Aaron Schwartz is founder and CEO of Modify Industries, Inc., which designs interchangeable custom watches known as Modify Watches. He loves working on startup ideas and has spent innumerable (happy) hours advising friends and former students on how to grow their ideas.
Modify has always been a brand that "punched above its weight": we sold over $100,000 in product to Google and Facebook within six months of incorporating. We were licensees of the NBA, LiveNation, MLS ,and Major League Baseball before we reached $1 million in annual revenue. We've also built a number of large partnerships in our five years with distributors, licensors, retail partners and manufacturers.
Nearly every organization we work with is bigger than Modify, and yet we have been able to build equal partnerships across the board. Based on our own experience, here are some suggestions for winning over big partners through negotiation tactics.
1. Both sides should win.
Got you there, right? A "win" for Modify where a partner isn't satisfied will only lead to a short-term arrangement. When negotiating, you should not focus on taking a bigger slice of the pie. Instead, focus on growing the pie and making both sides ecstatic. We built the relationship with Facebook, but we handed it to Canary Marketing to finalize the order. As a startup, we needed cash, and thus took a bit larger percentage than standard. They were happy for the contact, while we were happy to stay in business.
You need to be flexible in negotiating. But to do so, you need to know your numbers cold. We recently negotiated with a sports franchise that was looking to get our products at a 25 percent discount. Knowing that was important, and also understanding our cost of production, I realized that the deal would make sense only if we hit a certain order quantity. I shared that information, our partner said yes, and now we'll be in a new market.
3. Have references.
The best way to win over a bigger partner is to show them a track record of success. As much as possible, don't just sell them a vision; have data and references that back up your story. The easiest partnership we've ever built was with the NHL, one of the largest and most respected brands in the world. Once they found out we were working with the NBA, MLB and MLS, they agreed on the spot to take us as a licensee.
4. Bring something unexpected to the table.
The big dogs can work with anyone they want, so figure out a way to really “wow” them. We offer free design and focus on turning around their design requests within two days. Why two days? Because that's faster than anyone else in our business. Why free? It shows our partners that we care, and that we'll invest upfront to earn their partnership. We never want to sell something unless our partner loves it.
5. Meet them in person.
One of the best pieces of advice I got was that I needed to "get on a [expletive] plane." Why? Because the big companies need to know that you're a serious partner. They need to believe in you. They need to know that you will not damage their brand.
6. Be transparent.
Don't bluff -- remember, you often need the bigger company more than they need you. Transparency has helped us tremendously in our partnership with Coveroo, a leading custom case manufacturer and the company that handles our production. When we had a huge order a few months ago and were wrestling with whether to produce it in San Francisco or overseas, I shared our dilemma. As it turned out, they were in a slow period with extra capacity, so they lowered their cost across the project by $6,000 for us. While producing in the U.S. was still more costly, we brought them the business. After the project, we went back to the previously agreed-to price.
7. Always ask, "Can we do better?"
In formal negotiations lingo, going back to an agreement and exploring ways to improve it is called a "post-settlement settlement." No partnership goes exactly according to plan, and over a few months you and your partner will often learn about ways both sides would be happier. Bring these things up, saying, "We're happy with the current arrangement, but would like to know how we can improve." This will fortify the partnership in a way that leaving things "business-as-usual" might not.
When you are building your business, remember that everything is a long game. You might be able to build your business without any help, but it won’t grow as fast and frankly, it will not be as fun.
To accelerate your business, focus on building deep relationships with bigger companies. Treat your partners with respect, deliver on your promises, and leverage the "big dogs" to grow in a sustainable way.