The Art of Contract Negotiations: A Small Business Perspective
Want to be a contract negotiation pro for your small business? Find out how to create fair deals that truly benefit you.
Recently, a client of Checklist Legal, let's call her Aisha, found herself in a situation that many small business owners will find all too familiar.
Aisha had been offered a collaboration opportunity with a high-profile organisation, a titan of industry. The initial excitement, however, was tempered by a contract that seemed unbalanced, especially concerning the usage of Aisha's intellectual property.
How can you protect your interests when negotiating with an big industry player… without risking the potential partnership?
It's a common conundrum, and I'm hoping my ideas for Aisha's situation can help shed some light for you on how to navigate this tricky landscape.
Ask for changes
The first piece of advice I shared with Aisha might seem glaringly obvious, yet it's often neglected due to the perceived power disparity: Ask.
Yes, it's that simple. If a clause in the contract does not sit right with you, raise the concern.
In Aisha's case, she was troubled by a clause that allowed the larger organisation broad ownership of her intellectual property. She didn't feel comfortable with this (and rightly so!). I advised Aisha to ask for changes to the problematic clauses.
Usually, these organisations are interested in specific elements of your IP for a particular purpose. So they might only need a licence to use the IP (not necessarily ownership).
Find out what they're after and discuss options. If it’s your IP, you always want to start discussions on the basis that you will keep ownership as the starting point… anything else may require a higher fee.
Asking the right questions often leads to a mutually beneficial discussion (and often the potential to charge more for what the other party really wants).
Increase your fees
A second key piece of advice I offered Aisha was to Up the Fee.
If the other party insists on having their way… whether it is you holding all the risk with a one sided liability clause or comprehensive ownership of all created IP, suggest to them that you will need to charge a higher fee to reflect the value you attach to your work and to the increased risk profile.
The prospect of paying more can often nudge the other party into revisiting the terms of the contract.
While big organisations do have deep pockets, they are also accountable for maintaining their bottom lines. A proposed fee increase for broad access to IP can serve as a catalyst to open up renegotiation talks.
These two strategies often give a good opening point for meaningful negotiation, however, there might come a point when you need to escalate matters and involve a lawyer…
When to get a lawyer involved in contract negotiations
The financial implications are significant: If the deal involves a large sum of money (either you receiving or you paying), it’s best to have a legal professional review the contract for issues you might not have spotted.
It’s a long-term contract: A contract spanning several years can have implications for your business’s future. Legal advice is crucial here to avoid binding your business to unfavorable long-term conditions.
The deal involves substantial visibility or work: High-profile partnerships can greatly affect your business’s reputation and future prospects. Lots of eyes or lots of work can also give you a bigger target on your back for a regulator such as the ACCC. Having a lawyer's perspective can be invaluable to avoid potential hidden traps.
Given Aisha’s contract had a high dollar value and big potential for an ongoing relationship, Aisha decided to engage Checklist Legal s to review the contract, give high level advice on specific areas of concern, as well as handle a few rounds of back and forth negotiations, helping to ensure her business interests were supported and protected.
We were able to successfully negotiate terms that were more balanced for her (reducing her potential risks) and which the larger business could agree with. These negotiations not only helped to safeguard her interests but also laid the foundation for a mutually respectful business relationship, making Aisha look professional and diligent.
Don’t be scared of negotiations
To sum up, contract negotiations don’t have to feel scary or like a 'take it or leave it' battle. With the right approach and professional advice, it is possible to secure a fair deal even when dealing with the big guns in your industry.
It’s your unique value proposition that those large organisations are interested in.
Stand your ground, seek clarity, and negotiate in good faith.
Remember, it’s not about winning or losing but finding a balance that benefits all parties involved.
Want some extra help?
If you want to chat about help with your contract reviews, reach out for a free no obligation chat with a friendly Checklist Legal lawyer today.
