In today’s business world, it’s often necessary for small companies to partner with large corporations. Because of the sheer size and influence of many of these corporations, both in their products and business reach, it’s often easy for them to take advantage of their smaller partners. By paying attention to key elements of the negotiating process and not allowing the large corporation to take advantage of your work, you can make sure that the deal works out well for both parties.
How the Big Boys Benefit
While the benefits to the small company in partnering with the larger company are obvious, such a partnership also offers many rewards for the large corporation. Small companies are often able to innovate and create new products faster than large corporations. Large corporations typically have complicated approval and oversight processes, which hamper their innovation and delay the introduction of new products to the market.
Another reason larger corporations make deals with smaller companies is that it’s often cheaper for them to source technology from smaller companies, rather than build it themselves. While the larger corporation may have a vast distribution and sales network, it may lack the specialized technical know-how to accomplish a specific project or build a particular product – and it may be too expensive to acquire.
Also, the venture being contemplated by the large corporation may be risky and, therefore, could be potentially harmful to the careers of the people championing the project. By dealing with a smaller company, they have the option to outsource the risk. If the project is a failure, the damage is all contained within the smaller company.
How the Little Guys Can Leverage These Benefits
Because of the potential risks, you must leverage the perceived benefits to boost yourself when making the deal. Adopting an equal business stature from the beginning is important. Remember that you have something the big corporation wants, and keep in mind that there’s no reason to act as if they’re doing you a favor. There’s no reason to be objectionable, either – each of you has something to offer the other.
Don’t be afraid of asking for pre-payment or an advance, especially if the deal is going to require you to make a substantial investment in equipment or staff. Not only does this touch on the issue of equality, but it ensures that you don’t exhaust your resources in a way that will make it impossible to deliver on your commitments to the large corporation.
Things change at large corporations all the time (reorganizations, change of priorities, budget revisions, change of management, etc.), so it becomes necessary to negotiate a cancellation clause. This is especially important, considering that cancellation of a large contract can have little to no impact on a large corporation, but can be deadly to a small company. Always negotiate what they will pay you in the event of such an occurrence, as this protects the smaller company.
It’s important for a small company to do some hands-on research before jumping into a partnership with a larger corporation. No matter how attractive the deal may look or what difference it could make to your company’s prospects, you need to seek these things out.
- Speak to others who have done deals with the larger corporation. They may have some instructive insight to share, even if they are your competitors – a corporation’s reputation with their partners is very telling. Pay attention, especially, to what other partners say about key executives and decision-makers.
- Pay attention to the culture of the larger corporation. Some corporations have an extremely collaborative culture that goes to great lengths to ensure that their partners succeed. Other corporations have extremely competitive cultures that place their own success over others’.
- Look at their agreements and contracts. If they start off being very one-sided and slanted in their favor, that’s a bad sign – even if you are able to negotiate them to a more even-handed agreement. It’s a telling sign of how they view the partnership – and you. If the agreements and contracts are fair and even, there’s an increased likelihood things will go well in the long run.
Too often, small companies allow large corporations to take advantage of them without fair compensation. Don’t let what’s at stake in the deal distract you from considering what’s at stake for your business’ long-term growth. If both sides keep their mutual interests at the forefront, negotiating a fair contract becomes second nature. And that’s a win-win.
Dush Ramachandran is Business Transformation Coach for The Net Momentum. He has built, grown and sold two of his own companies and most recently served at Vice President of Sales and Business Development at ClickBank where he was instrumental in growing the company’s revenues nearly 500% in five years. Dush is a vocal participant in the Internet marketing industry, the host of the ‘Entrepreneur Effect’ radio show and, and serves on the board of several industry organizations including Affiliate Summit and A4U Expo in Europe. He is also the author of an upcoming book on entrepreneurial success.