Contract negotiations can be fraught with risk, particularly when it’s hard to determine how much good faith there is in an agreement. Unlike many countries, the United States doesn’t have a central repository of annual financial statements of companies, so it’s hard to do a lot of research on a prospective partner. However, careful negotiations can reveal a lot about a company, and at that point, you may decide it’s better to walk away and carry on.

Risks of a Bad Deal

You can’t win everything, and if you push negotiation too far when it’s clearly going to be unproductive, you end up sinking a lot of time into it. This is known as a sunk cost fallacy — where you have already invested (in this case time) in a venture so you feel compelled to invest even more.

But there are even bigger risks to accepting a bad deal, beyond the amount of time you need to spend on it. It may hurt you financially, or it may cause employees to leave — strikes still happen, and sometimes valuable staff members can leave because they are being overworked or underpaid for what they are producing.

When Coca-Cola took over an Akron, Ohio, bottling plant, its deal with the Teamsters union expired fairly quickly. Because it was lax in creating an agreeable position, the workers went on strike. At that point, they knew that going on strike now meant a better pay deal in the future. Eventually, the strike ended, and the employees returned to work with a better set of terms and conditions.

Dealing With a Weaker Position

In some cases, you won’t be negotiating from a position of strength. As an example, the company might be the only one that can deliver what you need, or you may have financial constraints that make it important to accept the deal that you’re given. Even then, you may still need to consider alternatives — is that part absolutely essential, or can you find a way to do without or even make yourself? Can you create repercussions down the road should your requirements not be met? For example, if you had a specific brand of tractor, could you accept a manufacturer’s service contract with the provision that should the terms not be favorable, you would buy a different brand of tractor at a later date?

Finding a reasonable alternative to simply walking away can make negotiations a lot fairer.

Developing a Contract

Of course, appearances mean a lot, and a well-ordered contract ensures each party understands what’s on offer and what their responsibilities would be. Always have a lawyer read over the contract before accepting to ensure there are no ambiguities. Be sure to combine PDFs to help turn the contract into a file format that is compatible with most devices, making review much easier.

Focus on Benefits

Ultimately, any negotiation that you take part in has to have a clear benefit to your company, whether it’s financial inflow, a reasonable SLA for a service you need, or a reduction in costs. However, you can’t win everything, and there are times when it’s simply better to walk away having found alternatives.

If you’re looking for negotiation partners or businesses, contact your local chamber of commerce today.