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 10 minutes

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

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 to 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.

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.

Two businessmen stand shaking hands in office, elevated view. concept: how to negotiate a contract

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

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

Here the most common mistakes you need to avoid 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 you’ll be more confident when you feel completely prepared, 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).

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 your clients need, you might be able to give it to them. If you’re not sure of their goal, you won’t be able to provide it.

A 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 unwilling to do: this will give you an idea of what to expect. Paying attention to the other party’s needs 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, both sides will be on edge, and everything will get harder. 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.

contract, how to negotiate a contract

7. Not realizing things can always go wrong and it’s ok to walk away

Sometimes it’s easier to cave into 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 the contract terms are all right (from a legal point of view).

10. Assuming that something isn’t negotiable

When it comes to a 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.

11. 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.

Also, don’t let a price tag stop you from signing a contract that could bring you great profits at the end of the day. A small business loan can often work as a quick financing method to help you keep your part of the deal.

handshake, how to negotiate a contract

12. 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.

13. 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 the 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.

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.

#CaminoTip
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.

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 in the contract, or maybe you need the cash before the negotiation to make sure you can provide what you want to offer. A small business loan can help you ensure enough financial funds.

How to write a contract

Now that you were able to negotiate your contract successfully, it comes time to put pen and paper and write the contract with all the agreements you reached with your client.

Make sure that your contract includes these crucial sections:

  • the offer
  • the parties involved
  • the legal agreement
  • signatures that accept the contract’s contents

Learn more about how to write a contract and find some tips on how to write the perfect contract:

How to write a contract

Latin american businessman and female trainee at job interview at office of start up company. concept: how to negotiate a contract

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.

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

And you can be an expert in many other things if you join our newsletter. By subscribing, you’ll receive directly into your inbox all the information you need to become the most successful business owner. We’ll give you tips on how to manage your business, ways to improve your profits, and the latest news that affect small businesses.

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