Contracts are the backbone of most business relationships. They set out what each party has agreed to do, by when, for how much, and what happens if things go wrong. If you're running a business, you likely already understand the importance of having contracts in place. In this blog, we move beyond just what contracts should contain, and into how to handle the negotiation process itself.

What many business owners find most challenging, and often avoid, is the negotiation phase of a contract. It’s easy to feel out of your depth when handed a contract by a larger client, or you're unsure how to respond when a customer starts challenging your standard terms. However, negotiating a contract isn’t a confrontation. It’s a conversation. And done well, it can help you establish trust, clarify expectations, and protect your business long before a single invoice is raised.

Here’s a practical guide to help businesses navigate contract negotiations confidently.

Start with your objectives and non-negotiables

Before you begin reviewing or discussing a contract, take a step back. What are you trying to achieve with the relationship? What are the key risks you need to manage? Identify the essential terms that your business cannot (or should not) compromise on. These may include:

• Payment terms: How quickly do you need to be paid to maintain healthy cash flow?
• Limitation of liability: Are you prepared to accept unlimited liability for delays or defects? (Hint: You shouldn’t!)
• Termination rights: Can you exit the contract if the relationship breaks down or the client stops responding?
• Intellectual property: Do you need to retain ownership of what you create?

Knowing your red lines helps you avoid wasting time on terms that are unworkable and ensures you negotiate from a position of clarity.

Read the contract - properly

This sounds obvious, but many business owners skim contracts or assume they're "standard" and can’t be changed. Don't make that mistake. Look out for clauses that seem one-sided or unusual, particularly around:

• Indemnities and liabilities
• Automatic renewals
• Dispute resolution
• Service levels and penalties

Make notes. Flag anything that doesn’t reflect your understanding of the deal, or that could expose you to disproportionate risk.

Understand the other party’s concerns

Good negotiators don’t just defend their own position, they also listen carefully to what matters to the other side. For example:

• A large company may insist on stringent reporting or compliance obligations because they’re regulated.
• A start-up might be nervous about payment terms because they’re still managing cash flow.
• ·A client may want ownership of deliverables because they’re investing heavily in the outcome.

Understanding the rationale behind a request makes it easier to offer workable alternatives—rather than rejecting terms outright.

Use the opportunity to clarify expectations

Negotiation is a chance to dig into the detail and make sure both parties are genuinely on the same page. For instance:

• What exactly is being delivered—and what’s out of scope?
• How will changes be handled?
• What happens if deadlines are missed, or the client goes quiet for weeks?

The clearer you are at this stage, the fewer surprises you’ll face later.

Push back - professionally and constructively

It’s absolutely okay to suggest changes, even when a contract is presented as “standard”. Larger businesses often expect some back-and-forth, and smaller clients frequently gain respect by demonstrating they’ve read the terms properly. That said, how you communicate matters. Here are a few tips:

• Be constructive: “We’re happy with most of the agreement, but we’d like to revisit a few points…” is better than “These terms are unacceptable.”
• Be specific: Reference clause numbers. Suggest alternative wording if you can.
• Explain why: The other side is more likely to agree to changes if they understand your reasoning.

Know when to walk away

Not every deal is worth doing. If the other party is unwilling to budge on key issues, or if the contract exposes you to disproportionate risk, be prepared to step back. It may feel uncomfortable in the moment—but walking away from a bad contract is often cheaper and less stressful than trying to fix things after the fact.

Work with a legal adviser who understands business

Legal support doesn’t need to be heavy-handed. A good adviser can help you identify the real risks (not just theoretical ones), spot traps in the fine print, and support you in pushing back diplomatically. It’s often better to get a lawyer involved earlier, before you've signed anything, than to try to resolve disputes later.

Case study: Rewriting the power balance with a fair contract

Business type: A growing digital marketing agency
Client: A national property firm
Deal: 12-month retainer for content and SEO services

The property firm sent over a comprehensive contract - 30+ pages, with terms that included:

• A 90-day payment period
• A clause allowing them to terminate “at any time, without cause”
• An indemnity clause requiring the agency to cover all losses, including indirect and consequential one.

The agency had never pushed back on a client contract before, but the managing director was concerned and consulted a solicitor.

Approach taken:

• A short, clear response was sent outlining the agency’s concerns: cash flow would be affected by 90-day terms; early termination would leave them exposed; the indemnity clause was too broad.
• Alternative language was proposed: 30-day payment terms, 30-day notice for termination, and a mutual indemnity clause limited to direct losses.
• The solicitor helped frame these requests in a constructive and commercial tone.

Outcome

The client agreed to all proposed changes. They appreciated the agency’s professionalism and even admitted they had used the contract “as a starting point” but were open to revision.

Lesson

Many businesses, especially large ones, use aggressive terms as a default. They often respect and respond well to smaller business partners who are confident enough to negotiate.

Finally

Negotiating contracts isn't about being difficult. It's about being clear, fair, and proactive. Whether you're on the receiving end of another party’s terms or defending your own, negotiation is your opportunity to shape a deal that reflects your commercial reality and safeguards your business. The best contracts are those that both parties understand, agree with, and feel comfortable signing.

The confidence to negotiate doesn’t come from having all the answers, it comes from knowing your priorities, asking the right questions and getting expert support when needed.

If you’d like help with negotiating contract terms, feel free to get in touch. It’s a small step that can make a big difference.

Contact Sarah Naylor on 01302 320621 or at sarah.naylor@switalskis.com.