When and How to Avoid a Bad Deal

As a businessperson, you engage in contract negotiations all the time, but you know you can't win every time. Sometimes you have to walk away to avoid a bad deal. Don't feel guilty about this. You haven't failed. In fact, you may be saving your business.

Know Your BATNA

Before you enter into any negotiation, you must determine your BATNA, your “best alternative to a negotiated agreement.” In other words, know what you can and can't offer if negotiations break down. If, for example, you're seeking to purchase a piece of equipment, your BATNA may be buying a different piece of equipment or finding another supplier for it. 

Think Presentation

As you begin the negotiation process, pay close attention to how you and the other party present your potential contracts. Consider if they're clear and concise, well-written, and easily understood. Also be sure all the necessary details are included and the contract itself looks professional. First impressions are, after all, important for both sides. Make sure your presentation is in a format the other party can easily access. Software that can merge PDF​ files ensures both readability and security.

Consider Consequences

After you've carefully considered the details of the potential contract, pay close attention to its consequences. Think about whether you could lose money, lose time, alienate employees, reduce company morale, or reduce market reputation through this deal. The effects of a bad deal can be severe, and there are times when it costs more to go through with a deal than to walk away. 

Negotiators sometimes get hung up on one particular issue—often price—but it's essential to consider how the deal positions you for the future. If it commits you to an inflexible path of action, that can affect growth in the long term. 

Reject Failure

Always remember that it's better to walk away from a deal than accept it out of fear or guilt and deal with the negative consequences that follow. Remember, too, that walking away doesn't mean failure. It simply means the deal wasn't a good fit at this time or in these circumstances. There will be other opportunities.

Know You Aren't Alone

You aren't alone if you walk away. When Mondelez International (the firm that owns Nabisco and Cadbury) was considering a deal to purchase the Hershey company, negotiations fell through. Hershey demanded a higher price than Mondelez International was willing to pay. There was also a legal question about one of Hershey's shareholders. For the sake of the company, Mondelez International's negotiators decided to walk away from the deal. 

Walk Away

For the sake of your business and your bottom line, there are times you must simply walk away from a bad deal. 

For support with this or other business issues, consider joining your local chamber of commerce.