There are many phases of negotiation, all of which are important to understand before you enter into a contract with another party. If you apply each phase of negotiation properly, you’ll have greater results. Before entering the negotiation phase, you’ll want to prepare yourself and your business so that you are all aware of what is required to appropriately negotiate the best results for your business.

There are several phases of the negotiation process, including the following:

  1. Pre-negotiation
  2. Exchanging information
  3. Bargaining
  4. Closing
  5. Follow-up


Before the actual negotiation begins, the parties need to prepare. This is when pre-negotiation takes place. You’ll want to prepare yourself and other team members before entering the actual negotiation stage. Be sure to understand the business’s short-term and long-term goals and objectives. Also be prepared to discuss what your business hopes to get out of the contract, how much revenue it wants to earn, and what type of relationship you want both parties to have. Some of the items to be discussed among your team during the pre-negotiation stage include the following:

  1. The purpose of preparing for the negotiation stage
  2. Interests
  3. Alternatives, in the event that the other party disagrees with your viewpoint
  4. Options
  5. Agreements

Exchanging Information

This stage will include the exchange of information. You’ll want to share information with the other party, inclusive of your business’s interests and objectives. You’ll want to identify what you expect to gain from the business deal. The more information you share with the other party, the easier it will be for that party to fully understand what you are looking for. The following 4 assessments are made during this stage:

  1. Trustworthiness
  2. Competency
  3. Likeability
  4. Alignment of interests


This stage involves working with the other party to compromise on what you both want. This stage will require two things – compromising and creativity. You’ll need to compromise with the other party, as you can’t expect to have everything you want in the contract. And along with compromise comes creativity. In the event that the other party takes an entirely difference stance as to what they want in the contract, you’ll have to be creative and come up with other options for what to include in the contract.

For example, if the other party doesn’t agree to the pricepoint that your business wants, then you’ll have to work with the other company to come up with an appropriate price depending on the time and work being conducted. Similarly, the other party might want your services to be complete within 2 weeks, whereas you’ll need an entire month to complete the work. Such items are essential in the contract, and you’ll want to be sure that you and the other party fully understand and agree to such terms before the contract is drafted.


After you have compromised on all essential items that will be included in the contract, you can end the negotiation stage by reiterating what was discussed in the prior stages. Allow the other party to raise any potential concerns that they might have regarding the deal. Likewise, if you have any concerns, address them during this stage.

Once you have come to an official agreement, you can draft the actual contract. This phase might also include other items to be included in the contract, such as legal items. You’ll want to include information regarding legal dispute resolution, and when and how a legal suit will arise.


The follow-up process will take place after the contract is drafted and signed by both parties. Even though the contract is now legally binding and the project is under way, you’ll still want to follow up with the other party throughout the project to ensure that the project is running smoothly. Furthermore, you’ll want to mitigate the risk if any unforeseen circumstances arise. For example, let’s assume that you hire a contracting company to remodel your garage and backyard. If an unforeseen weather event occurs, i.e. hurricane, then you can’t expect the contracting company to continue doing work on the outside of your home during such a significant weather event. Therefore, a follow-up should take place to potentially amend the contract as the period of time to finish the project will now be prolonged.  

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