Take Extra Steps When Selling to Large Firms

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For a small business, it’s a significant moment when it comes time to sign a contract with a major player. Andrew Demetriou, head of corporate banking and business at Fulbright and Jaworski LLP, said there are a few details that entrepreneurs should keep in mind.


“The number one issue in transactions is the reliability of financial information. It is not uncommon for smaller companies to not pay full importance to their financial statements, whereas bigger ones live and die off audited financials. Another thing small businesses should be aware of is that they tend to include personal expenditures like cars and insurance in their financial information, which larger firms may have recast to exclude those details.


“Small businesses should discuss and review their business with their lawyers and accountants to make sure there are no significant open ends. Smaller companies tend to work more on trust while larger companies look to the contract for their rights. Not paying attention to the contractual process may put a small business in a situation where they don’t have the rights they thought they would or where the corporate firm has rights that the small business did not anticipate.


“Also, larger companies may have some clauses that they don’t negotiate under any circumstances. The smaller company in such a situation should decide if they still want to go through with the deal.


“Due diligence is often more relaxed or even nonexistent in some contracts. Larger firms tend more toward credit checks on the company than a full-fledged corporate due diligence.


“Entrepreneurs should ensure that they have good confidentiality protection in place. Certain unique ownerships, individuals or intellectual property of the company may need to be safeguarded while under review.


“The renewal terms of the contract are to be considered carefully. Often, contracts are renewed automatically and two parties might end up in a deal that they did not want to continue.


“The small business should probably engage in self-reflection and evaluate their financial operations and also see if they are adequately prepared to stand up to the scrutiny that a corporate company would put them through during negotiations.”



*Case Study is a feature in which experts offer advice on the various challenges that small-business owners often encounter. If you face an issue or challenge you think applies to others as well, please contact the Business Journal at

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