Posted on June 2, 2025

For small medical device manufacturers, distribution agreements can be a game-changer. The allure is clear: by aligning with a larger, more established distributor, these companies gain access to broader markets, a seasoned sales force, and valuable industry connections they likely couldn’t develop on their own. It’s an exciting step forward—often one that represents a leap in growth potential.

At the start of these partnerships, optimism runs high. Both parties are eager to make the relationship work, focusing on logistics, pricing, and sales targets. Discussions tend to revolve around how to launch products into new markets and maximize mutual benefit. What often gets neglected, however, is the uncomfortable but crucial topic of how to end the agreement if needed.

It’s natural to avoid thinking about exits when you’re entering into what feels like a promising collaboration. But failing to include clear termination terms and exit clauses in a distribution agreement can create major headaches down the line. Circumstances can—and often do—change. Whether it’s a strategic pivot, acquisition, leadership turnover, or simply a change in priorities, either party may one day want to dissolve the relationship. When that happens, a vague or one-sided contract can turn a manageable transition into a legal and operational quagmire.

One of the most common consequences of an ambiguous agreement is the disruption of future business opportunities. For instance, if the small manufacturer decides to sell their business, unclear distribution terms could scare off potential buyers. They may be wary of inheriting a long-term, inflexible agreement that limits their strategic options. Similarly, a change of control in the distributor’s organization—such as a merger—might lead to misaligned goals or deprioritization of the small company’s products.

Negotiating exit provisions up front might feel unnecessary, even pessimistic. But building in clarity while all parties are aligned and on good terms can actually foster trust and goodwill. It demonstrates maturity and a long-term perspective. Common-sense clauses around termination notice periods, product repurchase terms, rights to transition sales, and ownership of customer relationships can protect both parties while minimizing conflict.

Moreover, crafting an equitable exit plan doesn’t mean preparing for failure—it’s about reducing risk and ensuring flexibility for the future. In fact, knowing that a fair exit path exists can give each side more confidence in committing to the partnership fully. It may even strengthen the working relationship by promoting transparency and mutual respect.

For small medical device manufacturers seeking distribution partners, the advice is clear: don’t overlook the endgame. Taking the time to negotiate clean exit ramps at the beginning can preserve the value of your business, ease future transitions, and ultimately make your distribution strategy more resilient. In business, as in life, it’s wise to hope for the best—but plan for change.