Outsourcing is great for you to expand the reach of your startup business. However, there is more to it than just signing up with a good provider. You and that provider need to hit it the right way. And that will often hinge on the contract that both of you have agreed to sign.
Here, negotiations will play a vital role. And you are likely wondering how you can go into the negotiating table and come out with a good deal. So, let’s look at how you can do yours right.
What You Need To Understand About Outsourcing Contract Negotiations
When you think of contract negotiations, you might often focus more on what your startup company gains. This mindset is not wrong per se. However, it can limit how you approach the negotiations and, ultimately, what you get.
For that, we need to look closer at what such negotiations can offer. Understanding these benefits can help you better determine what direction to push your negotiations.
It Brings Certainty
You and your outsourcing partner want to know what you can gain from the team-up. That is the chief purpose of the negotiation phase. Here, you set in stone the expectations you have. It includes the quantity and quality of the work produced. For their part, the outsourcing partner gets a clearer idea of what they get in return.
Beyond that, the negotiations also establish the repercussions on both parties for failing to fulfill objectives. That is crucial, as it gives both parties a more concrete sense of responsibility. With it, they become more focused on accomplishing the contract terms.
It Provides Structure And Planning
In connection to establishing certainty in the project, negotiations also help develop the project structure. This is where you can begin taking advantage of the outsourcing provider’s expertise. They can provide you with suggestions and ideas on better developing the project.
The negotiations also help you chart a course beyond the initial partnership. Here, you get to determine the potential issues both of you might encounter and develop solutions. In particular, the negotiation stage helps you lay the grounds for an acceptable conflict resolution process.
It Paves The Way For Long-Term Relationships
While you might initially be seeking to outsource for a short period, it can eventually develop into a long-term partnership. Effective negotiations help lay down the groundwork for that in various ways. For starters, the above planning helps establish the rules for that long-term partnership.
But more than that, it also establishes mutual trust between you and the outsourcing provider. It lets you both see the values that each espouses. Additionally, you get to observe how each other handles the situation. With that, you get to know if you are indeed in good hands.
How Your Startup Business Can Successfully Negotiate An Outsourcing Contract
One thing you should know at this point is that there is no singular approach to contract negotiation. For your startup business to nail it correctly, you need to consider the unique aspects of the project to be outsourced. Also, account for the provider’s characteristics when making your propositions.
Nevertheless, there are a few things that you can focus on when developing your negotiation strategy. These items will help you establish the points you want to emphasize during the talks and reach a more favorable result.
Creating Value
The first thing that you need to look into is how to create more value in the contract. Note that this isn’t just about the value you can gain from it. Consider what you can offer the outsourcing provider as well. That will better convince them to take up the job for you.
Here, explore what is known as “expanding the pie”. This is the process of adding new elements to the contract so that both sides gain more. One thing to note here is that you might have differing values. Your goal is to reconcile these and come up with something that both parties will like.
Additionally, create optimism that this new value would work for both sides. That will require some bit of back and forth as you find that sweet spot where both parties agree. Banking on a common interest will also help you bring the desired outcome.
Bringing In The Right Negotiator For Your Startup Business
Assigning the negotiation work to the right person will also ensure the success of the talks. Both sides’ negotiating teams should have at least one person working directly with the project. That will help you better determine what the teams need to do the work effectively.
A sales rep and a senior operations staff should also be part of the two sides’ panels. They will be there to iron out the contract details and go over the more technical matters. Beyond that, you should limit the number of members in the team to only a few to make everything simple.
Focusing On The Key Terms
To ensure that the negotiations don’t stray from the intended course, you should only focus on the terms already outlined in the contract. Some of the essential elements that you should pay attention to are:
- Service level agreements
- Time frames and performance metrics
- Scope of services
- Warranties and liabilities
- Defaults and breaches
These are some of the sections where conflicting views most often occur. Thus, both sides should give some time to iron these out.
Addressing Relevant Laws
One thing to remember about contract negotiations is that it isn’t just between your startup business and the outsourcing provider. The states where your companies are located also serve as the third party in the negotiations. Thus, you should ensure that all the negotiated provisions are within the applicable laws.
This can become a bit more challenging when getting an international contractor. There will often be laws that are incompatible with each other. Here, you and the outsourcing party will need to reach a compromise that would conform to these applicable laws. Bringing in an international labor expert will help both sides better assess the situation.
Creating Flexibility In The Startup Business Outsourcing Contract
As mentioned earlier, contract negotiations are a back and forth between your startup business and the outsourcing provider. To better facilitate that exchange, you should add some form of flexibility to your contracts.
Account for as many applicable special cases as possible. Consider the ones that are most likely to occur first. You then need to consider other situations that might be less likely but would still affect the partnership if they happen.
Image from Memuk.org.Do note that this flexibility is not without its limits. Be clear on what those limitations are. Before proceeding with the negotiations, ensure that the outsourcing provider is okay with these limitations. You might need to thoroughly talk about this first to arrive at a suitable agreement.
It would also help to develop contingencies in case the contract cannot accommodate certain situations. These contingencies will serve as another safeguard to convince both parties of the contract’s viability. While both sides can prepare their contingency plans, they should also develop a joint one for the project.
Get A Win-Win Deal For Your Startup Business During Outsourcing Negotiations
One last thing to remember is that you need to be realistic with the outsourcing contract negotiations. Be aware of both your needs and the capabilities of your chosen provider. That will help your startup business steer the negotiations to a favorable conclusion.
We at Virtua Solutions understand these and make it a point to arrive at a win-win scenario with our new clients. So, get the partner that can do more for your startup business and sign up with us today.