Contract Negotiation: Protecting Yourself While Closing the Deal

The Contract Is Not the Enemy of the Sale

Many small business owners treat contracts as a necessary evil, something that slows down the deal and introduces awkwardness. So they rush through it, use a generic template they found online, or worse, operate on handshake agreements.

Then something goes wrong. The scope creeps. The client pays late. The project runs over budget. And suddenly you are in a dispute with no documentation to back you up.

A good contract does not kill deals. It protects them. It forces both parties to align on expectations before work begins, which is exactly when alignment is cheapest and easiest.

The Non-Negotiable Contract Elements

Every service contract, regardless of your industry, should include these elements:

Scope of Work

This is the single most important section. Be specific. Not "we will redesign the website" but "we will design and develop a 10-page responsive website including: homepage, about page, 5 service pages, contact page, blog listing page, and individual blog post template."

List what is included AND what is excluded. "This proposal does not include content writing, stock photography, SEO optimization, or ongoing maintenance." The exclusions section prevents 90% of scope creep disputes.

Timeline and Milestones

When does work start? When is each phase due? When is the project completed? What happens if the client delays providing materials or feedback? (Answer: the timeline extends by the same amount.)

Payment Terms

• Total project cost
• Payment schedule (deposit, milestones, final payment)
• Payment methods accepted
• Due dates for each payment
• Late payment penalties (typically 1.5% per month is standard)
• When you stop work for non-payment

Critical clause: "Work will be paused if any payment is more than 15 days past due and will resume within 5 business days of payment being received." This one sentence will save you from completing entire projects for clients who never pay.

Change Order Process

Scope will change. It always does. Define how changes are handled:

• All changes must be requested in writing
• You will provide a cost and timeline estimate for each change
• Work on the change does not begin until the change order is signed
• Changes do not alter the original payment schedule unless specified

Intellectual Property

Who owns the work product? When does ownership transfer? (Typically: upon final payment.) What happens to unused concepts or drafts?

Termination Clause

Either party should be able to end the relationship. Define:

• How much notice is required (14-30 days is typical)
• What happens to work completed to date
• What payments are owed for work completed
• What happens to materials and deliverables

Liability Limitation

Cap your liability at the total contract value. "In no event shall [your company] be liable for damages exceeding the total fees paid under this agreement." This protects you from catastrophic claims.

Negotiation Tactics That Protect Your Interests

Know Your Walk-Away Point

Before any negotiation, determine the minimum terms you will accept. What is the lowest price, the longest payment terms, the most scope you will agree to? Know this number before you sit down, and stick to it.

Trade, Don't Cave

Never give a concession without getting something in return. If the client wants a lower price, trade for something: a longer timeline, reduced scope, faster payment terms, or a testimonial and case study.

"I can bring the price down to $15,000, but I would need the payment terms changed from net 30 to net 15, and the project scope would be reduced to 8 pages instead of 12."

Use "If... Then" Language

Frame every concession as conditional. "If we can agree on a 50% deposit instead of 30%, then I can reduce the total by 5%." This positions every adjustment as a mutual exchange rather than a one-sided concession.

Silence Is a Tool

After you make an offer or respond to a request, stop talking. Do not fill the silence with justifications or further concessions. Let the other party respond. Silence makes most people uncomfortable, and they will often concede or accept just to break it.

Put It All in Writing

Verbal agreements made during negotiation are worthless unless they end up in the contract. After any negotiation meeting, send a summary email: "Per our conversation today, here is what we agreed to..." and then update the contract to match.

Red Flags in Negotiations

Watch out for these warning signs:

• "Let's just get started and we'll figure out the contract later." No. The contract comes first. Always.
• "We don't usually do contracts for this kind of work." That is exactly the kind of work that needs a contract.
• Excessive pushback on payment terms. If they are fighting hard against a deposit or milestone payments, they may not have the budget.
• Vague scope demands. "We want you to handle everything digital" is not a scope. Get specifics or walk away.
• "Our legal team needs to review this." This is fine and normal. What is not fine is if their legal team rewrites your entire contract to shift all risk to you. Review every change carefully.

The DIY vs. Lawyer Decision

For contracts under $10,000 and standard service work, a well-crafted template that you customize for each project is usually sufficient. There are good templates available from SCORE and your industry associations.

For contracts over $25,000, complex projects, or anything with significant liability risk, invest in having an attorney review your template. A few hundred dollars for a legal review is cheap insurance against a five-figure dispute.

For anything in between, use your judgment. If the scope is straightforward, your template is probably fine. If it is complex or the client has unusual requirements, get a legal review.

After the Signature

A signed contract is not a set-it-and-forget-it document. Reference it throughout the project:

• When scope creep appears: "Per our agreement, this falls outside the defined scope. I would be happy to provide a change order."
• When payments are late: "Per Section 4 of our agreement, payment was due on [date]."
• When timelines shift: "Per our agreement, client delays in providing feedback extend the timeline by an equivalent period."

The contract is your friend. Use it.