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Contract Negotiations: What Every Product Manager Must Know?

How necessary are negotiations of an MSA contract before getting into a deal? Here we have explained the types of contracts and key points as a takeaway for every product manager to know.

Master Service Agreements (MSAs) are one of the primary ways product managers can maintain control over their costs and quality, but it’s not always as easy as just signing on the dotted line. If you want to protect your interests with an MSA, you must make sure that you fully understand how they work, how to find the right MSA Contract Negotiations, and how to negotiate in your favour to maximise your benefits investment. This guide will give you all the tips and tricks you need to ensure that your MSA contract negotiation goes smoothly and produces the best result possible.

The process of negotiating a set of legally binding terms for a contract (in this case, we’ll concentrate on negotiations between two businesses) is known as contract negotiation. When two businesses negotiate, both parties aim to get good terms and reduce operational, legal, and financial risk.

Four types of contracts:

1. Non-Disclosure Agreements (NDA)

A non-disclosure agreement, or NDA, is a legal document that specifies the information that cannot be shared outside of parties in a defined relationship. NDAs are used in many business situations, from securing product development and marketing agreements, employment contracts with highly sensitive positions, and even rental agreements for office spaces. They provide a mechanism to protect trade secrets and proprietary information. For example, your company does not want its research labs’ ideas stolen by other organisations in your industry, so NDAs are critical when signing consultants who have access to those areas of operation. Alternatively, your company will never share customer lists without prior approval, so carefully written NDAs between sales teams and clients are also essential. 

2. Master Services Agreements (MSA)

To ensure your company has a successful product or service, you’ll need what is known as a Master Services Agreement (MSA). An MSA can make sure your clients agree with and follow all of your business policies and procedures. While it might seem difficult, there are simple steps that will allow you to prepare for master services negotiations so you can get exactly what you need. 

3. Statements of Work (SOW)

Your SOW is your contract. It’s not a letter of intent (LOI), but it’s what you expect to deliver in exchange for payment. It includes all product specifications, user stories, wireframes, and more. It defines how much you get paid for what milestones and at what cost per hour. Get your SOW signed before diving into any other deliverables; it ensures everyone is on the same page about what’s going into every development step. In addition, it shows clients how serious you are about hitting agreed-upon deadlines and that they have full access to your work so far.

4. Change Orders (CO)

 Change orders are necessary if you want to make a change in scope during a project. However, they’re also time-consuming and often lead to contentious discussions with your client. You need them on board for each new change you ask for so that you can limit or eliminate pushback from them later on. Here are some tips for better contract negotiations and less stressful change order discussions

What are the key points a product manager should know?

The investigation, performance objectives, and product scope are the three most significant things a product manager should know. These terms refer to information essential in understanding what your client expects from you. The research includes technical reviews and needs analysis, which provides a better understanding of how your product could benefit. Success criteria refer to what a company needs their new system or technology to do for them and what they need it not to do. Finally, deliverables refer to tasks outlined in detail in your proposal and MSA contract  documents. Be sure these are spelt out clearly, so there is no confusion on either side of the agreement later on down the road. Use each one of these three topics for your piece.

Here are four ways that every product manager should know

Define Your Needs Before You Begin Contract Negotiations

Make sure you clearly define your needs before you start negotiating. Write down everything you want in an MSA so that when it is time to negotiate, you know what would be the acceptable and unacceptable terms in your MSA Contract Negotiations. Ensure to include how much notice customers must give before canceling their subscription or how often they must pay invoices on time. Once you have defined your needs, compare them against similar contracts other companies have used to understand where room for negotiation exists and where there may be no room.

Decide What Is Important and What Is Not

In addition to defining your needs, decide which ones are most important and aren’t worth fighting over. For example, if one clause in an MSA says that if a customer cancels his subscription, he cannot receive any sort of refund, then you probably won’t try very hard to fight for a different policy. However, suppose another clause states that customers who cancel their subscriptions within six months after signing up will not receive any refund. In that case, you may fight harder because more money could be involved.

Find Out How Much Negotiation Room Exists

When determining how much room, ask yourself these questions: How flexible are my terms? Are they set in stone, or do I have wiggle room? Are my competitors willing to compromise? Do I care about making compromises? Will I lose potential customers because of rigidity? 

Know When To Walk Away

Even though you know what is important and what isn’t, don’t be afraid to walk away from a deal if you feel strongly about certain points. The worst thing that can happen is your client walking away from a deal instead of compromising on issues that don’t matter as much to them.

Get creative with your negotiation strategy

How will you convince them? Letting them move first puts them in a position of power. This can feel uncomfortable, but remember that they’re negotiating with you because they need your product or service more than you need theirs.

Bonus tips when negotiating as part of a team

In negotiations, each person on your team has a role and should know it. Decide in advance who will make which points. The same person doesn’t necessarily have to lead every point, but it is good for one person to take on that responsibility. It may be easiest to split roles by product area or feature set, each leading a few topics. And if you’re working with multiple companies in an alliance, someone needs to coordinate between them, and their teams may want someone else to speak for them entirely.

Skills Required

  • Understands each step of product development, from idea generation through release 
  • Understands each step of project development, from creating a proposal to delivering the final work product
  • Understands business processes and tasks involved in sales, marketing, and support functions; must be able to perform these tasks when required
  • Possesses strong verbal and written communication skills
  • Recognises when further education is needed for new job duties or tasks with minimal supervision; actively seeks such training if necessary
  • Develops technical content for internal and external audiences at all levels of both organisations’ personnel (i.e., investors, management, research scientists, software engineers)
  • Plans short-term activities that support long-term business goals. Identifies potential problems, develops solutions, and monitors progress toward solution implementation 
  • Identifies risks associated with complex projects and recommends ways to mitigate them
  • Demonstrates ability to manage multiple tasks simultaneously within established timeframes; adjusts priorities to meet deadlines
  • Communicates effectively across departments using various media (phone, email, meetings) as appropriate 
  • Interacts professionally with peers inside and outside the company; builds positive relationships across departments/organisations as appropriate.

Conclusion

Whether you are a product manager at big corporation or a startup, you will always be a part of Contract Negotiations. As a product manager, you must know what constitutes a good deal and when you should walk away from one. This guide provides three examples of good deals with descriptions of how each deal came about and what lessons were learned. We want you to go into negotiations confident that your demands will be met and know when to walk away from something unproductive. 

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