There are things in life that people only learn to do the hard way. Negotiating contracts is one of them.
It’s an emotionally fraught process. I get that! Because I encounter so many people making the same mistakes, I felt compelled to write about it. I’ve been negotiating contracts for decades now. For the past 14 years, I’ve helped inventRight students negotiate theirs. This is what I’ve learned.
Having a good attitude is the most important asset you can bring to the table, hands down. If you act like you can make it work, you really might be able to. Think about that. When it comes to contracts, the power of positively is real. Likewise, it pays to hold on to your sense of humor, especially when the going gets tough. You have to keep your relationship positive. These are the people you’re going to be working with if the contract ends up being signed. Somehow, people lose sight of that.
If you haven’t had a lot of experiencing negotiating a contract, take the following advice to heart.
1. Take your time.
In my experience, contracts that are signed quickly tend to be lousy. Most people do not enjoy negotiating and just want to get it over with. I get that, but please, don’t rush. The final product will be much better for it.
2. Get professional help.
I may know what I want out of a contract business-wise, but I certainly don’t know how to write one in such a way that protects my interests. I always have my lawyer review anything I sign. Don’t get me wrong, I try to do as much as I can on my own, in part because I enjoy negotiating. I feel pretty confident about my skills after all these years. But at the end of the day, I need his help, because I’m not a legal expert.
3. Always start with a term sheet.
Term sheets address big picture items. I think of this initial stage of the negotiation process like dating. At this point, everyone should be happy! Make sure to stick to just the broad strokes at this stage. If you can’t agree to a term sheet, why bother trying to sign a contract? It will never work out. Don’t waste your time.
4. Think of negotiating a contract like eating an elephant.
You’ve got to do it a step at a time. I recommend you start by tackling some of the easier aspects first. Focus on gaining some momentum. Remember, the attitude with which you approach the process is crucial. If you get some things out of the way early on, you’ll both be pleased. Then, later on, you should bring up the difficult issues. At that point, your conversation is likely to go more smoothly, because frankly, you’re both invested! You’ve spent time on the agreement. It will be harder for the other party to pull out.
5. Do the math.
How much do you stand to gain? You should have a concrete idea. Ask your partner for the information you need to help you make a determination.
6. Don’t hesitate to pick up the phone.
We’ve all received emails that have come across terribly and left us wondering about the sender’s true intentions. If your communication seems to be faltering, call the person! Don’t wait for a full-blown misunderstanding to brew. You’ll get a much better read on the situation, including when to back off and when to accelerate.
7. Understand that the first contract you receive is just that -- the first.
The contract you end up with will be very different. Don’t flip out. It’s needless and unproductive, because it’s just a starting point. Shake it off. Everything is negotiable. That’s the point. If you don’t understand something, ask for clarification. If you don’t agree, ask to discuss the point. Discussing an issue (rather than going back and forth in print) can help speed up the process. If your partner agrees to let your attorney insert the language you want into the contract, take full advantage of that.
8. Consider finding someone to play “bad cop.”
Some people are uncomfortable asserting what does and doesn’t work for them point-blank. It can be helpful to have a partner. My wife is my partner. I consult her before committing to anything. The people I’m negotiating with this know this. I can tell them that I need to run something by her first, or say, “This doesn’t work for Janice.” Many companies have employees play bad cop and good cop, because it works!
9. Be reasonable.
I mean it. To be reasonable, you need to know what is actually reasonable -- so do your research. Talk to some industry experts. What can you expect? Actually listen to what they say.
Never forget to think about your end game. What are you really after? How much do you want to make this partnership work? What are you willing to give up in return? If someone tries to rush you, that’s a big red flag. These are important considerations -- considerations that may evolve over time. Plot your moves carefully.