29 September 2016

14 negotiation hacks to close deals faster and cheaper

Most commercial lawyers like a good contract negotiation. It gets us out of the office and doing what we do best.

After a while though, when the novelty wears off, ongoing negotiations can often become frustrating, bad tempered and, crucially, way too expensive.

So if ‘getting to yes’ quickly, effectively and efficiently is more your thing than debating the hypothetical nuances of convoluted legal drafting, each of these fourteen hacks could serve you well.

1. Don't negotiate - It seems obvious, but the first question we should be asking is ‘do we actually need to negotiate this contract at all?’ Surprisingly often, we don’t. Granted, a global services deal will need some detailed discussion, whereas a software licence probably doesn’t, but at the end of the day, work at the boundaries here. After all, our terms are part of our products and services, and just because others negotiate particular contracts doesn’t mean we have to - subject, of course, to the next point.

2. Start fair - It’s amazing how little needs negotiating if we start with a contract that’s fair and reasonable for both partners. In fact, it’s a prerequisite for a non-negotiable contract because we’ll simply fail if we don’t incorporate the needs of our customers/suppliers into our commercial model. Even if we do negotiate though, we’re setting a far more constructive tone if we start with balanced terms that we genuinely believe work for everyone. Negotiating back from an extreme position may be billed as tactically astute, but it’s actually nothing more than unnecessarily time consuming and expensive posturing, and best left to the amateurs.

3. Don’t sweat the small stuff - Using negotiation ‘chaff’ (those defence flares used by military aircraft) is a surprisingly popular practice in contract negotiations. Theoretically, we throw out loads of decoy points that we claim to care about, ‘reluctantly concede’ those, but only on condition we get what we actually wanted. Cunning, right? No, not really. Anyone with an ounce of intelligence is going to see through this tactic, at best ignore us, or more likely get annoyed and try to take us to the cleaners. Play it with a straight bat. Ask only for what we need. Influence our partners to see our perspective. 
 
4. Check egos at the door - Contract negotiation is not a competition with winners and loses, yet I’m constantly amazed at just how many people get this one wrong. If we force our partners into a poor deal for them, we are guaranteed to suffer the consequences. Think buyer’s remorse and stick to win-win. Always.
 
5. Keep it simple - I don’t even want to think about how much of my one and only life I’ve spent discussing what contract terms are meant to say but just don’t. Pages and pages of incoherent nonsense when a plain language paragraph would have done a far better job. If we keep it clear and simple everyone can understand it and we don’t need to waste time struggling through the undergrowth.

6. Forget sales bonuses - Although sales bonuses have probably been proven to get us to yes faster than anything, they very often get us to a very poor outcome. Then we bring in the lawyers who give us a hundred reasons why the deal doesn’t work and we have to unravel it and start again, with a fair degree of ill feeling for the wasted time. Best not to incentivise sales to ‘sell tenners for a fiver’ (as a very good friend of mine has been known to say).

7. Minimise facetime - Sometimes, we need to do business face to face, but with today’s technology, we rarely do. Flying in for long meetings takes up unnecessary time, exhausts everyone, and inevitably, they’re not very productive. Better to meet first to build some rapport then work remotely via webshare tools.

8. Location, location, location - I particularly love the luxury of negotiations. Five star hotels, great food, bright, riverside offices in the best cities in the world and all on expenses. Every bit the high-flying executive - and completely insane if we want to close the deal fast on any sort of sensible deal budget. Instead, try putting everyone is a windowless room in a lower basement with bad coffee and a takeout pizza menu. Everyone will want to go home asap.

9. Lock everyone in - This one works particularly well when a few stubborn points can’t be agreed towards the end. Put the negotiators in a room and tell them they can’t come out until they’ve done the deal. Maybe think about not feeding them so often too. Just like children, they’ll soon work this one out. (Just for the record, I don’t lock up or starve my kids.)

10. Announce the deal - If CEOs go public on a major deal it has to happen on time. Company valuations are sensitive to these things.

11. Keep it in the room - Put the decision makers in the room. There are few things more inefficient than negotiating with people who have no authority, whether that’s business teams or lawyers. It’s frankly disrespectful too.

12. Incentivise efficiency - Surprisingly, quite a few businesses still prefer to use advisers (consultants, lawyers) for deals on an unlimited time and materials basis. In other words, the longer the deal takes, the more these people make. They’re incentivised NOT to agree! Instead, if possible put advisers on a fixed fee deal with a bonus/tip if they can close early. (This doesn’t contradict my sales bonus point. Poor advice from a law firm in order to close a deal fast is likely to be professional negligence.) 

13. Use one law firm - I’ve been kicking this one around for years. Why not explore at the outset whether it's possible to negotiate the commercial deal without instructing lawyers and then jointly instruct one firm to document the deal on behalf of both parties? If the lawyers confirm it can be done and they're happy to do it, that’s immediately halved the legal bill, before accounting for the relentless bickering between two law firms.

14. DIY - Why not just take external advisers completely out of the picture and do the work ourselves? It is possible to do far more work in-house by putting contracting tools and processes in that replace the need for deep specialist experience with tool-based expertise. Yes, there’s an upfront investment, but a substantial ROI on every deal that follows. More detail on this in my July 2016 blog, ‘My nine-year-old lawyer’. 



So there we go, fourteen ways we can save a tonne of time and money closing deals. I'd love to hear your own experience.

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