To successfully negotiate a contract in today’s sales climate, you need to prioritize relationship building over persuasion, practice active listening, and empathize with your customers’ challenges. If you’re wondering what that means in practice, you’re in the right place to learn. We’ll explore practical tips and strategies to help you navigate the negotiation process effectively.

What you’ll learn:

• What is contract negotiation?
• Why is contract negotiation important?
• What are the challenges of contract negotiation?
• When to negotiate a contract
• The contract creation and negotiation process
• How to improve contract negotiation core skills
• 9 contract negotiation tips

What is contract negotiation?

In its most basic form, contract negotiation involves a seller working with a buyer to determine sales contract terms. Both discuss desired outcomes, establish initial parameters and details, make changes and compromises, and finalize the legally binding contract together. This way, everyone has a say and knows exactly what they are responsible for and when. It’s also a way to ensure both sides have their interests protected.

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Why is contract negotiation important?

When contract negotiation is executed successfully, it creates a win-win situation where both sides understand and agree to the terms. It also protects each party legally. But when you skip negotiation, the final terms of a contract may be lopsided, favoring one party above another. This can create resentment and distrust. In some cases, it even leads to legal action.

Beyond the finalization of the contract, however, effective contract negotiation helps sellers understand buyers’ needs and preferences better. This information can be used in future sales and service conversations to help deliver value.

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What are the challenges of contract negotiation?

During contract negotiation, a range of challenges may pop up. Here are a few of the most common you’re likely to come across:

• A high number of decision-makers: Gartner found that an average of six to 10 people have a say in complex B2B transactions, each with their own concerns, objectives, and priorities. You’ll need to craft proposals that work for everyone with a vote.
• Resistance to change, skepticism, or reluctance to commit: A buyer who is worried about risk or unwilling to compromise, even after extensive negotiation, can derail the whole process. In these cases, you need to help them see how their current situation is riskier than purchasing your solution and may cause them to fall behind their competitors. Take a careful look at the situation. A willingness to explore alternative solutions can help keep the deal on track.
• Last-minute changes: An eleventh-hour switch-up can disrupt the negotiation process and create uncertainty on both sides. Effective communication, flexibility, and being open to solutions that help both sides are essential for avoiding last-minute changes. If changes are needed, take a close look at them carefully to understand how they affect the agreement and the interests of everyone involved.

Address these challenges proactively. Bring patience, professionalism, and a plan to the conversation to increase the odds of an agreement. Answer questions early and often. Have information handy that can help you ease concerns and prove success. When you and your buyer are on the same page, you have more power to reach a mutually beneficial outcome.

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When to negotiate a contract

You might negotiate a contract for many different reasons. Each provides a chance to build trust and nurture stronger relationships with stakeholders.

Here are a few examples I’ve seen as CEO of JB Sales:

• When it’s time to renew: This is a great chance to evaluate product/service performance, see where you might improve, or adjust terms of service.
• When the customer is ready to upgrade: If technology or best practices have changed since the original purchase, you may need to renegotiate pricing and scope.
• If market conditions or laws/regulations change: You may need to make some changes to keep pricing fair and ensure the contract is still legal.
• If the customer is ready to scale or needs to cut back: As your customers grow or scale back, they may need to renegotiate to add new services or cut costs.
• When your company introduces new products or features: Contracts may need to be revised, so your customers can take advantage of product changes or add new features or services.

Your ability to collaborate, remain flexible, and listen to the other party are key in all of these situations.

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The contract creation and negotiation process

For me, contract negotiation is not about playing games. I let my customers know my prices and the levers I can pull for discounts, such as long-term contracts and early payments up front, and I’m clear about my non-negotiables.

Details will vary based on the product or service and industry, but the contract negotiation process usually looks something like this:

1. Make the right connections: Start building relationships with as many stakeholders as you can as early as you can, so they feel included. For example, if you only invite legal into conversations at the end of a contract negotiation, they could be your biggest opposition, trying to protect the company at all costs. Bring them in early, and they’re more likely to see the value of your solution and help you sell it.

2. Draft the contract: The initial draft should outline the terms and conditions of the sale. Be sure to include key details such as pricing, delivery terms, warranties, and legal protections you’ve agreed on. It should clarify both the buyer’s and the seller’s rights and responsibilities to avoid confusion and conflict.

3. Share with the customer: Once you have all the information necessary to draft a contract, share it with the customer for review and feedback.

4. Negotiation: Negotiation is an opportunity for you and your customer to ask questions, express concerns, and suggest changes. You’ll need to listen actively, handle objections, and be open to reasonable adjustments.

5. Agree on concessions: Both sides may need to practice give and take. And you both may need to compromise to reach an agreement you’re all happy with.

6. Finalize the contract: Once negotiations and revisions are complete and both sides are satisfied with the terms, the contract is signed and put into action.

When the product is delivered or services kicked off, follow up with your customer to make sure things are going smoothly and they’re happy. This helps strengthen the relationship and shows the customer you care about their success.

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How to improve contract negotiation core skills

Some sales leaders might have natural persuasion abilities or a personality that lends itself to negotiation. But most will need to learn and refine new skills over time.

• Ask questions and listen actively: When you truly understand what your customer needs, you can tailor a solution that delivers results and your buyer will see you as a valuable partner.
• Steer clear of arguments: Negotiation isn’t about being the winner. It’s about finding a win-win solution for both sides. Think about solutions, not problems.
• Communicate the value of your product as a life-changing benefit for your customer: If you can sell your product as the solution to your customer’s pain points, you’ll stand out among competitors. That’s your ticket to avoiding brutal negotiations solely based on price. Show them why they’re better off with what you have to offer, what they’re missing out on by not buying it, and how it will help them achieve their goals.
• Hone your communication skills: Read, take courses, and follow top negotiators to improve your negotiation tactics, persuasion abilities, and active listening skills. The more you know, the easier it will be to think on your feet during the negotiation process.
• Seek out mentoring and analyze interactions: When offered, 81% of sales reps find value in coaching from managers. Technology solutions, such as Einstein Conversation Insights, can provide valuable feedback and insights based on customer interactions. That helps you learn more about what works and makes you better at handling negotiation hiccups in the future.
• Practice, practice, practice: As with anything, you’ll get better at contract negotiation with repetition. Shadow senior members of your team to see how more experienced sales pros tackle negotiations. Ask for advice when handling objections or setting terms. Every negotiation will give you more insight you can use to polish your process.

While you may not find negotiation intuitive or comfortable in the beginning, deliberate practice, learning, and a growth mindset can help you become a savvy negotiator over time.

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9 contract negotiation tips

Contract negotiation is about mutual agreement. Sometimes, you have to make sacrifices to get what you want. You won’t be excited to work together if the terms are unbalanced and one side holds more power. But if each party feels good about the outcome, you can build a strong partnership for the future.

Better negotiation skills help you move through the sales cycle faster, build stronger relationships, and set yourself apart from competitors. Lean on these strategies:

1. Believe in what you do: Confidence is contagious. Believing in your product’s value is a great way to get others excited about it.
2. Show your humanity: Get to know the people you’re working with. Listen closely and ask questions when they outline their business challenges. Address concerns without relying on generic scripts or pitches and give them personalized recommendations. Customers can tell when you’re being genuine and when you’re not. Treat them like a number and they may walk.
3. Show the value of your product: Communicating your product’s value with real examples and data can better equip you to handle objections and set yourself apart from the competition. Provide evidence for your product’s ROI, such as testimonials, case studies, and data.
4. Be prepared to handle objections: Customer protests will be less likely to derail the sale when you’ve got answers at the ready.
5. Engage early and often with as many stakeholders as possible: Include key decision-makers in sales conversations right away. This way, no one feels slighted or out of the loop when it’s time to draft contracts.
6. Offer a money-back guarantee or a risk-free trial period: This can help provide a safety net for the deal that can ease customers’ minds and motivate them to make a purchase.
7. Know your walk-away line: Don’t be like the people on “Shark Tank” who start by saying they’ll give 20% of their company for $200,000 and end up giving away 95% for $50. Fear of losing a sale can affect your bottom line and make you say “yes” when you should have said “no.” Get in the habit of knowing when a deal isn’t worth it.
8. Remove the word “discount” from your vocabulary: Get creative with your pricing or flexible with your terms instead. For example, you could offer long-term or repeat customers preferred pricing as a perk rather than a one-time discount.
9. Keep prospecting: A full sales pipeline means more opportunities to close deals even if one contract falls through. A CRM such as Sales Cloud can help you nurture leads and track sales KPIs throughout negotiations.

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Work toward better sales negotiations

If you take a genuine interest in helping your customers, you’ll see more success in your contract negotiations. You’ll also be able to create more long-term partnerships based on trust and transparency, which will help you in all aspects of your sales career. The key: Instead of pushing your product or service, position it as a solution to your prospect’s problems. I’ve found that when I work with customers to find the best solutions at the best price for them, they are more likely to trust me and buy from me again.