459: Improving Your Business Negotiation Skills As A Contractor

This Podcast Is Episode Number 459, And It's About Improving Your Business Negotiation Skills As A Contractor Several aspects of the construction business can only be learned through experience. One of them is negotiating contracts. Owning your business requires many skills, and among the most important might be the ability to manage negotiations. As a business owner, you could find yourself negotiating in many circumstances, such as:

• Salary and job expectations with a potential employee
• Financing terms with a lender
• Payment terms with a supplier
• Lease or property agreements
• Equipment agreements.

Most people fear the negotiation process because it is an intrinsically uncomfortable process. Asking for more money or making personal demands doesn't come naturally to everyone. But with the right toolkit, you can breeze through contract negotiations. And you'd better get used to it because you'll have to handle many contracts whether you're a construction company owner or employee.

Having the right mindset is critical to contract negotiations. You have to believe that you are going to get your way. Bring a positive attitude and a smile to the table. You're not signing contracts with the enemy. The people you're negotiating with will be your business partners in one capacity or another.

Tips For Costing Out Jobs

For small construction businesses, it's vital to appear as professional as your larger competitors whenever you communicate with clients, but especially when negotiating the details of a potential project.

Be sure when you're preparing your quote or estimate that you include the following information:

• Your business number
• Business contact info (phone, email, address)
• A detailed summary of the work to be performed
• A breakdown of costs (subcontractors, materials, time, and hourly cost for labor)
• The total cost
• A timeline for the work and completion date
• Contract terms, including deposit and payment schedule

Another essential piece of information is to provide your clients when the quote or estimate expires. Many companies choose an expiry date of 30 days to protect themselves from the possibility of rising costs for materials or other factors that may influence the cost of the job.

Your ability to negotiate will impact your financial situation, which is why it's a good idea to refine your skills. That way, you'll feel confident when discussion time comes around.

Here are four tips to improve your negotiation skills:

1. Be prepared

One of the best things you can do to improve your skills is to be prepared for any negotiation. By being prepared, you'll be better able to negotiate beneficial agreement terms, and you'll identify when someone is offering you a great deal that you should take advantage of.

This means doing your research to understand the scenario you're negotiating in. Get to know what terms businesses like yours have agreed to, what other options you have available to you and how they'd stack up against the agreement you're considering.

Also, give thought to what you would consider a good agreement. Ask other people how they have handled similar negotiations. Finally, make sure you know what you'll do if talks fall through. It's easier to walk away from a negotiation if you know you have a backup plan in place.

2. Know what you're willing to give up

Before you go into the negotiations, it's crucial to not only know what you want but what you're willing to give up. Would you lose an investor, so you keep more shares in your company? Would you give up partial control of your company for more claims? Would you pay more money for additional storage space?

Understand what you're willing to give up and what you won't yield on.

Knowing what you will and won't give up on helps you stay focused and prevents you from making snap decisions that you ultimately wind up regretting. It also enables you to evaluate whether the deal is good for you and pushes you to keep the most important things.

3. Practice negotiating

There are plenty of opportunities in your daily life to practice your negotiation skills in a low-stakes environment. You can practice negotiating where you want to eat for dinner, who has to do the chores, and what activities to participate in on the weekend. Use these situations to develop your listening skills and find a way to mutually beneficial terms.

4. Keep it conversational

Negotiations are about both sides walking away feeling optimistic about the deal that has been reached. You don't want a negotiation to become adversarial. Remember that you are having a conversation to reach an agreement between all parties involved, and keep in mind that the negotiation isn't personal. You and the other parties both want to get something out of the agreement, and you likely both want the other side to come away happy as well.

Final Thoughts

Negotiation is an integral part of business life. Ideally, you want to feel confident, relaxed and prepared to go into any negotiation. The best way to do so is to do your research, know what you want, practice your skills, and keep things conversational.

Offer a client the opportunity to ask questions before approving the work. That way, both parties can avoid any misunderstandings about expectations and project costs before the work begins.

Negotiating a contract is like a long chess game, except both parties need to come away from the table victorious. Before you begin the process, figure out your short and long-term goals. Having a clear vision will help you navigate the tricky waters of contract negotiation better.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com