevic
Read in 9 minutes

How to Negotiate a Contract with a Customer: 15 Mistakes to Avoid

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Negotiating with your clients can be the key to having a successful small business. When you know how to negotiate a contract, you will set clear boundaries that will protect you and your business. You can also set up payment terms and clients will have more chances to pay on time, plus, your business won’t suffer from a lack of cash flow.

Learn here how to decide payment terms and how to manage your account receivables

The purpose of negotiating a contract is that both parties end up happy with the terms and gain something. Unfortunately, that’s easier said than done. Not having the right negotiating skills might lead to failure and your business might end up being harmed in the long term, so it’s crucial to learn how to negotiate a contract.

Luckily, like any other skill, how to negotiate a contract can be learned.

And what is the best way to learn than from mistakes? We have gathered in a list the most common mistakes business owners and entrepreneurs make.

15 Common Mistakes Made by Business Owners Who Don’t Know How to Negotiate a Contract

Here the most common mistakes that you need to avoid in order to learn how to negotiate a contract. Plus, there are suggested solutions to tackle every challenge that negotiations bring.

  1. Not preparing yourself and doing your homework. Research the party you’re negotiating with (there are no two clients that think the same way), the terms you’re negotiating and every single aspect that occurs to you. This is crucial when learning how to negotiate a contract. Also try to rehearse your arguments, because when you feel completely prepared, you’ll be more confident, which is vital for any contract negotiation process.
  2. Rushing into things. It’s important to take your time, a rushed contract might look decent from the get-go, but as time passes you’ll realize some things could have been better. Even worse, they could start hurting you or your client (or both). So, don’t hurry this process.
  3. Making it just about yourself. Ask yourself: Why does the other person need this contract? If you understand what they need, you might be able to give it to them. If you’re not sure of what their goal is, you won’t be able to provide it. Successful contract aims for both sides to reach an agreement.
  4. Not keeping in mind the terms of your client. Know what they are willing and not willing to do: this will give you an idea of what to expect. Paying attention to the needs of the other party, and adequately preparing your response are crucial contract negotiation skills.
  5. Starting with the most challenging terms. If you start negotiating with the harder contract terms, then everything will get harder, both sides will be on edge. If you know how to negotiate a contract you’ll know you need to start on a good note to keep that positive momentum going through the rougher conditions. Don’t step into the contract negotiation process “cold,” warm your audience a little bit.
  6. Not listening. Many people just stick with their thoughts and needs, so they fail to listen (and understanding) what is being brought to the table. Therefore, let other people speak freely, you’d be amazed by your discoveries. Also, encourage the dialogue by asking questions that don’t have yes or no responses.
  7. Not realizing things can always go wrong and it’s ok to walk away. Sometimes it’s easier to cave in to someone else’s demands just to get the contract signed, but when that ends up hurting you and your business, you need to walk away. It’s better to lose a deal than end up losing money or even your business. If you’re aware you can walk away at any time, you’ll have the upper hand, and it’s a key ability when knowing how to negotiate a contract.
  8. Making it a competition. You might be inclined to try to win and get what you want at all costs, but nothing is farther from the truth. A successful contract is a negotiation: both parties need to come out victorious. You’ll get more by searching for win-win solutions.
  9. Doing everything by yourself. It’s nice to do as much as you can on your own, but getting professional assistance can help you protect your interests best. Consult your lawyer before you sign anything, and in that way make sure contract terms are all right (from a legal point of view).
  10. Negotiating only the price. The most obvious point of the contract negotiation process is money, but don’t focus solely on it. There are many other aspects of a deal you can take advantage of. For instance, you can negotiate additional services, agreeing on an exclusivity clause or improve contract terms, just to mention a few examples.
  11. Letting your emotions take control. Excellent contract negotiation skills don’t leave room for emotional reactions and decision making. You must keep a cool head and don’t let your feelings get to you. It’s OK to care about the negotiation outcome, just be moderate and professional.
  12. Being unreasonable. To be reasonable about contract terms, you should know what reasonable implies in the first place. Do your research and check actual tendencies in the market or ask for an opinion of industry experts. Being realistic about your expectations and the terms you offer in return will make the whole contract negotiation process go smoothly.
  13. Assuming that something isn’t negotiable. When it comes to contract negotiation process, everything is on the table. If you consider everything as negotiable, then you’ll have much more options. Don’t limit yourself and set unnecessary boundaries.
  14. Giving the ultimatum. The worst way to close a discussion and end negotiations is to give an ultimatum. Instead, try to reach a compromise with assertive communication. Also, try to offer a deadline, that sounds much better than a demand, right?
  15. Not aiming high enough. Remember that you get what you ask for. When you expect more, you’ll get more. So, it’s no wonder why every successful negotiator is optimistic. People who aim higher achieve better results, therefore leave your pessimism and shame at home when negotiating.

After learning from these 15 mistakes, you’re now on your way to being an expert in how to negotiate a contract.

Ready to know more about the art of negotiating? Learn here How to Negotiate with Your Suppliers.

Become an Expert Negotiator

Negotiations are more than just reaching an agreement, they are crucial in establishing the basis for a long-term relationship with clients. Avoiding common mistakes will help you learn how to negotiate a contract properly. Also, keep in mind that it all comes to having a great attitude and being flexible.

However, remember that after negotiating, you need to keep your end of the bargain. Then you’ll probably need cash flow to provide what you agreed upon the contract, or maybe you need the cash before the negotiation to make sure you can provide what you want to offer.

To ensure enough financial funds, a business loan can come in handy.  Camino Financial offers affordable terms and a quick online application, so apply for a business loan and make sure your negotiations go smoothly.

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