by Mark Brigman
Making the Introductory Call
Now that you have listed and ranked your top partner candidates for each growth engine, you are ready to make an introduction. I have found that it is always best to make the introduction in person if you can. Otherwise, set up a call and share the opportunity by phone. I strongly encourage you to never make an introduction via email. Email is too informal and leaves too many elements open to misinterpretation. Email will simply cause your invitation to be shot down before you ever have a chance to give the pitch. Your partner candidate will have many clarification questions and having a live conversation is the only way to properly shape the communications.
As you prepare for your introductory meeting, remember that you will never get a second chance to make a strong first impression, so be prepared. Take the information that you have collected from your SPP and the individual partner candidate research and write out a bulleted list of items that you want to cover during your introductory meeting. Position the introduction correctly based upon your relative size and potential value to each company. You must also realize that the pitch that you are making is completely new to your prospective candidate, and they already have a full plate of projects for at least the next year. It is vital that you position the opportunity as having significant value for them and that time is of the essence.
During your initial conversation, begin by sharing the great qualities and accomplishments that the candidate company has achieved. Pay them compliments and demonstrate that you have thoroughly researched their organization. This approach allows you to build credibility and the topic makes for an easy “ice breaker” conversation. That is, every business leader loves to brag about their business and hear how others admire the results of their hard work. In order for them to agree to partner, they must feel like they “know you,” “like you,” and “trust you.” This is a process, and it does not happen overnight. The mutual decision to partner will come in due time. But for now, regardless if you eventually partner or not, your goal is to get them to feel as though they know, like, and trust you. Don’t use smoke and mirrors. Be genuine.
After you demonstrate your knowledge about your potential partner and the market and you offer a general description of the partnership opportunity, you are prepared to ask clarification and validation questions. As you start to ask questions, do not be surprised if you meet resistance. Many business leaders think they are cooking a “secret sauce,” and they do not want others to know their recipe. This is why it is imperative that you demonstrate your significant level of understanding of their business prior to asking probing questions. This sequence shows that you already have a solid understanding of their business, but you want to validate your understanding to ensure that they are a great fit to be your partner.
As your conversation progresses, reinforce that you are continuing the research process as you evaluate possible partners. Let them know you are not extending an offer to partner yet, as you need to convince yourself and your company’s leadership team that this candidate is the best option for your business. The most successful introductory conversations start with you seeking their understanding and interest, but they end with the candidate seeking your acceptance. These conversations are a delicate balance between enticing each candidate to follow you down this path, while also making them prove that they are an industry leader who are worthy of your opportunity. Similar to courting a potential spouse, you want your partner candidate to be interested but not seem desperate to blindly jump into a union.
At the top of your bulleted list, you will want to explain the key value points the partner candidate will receive. That is, be sure to explain what is in it for them. The sooner they understand and agree that they have a potential to receive value, the sooner you will peak their interest. Remember, size matters. Phrase your value propositions, statements, and questions with your relative size in mind. Explain in general terms how the opportunity will benefit them and how your company will gain as well; they will want to know what you have to gain, too.
You will have to find the balance of acceptable detail to communicate and clearly explain what your partner will be obligated to do and what they will receive (cost/benefit), but not in too much detail, though. The more details you provide, the more you will be “painted into a corner.” Up until this point, you have crafted a partnership concept without the benefit of their input. By keeping the conversation general, you will have the latitude to further shape your final pitch after you collect more information. Utilize your initial conversations to gather information that will help you create a term sheet. You will have a draft term sheet constructed prior to your first conversations with a partner candidate, but unless you fully understand the landscape, you will want to validate your beliefs about your partner and the market prior to sharing the term sheet with any prospective partners.
As you ask questions during your various conversations, take detailed notes. Let the candidate know that your goal is to collect information so that you can create a term sheet that accurately reflects the partnership opportunity. Keep in mind, your goal is not to get a signed partnership agreement; your goal is to achieve a competitive advantage by building a relationship with another great company. Just like dating, you will need to have several encounters in order to develop an opinion on potential fit. In your initial conversations, you are not trying to get a “yes.” Instead, you are performing a mutual evaluation of potential value and compatibility. Partnerships are built on trust, and trust requires human interactions over multiple encounters.
Recall that trust and alignment are the first two foundational elements of a successful partnership. Ask questions and make honest claims in order to build rapport and credibility with your prospective partner. Your initial conversation is your chance to gain insights and to validate various assumptions that you have made. In your conversations, share success stories to demonstrate your company’s strengths, but also feel free to show a genuine sense of humility by sharing a failure or challenge. This courageous act of vulnerability goes a long way to show that your organization is real and seeks to constantly improve.
During your initial meeting, be prepared to address objections that your potential partner is likely to raise. Again, you want to demonstrate that your team has thoroughly researched and carefully considered the various aspects of the opportunity. If your partner candidate asks a question and it appears that the question has never crossed your mind, it could be a hit to your credibility. This does not mean that you will have an answer to every question, but you should be able to speak to the basics. Explain that you are engaging the candidate in a collaborative manner to leverage their expertise. However, questions that your prospective partner deems to be “elementary” should be met with an acceptable response that shows that your company has carefully considered the risks and rewards.
The initial courting process requires several conversations. Each encounter offers an additional opportunity to learn more about each company’s culture, goals, and appetite for a partnership. As you engage in ongoing conversations, remember that your goal is not to get a signed partnership deal; you’re performing a mutual evaluation of potential value and compatibility. Developing a strategic partnership is a time consuming process. Remember, strategic partnerships are not a transaction—no “one and done.” It is a critically important decision and you must build a relationship one piece at a time.
Managing the Term Sheet
As previously stated, you should refine and share a term sheet with each potential partner after you feel that you have a solid understanding of your potential partner, the opportunity, and the market. If you are effective in leading conversations with your partner candidate, all elements of the term sheet will have been discussed prior to their receiving the term sheet.
If you have a “strong requirement” in your term sheet, such as a five-year exclusive deal with guaranteed revenues, discuss prior to sharing it in a document. When uncustomary terms are
shared in documents versus personal conversation, the trust that you are in the process of building is undermined.
Your term sheet should include your key “must-haves” and “nice-to-haves” that your partner must consider. You should also put elements in the term sheet that your partner candidate is requesting that you agree to. Remember, you are building the framework for a partnership and it must work for both sides or it won’t work at all. If your prospective partner has a “must-have” that you are unable or unwilling to fulfill, then you need to find a new partner candidate.
When your PDL has resolved the various elements of the term sheet with your potential partner and verbal agreement has been reached, you are ready to move to the contracting phase. Although the term sheet mostly consists of business terms, you should also include major legalese (risk terms) if you believe there is a high probability that they will meet resistance. For example, if your company requires that your prospective partner have a $10 million dollar umbrella insurance policy and there is no limitation on liabilities, this could be an issue for your prospective partner. Get these points resolved before you involve the attorneys for efficiency’s sake.
The term sheet will later be used as a resource document to draft the Strategic Partnership Agreement (SPA), if you get to that point. It is normal to have a couple revisions of the term sheet as conversations and collaboration continue. By the time the items on the terms sheet have been discussed and verbally agreed, the potential for a partnership becomes real.
Dealing with “No”
If (or when) you encounter a partner candidate who is uninterested or unwilling to partner, try to understand why. This could be a useful opportunity for you to learn about perceived weaknesses within your company or risk factors that they perceive. The reason could simply be lack of resources or strategic fit on the partner candidate’s side. That is okay. The last thing you want to do is be “married” to a strategic partner who never wanted to be married in the first place. This situation sounds crazy, but trust me, it happens all the time, even in Fortune 100 firms.
If your results are like most companies, only a small percentage of partner candidates will eventually become strategic partners. This is normal. Keep in mind that the game of business is infinite as long as your doors remain open. Just because you find that a company is not interested in a partnership today, that does not mean they will not be a match in a year or two. “No” does not mean “no,” it means “not right now.”
When you receive a “no” and you really want a “yes,” try to convert it to a “maybe.” This approach may sound odd, but it is important. You do not want to be known as the company that a particular firm said “no” to. It is much better to have their approach be “not right now.” The word “no” is definitive and final. In the business climate, companies, leadership, and strategies constantly change. If you feel that a company is a strong fit, you may be only one company reorganization away from earning a “yes.”
When you receive a “no” from a quality candidate, explain that you understand their current position that now is not a good time for a new partnership. Further explain that you understand that circumstances can change over time and you would like to drop him/her an email and check in every six months. If they agree, and in almost every case they will agree, this approach keeps the door open and allows you to continue to build rapport for a possible future partnership.
This approach is yet another contrast to traditional sales. Salespeople obviously want a “yes” and they can deal with a “no,” but they never want to hear a “maybe.” The word “maybe” means that the answer is not “yes” and the decision requires time. Sales are transaction based and quota driven salespeople do not have time to spare. However, in the world of strategic partnerships, we work on the other side of the continuum. We love a “yes,” but we are also good with a “maybe.” The word we do not want to hear is “no.” The art and science of strategic partnerships is neither time bound nor quota driven.
How to Evaluate Potential Partners
As you can imagine, your evaluation of a potential partner and their evaluation of your company commences the moment you first say “Hello.” As conversations continue, your evaluation moves from informal to formal, so documentation is critical. There are a number of factors to contemplate as you evaluate partner candidates. Some of which will consider general business effectiveness levels while others will be technology and/or market focused.
During the courting process, journal your conversations and continuously identify strengths and weaknesses that you perceive exist within your partner candidate and potential relationship. For every critical strength and weakness that you discover, validate your belief during later conversations. Before it becomes “etched in stone,” have a candid conversation with your prospective partner and afford him/her an opportunity to validate or refute your beliefs prior to making any final decisions.
As you start to formally evaluate a partner candidate for fit, consider using the following tool. For each element, grade the criteria 1-5, where 5 is the best score. Note any specific strengths or weaknesses that you have discovered that deserve special consideration. If your company has a team of PDLs participating in the evaluation, feel free to have each person conduct an individual assessment and average the scores. Or have open discussions and record the collective feedback on a single scorecard.
#
Criteria
Grade (1-5)
Strengths
Weaknesses
1.
Alignment
a
--Mission
1.
2.
1.
2.
b
--Core Values
c
--Goals
2.
Product Quality
3.
…..
When formally assessing your partner candidates, it helps to be reminded of the key traits of a great partner. As you and your team assign grades and document strengths and weaknesses of each partner candidate, include traits that seem to be abundant or lacking. If you are evaluating numerous candidates and you need only one strategic partner, these subtle yet significant characteristics can often differentiate your candidates.
Traits of a Great Partner Company:
Trustworthy
Listener
Committed
Personally Accountable
Transparent
Mutual Respect
Competent
Forward-Looking
Innovative
Adaptive
Understanding
Selfless
Solvent
Consider the ten factors below as criterion to evaluate each potential partner. Understand that you will have specific needs that are unique to your opportunity that must also be considered. Some of these factors may include technical or industry know-how or market experience that will accelerate your partnership’s success. If you believe that a particular factor is critical to your future success, include it.
During this process you should have a fairly good sense of how to score each candidate based upon the various factors. If you find that you do not have enough experience with the candidate to confidently assign a score, do more research. When evaluating new partner candidates, intentionally set up scenarios and “mini-projects” that force the partner candidate and you to collaborate. This has proven to be a great “test drive” to see how well a candidate’s company is run. Additionally, interview other companies that currently have—or used to have—a relationship with your prospective partner. Remember, hearsay and misperceptions are prevalent. Be sure to corroborate any strong claim, positive or negative, before considering it in your decision process.
Criteria to Evaluate Partners
Alignment of Mission, Core Values, & Goals
Quality of Final Product / Service
Scale and Capacity of Production
Financial Stability and Lon
gevity
Self-Accountability / Overall Management
Ease of Communication
Timeliness of Delivery of Products
Cost of Final Products / Services
Track Record of Strong Partnerships
Candidate’s Partnership Network
Negotiating a Win / Win Agreement
The art and science of contract negotiations fall into two categories, “complete contracts” (transactional) and “incomplete contracts” (continual). Stated another way, agreements are either finite in nature requiring no follow-up for further discovery, or agreements are continual and follow-up is a necessity. When I use the word continual, I am not referring to the term of the agreement but rather the collaborative nature that is required in order to achieve success.
In many cases, the follow-up activities include adding addendums to the parent contract to further identify the elements that become known as the relationship, market, and opportunity evolve over time. Yes, you guessed it. Strategic partnerships utilize incomplete contracts because they require continual collaboration in order to evolve and achieve the mutual intent of the agreement that was signed.
There are hundreds of books, classes, and professional training programs that teach the art of negotiating. Unfortunately, the vast majority of those resources take a one-size-fits-all approach. Contract negotiating is a much more complicated and multi-dimensional science than it is given credit for. While the intent of this section is not to make you a contract negotiation guru, we will debunk some myths and inaccurate teachings regarding strategic partnership negotiations.