In today’s world, big companies need startups to catch up with the latest innovations. This happens because large firms take time to approve a new technological project. There’s always bureaucracy that slows down decision making. When a small business owner is approached by a big company, they should be careful about how they approach the negotiation table. Here are a few tips they can use to get a deal that benefits both parties.
Create an Equal Playing Field
A big company will only approach a startup if the deal has the potential to increase its revenues. Since both firms are likely to benefit from the deal, the small company should make sure that they are doing business as equals. No one is doing anyone a favor. A smart way to do this is to ask for an advance payment. If the big company is interested in the small firm, they must show commitment through some sort of payment.
Never Sell for a Low Price
Most startups will sell their goods and services at a discount price because they want to attract customers. Big companies are aware of this strategy and will try to convince the startup to do the same for them. Large firms want to pay as little as possible because they also want to save money. However, startups shouldn’t give large firms a discount. Since a big company has the finances to pay more, the startup should give them a higher price and be prepared to say no if the buyer offers something lower.
Negotiate Better Contract Terms
Big companies have a lot to handle. As a result, they can walk out of a deal at any time if their priorities change. Before closing the deal, the startup should negotiate terms of termination of the contract. The small business should put a clause that allows them to be compensated if the large company walks out of a deal before the project ends.
Never Give them a Stake
If a startup is doing exceptionally well, there will be offers from lots of companies. If the owner of the business is serious about growing it, they should not take funding from big companies. Firms are always looking out for their interests. If a big firm buys a stake in a profitable startup, it will limit its growth by blocking good offers from competitors.
It’s always exciting when a small business is approached by a blue-chip firm. The owner is usually excited at the prospect of collaborating with the big firm. However, the large corporation may not have the interests of the startup at heart. For that reason, the startup founder should follow the above tips to avoid getting a bad deal.