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There are a lot of people in the business industry, from executives and investors to buyers or even employees, who are doing everything they can to avoid exclusivity agreements. For those unfamiliar with the term, these agreements are in fact documents which parties draft and sign and through which they agree to buy from or collaborate only with the companies that the document mentions. It can also be drafted so that the parties involved can only collaborate with each other therefore shutting down all the external possibilities.
Even if certain companies or buyers choose to not go for exclusivity agreements when they talk business, these documents can also be a huge advantage for both the buyer, for example a startup, and the company that proposes the agreement. By “exclusivity”, many people understand that they become banned from collaborating with other partners or companies over a limited period of time and that this hurts their chances of success greatly. The reality is not quite like this. In fact, it’s a lot more nuanced. In this article we will explore the benefits of opting for exclusivity agreements in your business.
They Can Help You Better Your Business
It’s important to know that, in case you are a company looking for certain types of exclusivity agreements for future collaborations, it’s worth taking a look at these exclusivity agreement samples. They may help you when you’re dealing with unprecedented situations, when you’re drafting your first contracts of the type, or simply if you want to know how a professional agreement looks like.
Now, another important factor that you need to consider is that an exclusivity strategy, should you choose to adopt it, is rather difficult to implement. However, this usually depends on how big your business is and the domain you are active in.
Moreover, exclusivity agreements usually help a company take unilateral decisions more easily and only focus on those. It’s always a more efficient strategy to choose only a few things but do them right, than go for many and do a bad job. The same thing applies to your exclusivity strategy with your clients and partners.
Yes, it may sound easy for a large and successful company like Apple to negotiate strict exclusivity agreements with its partners. Such businesses dominate large markets and the buyers will be a lot more receptive. However, if you are a smaller company, you can find a way to dominate a much smaller market.
Let’s see how this theory applies in practice.
For a Small Business
Let’s say you have a restaurant and want to arrange exclusivity deals with a nearby farm. That farm will only provide you with its fresh goods in exchange for being featured on the menu. Imagine how beneficial that can be for your business, regardless if it’s a family restaurant or a hip venue waiting to be put on the map. The farm will get more customers, you will get more clients because of the fresh food and transparency, and the competition won’t be able to replicate your menu because they won’t have the exact ingredients.
For a Startup
For a startup, things work the exact same way. A famous example of a legendary exclusivity agreement is the AT&T and Apple deal which happened back in 2007 when the first iPhone was launched. Apple, a small company at the time, agreed to launch its products only through one single carrier. The deal was to not have any carrier software installed on the device itself. It worked out incredibly well, and the rest is history. However, you shouldn’t think that a well-drafted exclusivity agreement will make your business as successful as Apple but it’s a big advantage if you know how to approach your partners and clients.
Competition Favors Exclusivity Deals
It’s no secret that behind any good exclusivity deal is a fierce competition and the fear of being replaced or surpassed. As a company, when a partner has something that you absolutely need for your business and which the competition doesn’t, don’t hesitate to propose an exclusivity strategy. Be careful about how you convince your potential partners that this is a win-win situation.
Be careful to not propose exclusivity deal to every partner or client that you have. This will seriously harm your reputation as a company and you might lose a contract or two. Only choose the best opportunities and do this rarely, for the most important deals only. Don’t rush it or you might seem desperate. Your clients will immediately know when you mean business or if you only want to take advantage of them. Tell them what your plan is from the get-go.
Finally, even if many board members, executives or advisors will tell you to avoid exclusivity agreements for your business, design your plan wisely. It’s mandatory to get a good understanding of the logic behind such deals before jumping aboard. They can be a blessing for your company and for the partners that you are working with.
So, always keep some exclusivity agreements with you each time you are going to a business meeting. You never know when an incredible chance might arrive, and you need to be prepared. Also, be creative when it comes to how you structure your deals. Be honest about the advantages and the downsides and always tell the truth! Nothing is more important than that.