AboutRonald J. Cappuccio, J.D., LL.M.(Tax) Expertise I have extensive experience in negotiating emerging business contracts and agreements, joint ventures, limited laibility company buy-sell agreements and buying and selling businesses. My approach is from a legal, tax and business prospective gearing my negotiations to practical solutions rather than merely drafting impractical documents
Experience I have have been an attorney since 1976 emphasizing business and tax law issues. I am an adjunct law professor in negotiation and alternative dispute resolution.
Organizations American Bar Associtiation
New Jersey State Bar Association
Camden County Bar Association
I need someone to negotiate (or coach me to negotiate) vendor financing to start an invention-based, online, wholesale/retail store.
Questions:
Apart from the viability of the product and the trustworthiness of the vendor, what are the basic principles that govern such negotiations. Does it boil down to competitive bids? Is there a standard for calculating compensation for such financing? How do you prepare for negotiations?
Quote:
“Is it feasible to negotiate an agreement to fund the manufacturing of an entire project through a vendor who supplies the parts, assembles & packages the product, and supplies the first finished goods for distribution, in return for an exclusive manufacturing agreement for a set-forth period of time.” (or ‘quantity of product’ - sic)
This seems to be exactly what I need. My new product (patent-pending) is superior to the competition, can be cost-effectively manufactured by fabrication of sheet acrylic in a relatively small quantity, in short lead-time. It has a ready wholesale/retail channel in a major product-sourcing, online directory used by online stores.
I have received quotations from seven contract manufacturers, two or three of which I can negotiate with. The start-up costs are as minimal as one can desire in such an enterprise.
Cheers …
ANSWER: Gene:
It is very hard to negotiate for yourself and you are right to state you need help. When you have someone doing your negotiating, that person can take positions that you might not be able to take.
You should read a really good book on negotiation. I have my law students read "Negotiate This" by Herb Cohen.
I am concerned that the proposed deal could result in your business having all of its "eggs in one basket." Is the vendor a US company? If not, particularly if the vendor is in China or another country noted for ignoring patents and intellectual property, you MUST PAY ATTENTION to Trustworthiness. I would be happier if you had several vendors supply a discrete part with the final assembly in your control.
I know you have suggested competitive bidding. As a small customer, you might do a lot better negotiating with a vendor you can trust and with whom you feel a high level of comfort. It is easier dealing with people you know and like.
I really suggest that you should retain a good attorney to negotiate the deal for you.
1. I reside in the West Indies. The manufacturer is American and has signed an NDA and non-competition agreement before being allowed to quote on the project.
Question 1. Do you still suggest I use more than one supplier?
3. I was looking for a rough formula to determine compensation due to a supplier for financing. For example, the supplier can be paid more than they bid for the job, proportionate to their exposure and for a pre-determined number of parts, in return for supplying parts, raw materials, printed materials, packaging etc. "up front".
Thanking you ….
Gene
Answer Gene:
If one supplier can do it faster and cheaper, it may be initially better. Nevertheless, you still run the risk of losing your only supplier.
Secondly, the type of agreement you are referencing is similar to a purchase order. For example, you may agree to purchase 100 units during a 12 month period. You and the manufacturer could agree to release 10 products at a time with you just paying for those items received. This is a common practice, although you will pay more than if you purchased all 100 units because the seller is financing and storing the units.
