Platt Perspective on Business and Technology

Online store, online market space – part 32: developing B to B partnerships and collaborations to gain better collective terms from suppliers 5

Posted in startups, strategy and planning by Timothy Platt on October 25, 2013

This is the thirty second installment in a series on building an online store as a new business (see Startups and Early Stage Businesses, postings 20 and loosely following for Parts 1-31.) This is also my fifth consecutive installment to more fully discuss business to business collaborations, and how they can bring value to all participants.

I began discussing business to business purchasing collaborations in Parts 28-30 of this series and then turned to consider how they would be negotiated in Part 31. My goal there was to outline some of the issues that would go into negotiating the formation and structure of a purchasing consortium with other potential partner businesses that would join in on it. My goal for this posting is to switch direction and consider how such a consortium would negotiate with large sellers, in securing better purchasing terms at reduced cost for consortium member businesses. And this is definitely a place where answers arrived at to the questions I posed in Parts 28-30 all have to interconnect.

• First of all, before you can begin to negotiate with a prospective selling business for better prices and terms of sale, you and your partner businesses have to have reached fundamental accord as to what you all seek, and on the basic terms parameters that you would find acceptable.
• This definitely has to include consideration as to what specific types of purchases would be included in these agreements and what might be at most just brought up a possible concession points in reaching finalized agreements.
• Then, a decision has to be made as to who will actually negotiate with the selling business.
• Legal counsel experienced in business to business negotiations would be extremely important here, and at the very least in due diligence reviewing and finalizing the terms of any contracts that would be entered into.
• And this brings me to a possible complication: every business that would enter into such a consortium agreement with an important seller that they would do business with should want to have a significant direct say on the terms of any negotiated agreements reached. But if every business in this group comes to the table with the seller seeking an equivalent and significant direct voice in these negotiations with them, the whole consortium falls apart and the seller simply finds itself dealing with a lot of separate client businesses, but in this case all at once and in the same room.
• So it is important that all participating consortium businesses come to agreement as to who will directly negotiate with the seller. And these negotiators, who would be acting on behalf of the entire group and not just for individual member businesses, would come back to the group with draft proposals that they would review, comment on, offer changes or corrections too, and hopefully agree upon after that. These drafts would be brought back to the negotiating table with the selling business and ideally this process would go smoothly and quickly.
• Templating a new potential agreement from the text of older agreements that have been found to work can be very effective for improving the likelihood of that, where prior experience actually working with an established agreement can validate that it is not likely to hold hidden problems that could emerge in implementation and when actual sales and purchasing transactions are taking place.

A lot of what I have been writing of here and in Part 31 would also apply when setting up a supply chain or essentially any other type of business to business agreement. So none of this should seem all that novel, even if the specific context or purpose that these business to business negotiations would take place in might be.

• And of course I have only been discussing one arc here, of what should be seen as a complete business process cycle
• Where validation of performance of these agreements would be tracked as a basic due diligence function,
• And any such agreements would be updated and course-corrected, or simply dropped if found to no longer offer sufficient value to their participants: buyers and sellers alike.

I am at least tentatively going to finish adding to this series with this posting, but may very well return to it again to further expand out its general lines of discussion. Meanwhile, you can find this series and related postings at Startups and Early Stage Businesses and also at Business Strategy and Operations and its continuation pages Business Strategy and Operations – 2 and Business Strategy and Operations – 3.

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