This article focuses on the concept of unequal bargaining power. Unequal bargaining power occurs throughout business and life. Being aware of when you are facing unequal bargaining power will help you strategize for your best possible outcome and lessen your risk.
Case Study: “Hitching Your Wagon (“Business”) to a Star (“SuperNova”)”
Partnering with a dominant corporation (SuperNova to use an astronomy analogy) by joining their eco-system can often be a smart and fast way to scale a business.
These positives however, are often offset by a loss of bargaining power, which shows up as a shifting of risks onto to the weaker party.
The underlying contracts are often very one-sided (in their favor) and can be legally revoked or altered almost at will. Whenever entering into such a relationship, you will want to look at the future risk of cash flows.
- Can my (dominant corporation) partner change terms?
- If so, do I get notice, or can it be overnight?
- If so, what happens to my business?
If you decide to hitch your business to a economic Supernova, it is important to take steps to maintain the certainty of your future cash flows and quickly diversify your company’s dependence upon one relationship for its growth or existence. You will want to consult with a solid business lawyer to review contracts and advise you as to potential risks as well as steps to mitigate those risks.
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