I had the responsibility of negotiating a really large contract once, even though I had no experience whatsover in negotiating a contract. While it was terrifying, it also was a really good experience and I learned a lot, especially as we started using third party vendors more and more. Surprisingly, it was also a lot of fun…..you feel like you’re part of a courtroom drama (being offsite, dealing with outside counsel, asking people to leave the room to have confidential conversations). Here’s some lessons learned:
- Bring in expertise where needed. Sounds obvious, but at the end of the day, you’re not the lawyer. Sometimes you’ll have multiple lawyers. A test of a great lawyer: one who that tells you there is a problem AND what your options are. We also did a ton of work on our numbers: we needed to understand what the financials would look like depending on the pricing we got.
- Understand that a partnership has to be beneficial to both parties. Too many times I’ve seen people try to get everything they want to the detriment of the other party. Even if the other party is fool enough to sign the contract, I guarantee that is a partnership which is doomed to fail. You can’t be in a partnership where the other party doesn’t benefit and is desperate. At the same time, you need to negotiate every possible advantage for your side before you hit that wall.
- Know what’s absolutely non-negotiable, and what’s not. Going into the negotiation, we set what was absolutely non-negotiable and the lawyers sat across me to be able to see my face. When something was proposed, the lawyers were able to see my expression. And yes, we had good cop and bad cop.
- Contracts with metrics need to be ironclad. I’ve seen a million metrics in contracts no one ever goes back to. Pretend you’re already with the other party and you’re in a review. What are the metrics you’d want to know about? Do they measure those metrics now? Ask to see what they do for another client. If you need a new metric, agree to the methodology now and have the other party show you how they would calculate the new metric. Be careful of anything that’s based on something where the methodology hasn’t been established….I guarantee you will come to blows if fees are involved when it’s time to pay up.
- Assume once the contract is written, you’ll never use it again. Sometimes you think because “it’s in the contract” you have insurance. The reality is that you will have already migrated to the new firm, and undoing the contract will be painful and embarassing. In other words, you’ve burnt your boats. Accept once that contract is signed, the only time you’ll pull it out again is when you want a divorce.