Kathy M. Zhu

In my experience, the most effective tool you can use is to ask “why do you want <insert position>”. The answer may surprise you. Once you understand the underlying interest, you can then decide if you want to trade, address that interest in a way that’s more palatable to your company commercially, or keep firm with your position understanding the deal may not progress. Negotiating without understanding interests is like trying to find a black cat at night with the lights off. You’ll just go around in circles.

I've often found that in B2B SaaS negotiations, the Sales team lobs the contract over to the Legal team without prior review and are mostly checked out of the negotiation process. That's a huge, missed opportunity. I prefer to get onto an alignment call ahead of any live negotiation with the AE and have them share the context behind certain legal terms and why the counterparty is pushing for something. I have them explain the overall tenor of the deal - a deal that's at risk requires a very different approach. Having the sales person engaged and aligned during the negotiation call can be tremendously helpful.

The single biggest negotiation aid to build rapport for me has been the use of comments in redlines. I use a friendly, approachable tone that signals that I am open to collaboration. I start off each comment with a positive statement that shows I understand where they are coming from and why they are asking for a certain position (or if I don't understand, I seek clarification), before then explaining the rationale behind my edits. I've found this approach often circumvents a need for a call and helps us to get to resolution much faster when we do engage in a live discussion.

The terms to examine the most carefully are the terms that "follow the money." Of course, this may not just be purely expressed in dollar amounts and instead is something else of value. Understand what value the parties are exchanging and how that's captured, what triggers payments, what results in a party not having to pay, and how to get out of the contract if things go wrong, or get damages covered if things go really wrong, these are the most important terms of the agreement.

Getting underneath the positions to uncover the rationale is the most effective communication strategy. Once you are negotiating interests rather than positions, you're in so much of a better place to get to a happy resolution.

I always prefer to bring the issue at stake back to the fundamental economics of the transaction. If the counterparty's position destroys (or severely jeopardizes) the value of the deal for my company, then I will point that out. Often entrenched positions, especially if they are policy-based, have evolved from circumstances that may not be relevant to the deal at hand. It helps to uncover that and why the position doesn't make sense.