Never take on work without knowing what the terms and conditions are, including the payment terms. You need to know at the outset how much you’ll be paid and when the money will reach your bank account. As a small business you are unlikely to have the kind of reserves you’d need to tide you over should you have to wait longer than expected to be paid. Negotiate before you agree to do the work. And put the terms in writing.
Do your research and prepare. Find out about the customer and their business. It helps, if you sound interested and knowledgeable, to build a working relationship and a rapport. If you know other people who’ve worked with the customer talk to them. Find out what the market price is for the kind of goods or services you’ll be delivering. Also prepare a list of all the questions you need answers to.
Listen. You need to understand your customer and what they are offering. Have someone else with you and stick to the 80/20 rule (listen for 80% of the time and talk for 20%). This will allow you to hear what’s offered and allow you time to think through your responses.
Know your own worth. This isn’t the same as knowing how much you are prepared to accept for a piece of work. Knowing your worth gives you a starting point so you can come up with a figure, make the opening offer and take control of the negotiation. If you are willing to accept less than that, it helps that it’s clear to the customer that you know that they’re offering you less than you’re worth.
Stay calm and polite. Customers don’t want to work with difficult people, just as you don’t. If it starts out aggressive and difficult it will only deteriorate. Being calm and polite will help establish the kind of working relationship and partnership you want to have.
Don’t concede too much, too soon, or beyond your bottom line. People running small businesses often say they are bullied into accepting the customer’s terms, especially payment terms. Stand firm and push back. The customer needs you as much if not more than you need their business. You won’t be respected for simply rolling over. They have power because they’re paying. You have power because you’re delivering.
Be prepared to walk away. If you are being asked to accept terms that will make it difficult for you to do the job or run your business, walk away. That is very hard because you’ll worry about where the next work is going to come from, but there’s no point in agreeing terms that will leave you in financial difficulties. Know what you’re worth and know how much less, if anything, you can live with. Standing firm or walking away gets easier after the first time.
The first offer is rarely the final offer. The customer will try to pay as low a price as possible and to take as long as possible to pay you. They probably know though that they will have to pay more and quicker. Everyone needs to feel they’ve won something from the negotiation. A ‘to and fro’ will hopefully get both parties what they need.
When negotiating the contract terms make sure the conditions of the contract are clearly defined and agreed by everyone involved. Then put the agreement in writing. In the future, if there are disputes, you have the proof about what was agreed.
A healthy negotiation should help customers and suppliers to understand each other’s business better and build the foundations of a good working relationship. Mentors, lawyers and accountants are good advisers if you need support or help with the written agreement. If the negotiation is a big one it may be worth paying an adviser to be in the meetings with you. That may sound expensive but it’s often a good investment.