Evan Labb is Head of Partnerships at Savings.com (savings.com). He shares four tips for successful deals. These tips will help small business owners when trying to close a deal.
- Openly discuss potential friction points prior to negotiation phase
- Clearly define implementation plans
- Avoid inflating risks associated with any legal changes
- Create operational elements that will allow for mitigating risks
In all the deals that I do for over the 10 years that we’ve been working on, what different technology partners and partners in the space. What I find most frequently is that a lot of people spend a lot of time working on deals that never get done and they waste their time and they waste their money and because they haven’t really thought out a few things in advance.
I think there’s a couple of key steps you can take to make sure that you are really both on track, both sides that partnership are on track to get something done and if you avoid these mistake you can do really well.
The first, I think and the most important thing I always like to do is happen just after the selling. So you finish selling and you’re just about to enter negotiations and this is actually a critical window where you need to do a couple of things.
The first thing is you need to openly discuss any friction points that may exist. The question I always ask my potential partners is what am I not going to like about this deal? What am I not going to like about this contract?
And I’m also open to tell them what are the things that I’ve most frequently get push back from on partners because what you do then is you able to put those things on the table, work through them in a business matter, understand if any of them are going to be deal blockers or any of them are going to be fatal to the deal and really get to consideration and get a consensus on that before you move to legal negotiations and contract redlines.
The next thing that I think is really important is to understand that all of the implementation plans are really laid out. Make sure that all the pieces of the pie make sense and make sure that you’re not just dealing with someone who’s a business development person who’s only interested in doing a deal, make sure you have buying for all the key partners on the product side, on the legal side of the other teams. So that there’s no big questions that are outstanding before you get to the negotiation phase.
Once you get that, I think you’re in the negotiation phase and you really starting to talk a little bit more about, how do we come to consensus, how do we come to agreement of some of the key issues that are out there.
One of the biggest mistakes I see people make is that they inflate the risks associated with legal changes. Often time just see this around indemnifications, liabilities or a warranties and representations. What you need to really do here is be careful. You need to understand that in the abstract some of these things may sound like they’re really risky or they may sound like big deals and sometimes your lawyer or their lawyer may think they are big.
It’s really need to take a step back and say, what is the real risk her, how likely is this is going to, that something bad will happen and how, if something bad did happen, what would be the consequences to me.
What I like to do in this instances is try to have some operational elements underneath on the inside that allow me to mitigate this risk, allow me to turn things off if things get go in the wrong direction, allow me to stop in the certain part of the partnership that’s exposing to too much risk down the line.
That’s really helps, so when you’re negotiating a contract and you’re trying to plan for all of the unforeseen, if you have some leverage and switches you can pull on the back end that make it easy to mitigate your risk you’ll have a lot of freedom in the negotiation process.
And the final thing that I see people doing very frequently is they try to get everything in writing. Try to have all the bits and pieces committed to in a contract and what you’ll end up seeing is that most often there are things that just people cannot commit to it for a wide variety of reasons it may be against company policy, they may not be willing to do that at this early stage of the partnership because they don’t know how successful this is going to be.
The tact I always take is to really understand that almost all of the opportunity and almost all of the growth happens after a deal has signed and it’s really built on the success of the partnership and the success of that relationship. So you need to be able to just let go of certain things that people can sign on to and know that if your partnership is successful you’ll be able to get those things in the long run anyway.
I think that if you know how to kind of avoid these key missteps you’ll do a much better job in spending your time effectively on contracts, you won’t waste any time or waste any money on things that are not going to help your business.