GROWPLAN: An Interactive Workshop on Business Development

Scott [email protected]

@slpollack

GROWPLANInteractive Business Development

Workshop

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Understanding Growth

Why are you in business?

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To build a $1B company.

To improve people’s lives.

To create amazing products.

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“To build a $1B company.”

“To improve people’s lives. “

“To create amazing products.”

To create something of value.

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Time

Lives improved

Products innovated

Dollars

made

Value

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Time

Growth is the measure of value created over time

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Developing a GROWPLAN

We’re going to spend today exploring:

1. How to think clearly about what is valuable to our organizations

2. How to identify and prioritize growth opportunities that create value over time

3. How to thoughtfully apply tactics to pursue growth opportunities

4. How to repeat the process again and again

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1. Intros 10:00 – 10:152. Growth & Business Development

10:15 – 11:003. Having Value: Strategic Business Development

11:00 – 1:004. Lunch 1:00 – 1:305. Communicating Value: Getting in the Door

1:30 – 3:006. Biz Dev: The Game

3:00 – 4:307. Delivering Value: The Evolution of Relationships

4:30 – 5:008. Post-Deal Drinks 5:00 –

7:00

What We’re Doing Today

Class Rules• Everyone participates• Your questions and opinions make the class

better• Your BD network starts here

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Who is THIS guy?

Big Corporate BD• American Express (7+ yrs)• Dow Chemical (3+ yrs)

Startups• CIO at UVentures• Founder at Hot Pot Culinary

Events

Total Deal-nerd• Writes about BD:

www.startofthedeal.com• Writing a book on BD

Why, hello there.

http://www.startofthedeal.com/

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Intros:

• Name• What you do• Why you’re here• The company for your

GROWPLAN• What you want to get out of

today?

Please allow me to introduce myself

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Business Development: A Process for Growth

Growth

Value

Business Development

The Goal

The Unit of Measure

The Process

=

=

=

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What is Biz Dev?

How would you define business development?

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The Grand Unified Theory of Business Development

Here’s how I define it:

business development:\biz ● ness duh ● vehl ● up ● mehnt\ noun or verb

Creating long-term value for an organization from customers, markets, and relationships.

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The Many Faces of Value

1. Economic Value: does it add to our revenue or profits?

2. Brand Value: does it improve the perception of our company?

3. Product Value: does it add to the intrinsic utility of our products?

4. Audience Value: does it increase our exposure?

5. Option Value: does it have the potential to open doors later?

What are some examples of each type of value?

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Customers

Customers are the people or organizations with whom you have an exchange of value.

How Value is Exchanged:

• Client/Vendor: Product Value Economic Value

• Ad Platforms : Product Value Audience Value Economic Value

• Marketplaces : Economic Value Product Value Economic Value

• Freemium: Product Value Option Value

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Markets

Markets are where customers “live” – both geographically and in their “value mindset.”

How to Enter New Markets

• Geographic Expansion: same product, same customer, different location

• New Channels : same product, different customer

• New Products: different product, same customer

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Relationships

Strong relationships enable the pursuit of growth opportunities.

The Gateways to Value

• Two Levels: individuals make decisions on behalf of organizations

• The Foundation: relationships are built over time with a mutual exchange of value on a platform of trust and integrity

• The Heart: nurturing strong relationships allows value to flow over them.

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Customers: Find new ones and extract more value from existing ones.

Markets: Figure out where new customers “live” and find a way to reach them.

Relationships: Build and leverage relationships founded on trust and integrity to facilitate opportunities.

Creating Value from Customers, Markets, & Relationships

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• What kinds of value are most important to your company?

• What kinds of value do you have to offer?

• What kinds of value are you seeking?

GROWPLAN Exercise: Types of Value & Sources of Value

Types of Value

Economic Value: Does it add to our revenue or profits?

Brand ValueDoes it improve the perception of our

company?

Product ValueDoes it add to the intrinsic utility of our

products?

Audience ValueDoes it increase our exposure?

Option ValueDoes it have the potential to open doors

later?Sources of Value

CustomersThe people or organizations with whom

you have an exchange of value.

MarketsWhere customers “live” – both

geographically and in their “value mindset.”

RelationshipsEnable the pursuit of growth

opportunities.

• Who are your customers?

• What markets do they “live” in?

• Who are the most vital individual and organizational relationships?

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The Three Stages of Business Development

Having Value

Communicating Value

Delivering

Value

What?

Who?

How?

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Having Value

Communicating Value

Delivering

Value

What?

Who?

How?• What kind of value do we

need?• What assets and

resources do I have that create value for others?

• What are the right growth opportunities to prioritize for my business?

• What paths should I take to pursue them?

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Having Value

Communicating Value

Delivering

Value

What?

Who?

How?• Who will care about the

value you can offer them?

• Who will be personally motivated help?

• Who will be in the right position to take action?

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Having Value

Communicating Value

Delivering

Value

What?

Who?

How?• How can you ensure it

was worthwhile?• How will you deal as

priorities and circumstances change?

• How will your relationships evolve over time?

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Fundamentals of Strategic Business

Development:

Having Value

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The 1st Stage of Business Development

Having Value

What?

•What kind of value does we need?

•What assets and resources do I have that create value for others?

• What are the right growth opportunities to prioritize for my business?

•What paths should I take to pursue them?

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The 1st Stage of Business Development : Having Value

Introducing: PowerStack Systems• PowerStack is an early-stage startup that

produces and sells mobile phone charging station kiosks.

• These kiosks provide customers with a secure locker into which they place their phone to charge while on-the-go.

• PowerStack’s kiosks have been a popular addition to New York’s bars and restaurants, providing customers with a convenience and venue owners with a new revenue stream (PowerStack pays 30% of the kiosk’s earnings to venues).

• Given the potential for scale, the CEO of PowerStack now believes the time is ripe to sell their kiosks into quick-service restaurants (QSRs) such as McDonald’s, Burger King, and Wendy’s.We are PowerStack’s Business Development

division and this is our first day on the job. What do we do?

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The Having Value Stage

Step 1: Identify the Opportunity

• Where are there opportunities for us to create value from customers, markets, and relationships? • Usually that means finding a way to reach new customers or improve

relationships with existing customers.

• Ask questions about your business

• Opportunity-First: Evaluate the opportunities that are presented to you organically and determine if they worth the investment of time and resources.• Are there gaps in your offering vs. competitors? • Are customers clamoring for something new? • Are there opportunities to sell a product to new customers?

• Value-First: identify the value that your business needs, and then evaluate the paths to get to realize that value.• What is the most important value for my business to be creating right

now?• What assets do I have that I can leverage to create value for others?

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Step 1: Identify the Opportunity (continued)

• Where is the exchange of value?• What value do I have that others may want?• Which customers would need that value?• In what markets do they live?• Which relationships would help me to reach them?

• Reminder: good (and bad) ideas can come from anywhere• What kind of value does the opportunity bring? Is that value aligned with

your company’s needs? Have you validated that the opportunity is legitimate?


PowerStack – Identifying the Opportunity

• Diners have appreciated the convenience of PowerStack’s products.

• Restaurant owners have enjoyed serving their customers while generating revenue.

• To date, there has not been any competition for mobile phone charging stations in quick-service restaurants.

• The PowerStack CEO believes this is an opportunity to sell its existing product into a new market.

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Step 2: Assess the Opportunity

• Size the opportunity• Can start with “back-of-the-envelope” calculations and rough approximations• Examples:

• Economic Value: Size of addressable market * % realizable customers * Expected conversion rate * revenue per customer

• Brand Value: number of impressions * average cost per impression• Audience Value: size of audience * estimated ad CPM• Product Value: potential price premium * existing customers• Option Value: probability of a future opportunity * size of future

opportunity

• Assess your resources• Product: do you have the assets and expertise to produce the product, or do

you lack anything critical?• Distribution: do you have a way to sell your product?• Other Strengths/Weaknesses: what else should we consider?


What are other resources to assess when assessing an opportunity?

What else should we consider when sizing an opportunity?

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PowerStack – Assessing the Opportunity

• Economic Value• A survey by National Restaurant Association says average QSR

restaurant has approx. 500 customers per store per day.• We estimate that 10% of all customers will use the charging

station @ $4.99 per use .• We pay a 30% revenue share to venue • 500 * 10% * $4.99 * 30% * 365 days = $45K per year per kiosk *

100 stores = $6.4M/year opportunity.

• Brand Value: • Anticipate 10M press impressions @ $0.10/CPM =$100K• Association with large chains provides stamp of credibility.

• Option Value : • Even at a pricing discount, a high-profile customer provides a

case study for use in other industries (rest stops, airports, etc.) .

• Expansive network of kiosks could create an opportunity to sell advertising.

• Resources: • There are no changes to the product and sufficient production

resources. • PowerStack has had success in selling directly to local restaurants

but lacks any relationships national QSR chains.

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GROWPLAN Exercise: Identify the Opportunity

Opportunity-First vs.

Value-First

• What opportunities are available to you right now?

• What type of value does your business need right now?

• What value do I have that others may want?

• Which customers would need that value?

• In what markets do they live?

• Which relationships would help to reach them?

Exchanges of Value

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GROWPLAN Exercise: Assess the Opportunity

Qualitative Value

Quantitative Value

Resources Required

• What intangible value should you consider?

• What metrics can you use to quantify the value of the opportunity?

• How will you calculate those metrics?

• What resources will you leverage to pursue the opportunity?

• What resources do you lack?

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Build

• What would it take to pursue this opportunity in-house?

• If resources are lacking, what would it take to create them?

Marketing

SalesProduct

Development

Step 3: Formulate the Options

Buy

• Are there “off-the-shelf” solutions (buy a product, buy a company, outsource, etc.) that can enable us to pursue this opportunity?

Outsourcing

HR

Procurement M&A

Partner

• Can we work with one or more companies to pursue this opportunity together?

Distribution Produc

tBrand

vs.

vs.

What is an example of where you Built vs. Bought vs. Partnered?

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Wait a second.

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I thought business

development was always

about partnerships…?

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I thought business

development was always

about partnerships…?

(nope)

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Partnerships are a common – but not the only – way to pursue new customers and markets.• Why partner?

• Upside: can be fastest / easiest / cheapest/ most efficient / best / only way to reach new customers and markets

• Downside: you have to give something up (value & control)• CEO of American Express: If I could do it all myself, I wouldn't

have partners.

• Types of Partnerships• Channel or Distribution partnerships – they have access

to a customer group that you don't• Product partnerships – together you can create a new

product or improve/enhance an existing product• Brand Partnerships – co-brand or cross-promote products or

services to jointly improve on a business opportunity

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Evaluating Partners: Finding Value Alignment• Distribution:

• Do they have an audience that overlaps with the market you need to reach?

• Do they have a sales force that is equipped and motivated to sell your product?

• Do they have marketing channels that they can/will leverage to promote your product?

• Product• Do they have a product that would be improved by integrating with

your assets, or vice versa?• Can they execute with speed and agility?

• Brand• Would there be a mutual benefit by association in pairing your

brands?• Does the credibility of the brand outweigh other mitigating factors

(e.g., reduced Economic Value for the Brand Value or Option Value of a “logo” slide or case study)?

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PowerStack could use their sales force to sell directly to large fast food chains. They will need to expand their sales team in order to prioritize the effort.

They know these are large organizations and they move slow, so they anticipate that it’ll take about 12 months before they’re able to close their first deal.

• Key Considerations• Economic Value: $6.4M/year revenue, but expect to pay

about $1M upfront for headhunter fees, new hiring bonuses, benefits, and 1st year salaries.

• Option Value: Landing an “anchor” customer can make it easy to get in the door with others.

• Audience Value: Generates exposure to a large audience, which could be monetized in the future via on-screen advertising.

Step 3: Formulate the Options - PowerStack

Option 1 – The Build Path

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PowerStack could buy a fast food franchise and setup a kiosk inside as proof of concept.

The PowerStack team is financially qualified to open the franchise, and believes by leasing a pre-built space they could be in business within 3 months.

• Key Considerations• Economic Value: $6.4M/year revenue (not including

revenue from restaurant operations) but a $3M investment in the building and franchise fee.

• Option Value: Provides a proof of concept for kiosks and direct access decision-makers for incorporating across all franchises.

• Brand Value: May distract future customers from company’s core offerings.


Option 2 – The Buy Path

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PowerStack could strike a distribution partnership with a company that already sells to QSRs to sell PowerStack kiosks alongside their offerings.

FoodPoint is the leader in the restaurant industry “point of sale” systems for the QSR market. The PowerStack team anticipates that a deal could be completed within 6 months.

• Key Considerations• Economic Value:$6.4M per year revenue but 30%

revenue share to FoodPoint($1.9M)• Option Value: Partnership provides an opportunity to

learn about the QSR market from an established player.• Brand Value: Establish a reputation within the fast food

restaurant market.


Option 3 – The Partner Path

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Step 4: Make the Decision

• Depending on the decision-maker, this can be a straightforward financial modeling exercise or a decision based more on intuition and gut.

• Build strategies are often the slowest way to enter a market, but provide the most control over the result.

• Buy strategies can be the riskiest and most expensive approach, but also the fastest.

• Partner strategies require giving up a degree of control and stake in the final result, but offloads some of the risk onto the partner (“Shared risk, shared reward”).PowerStack – Make the decision

• Option 1 – Build: leverage the sales team = 12 months and $1MM slow speed of entry to market but leaves $5.4MM opportunity ($5.4MM/year revenue – $1MM upfront cost).

• Option 2 – Buy: open a franchise location = 3 months and $2MM fastest entry but largest upfront cost resulting in $3.4MM opportunity ($6.4MM/year revenue – $3MM upfront cost)

• Option 3 – Partner: work with a distribution partner = 6 months and $1.9MM compromise on time and money but shared risk resulting in $4.5MM opportunity ($6.4MM – $1.9MM rev. share)

What should PowerStack do?

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GROWPLAN Exercise: Evaluate the Paths & Decide

Partner

• How could you leverage your existing resources to pursue this opportunity in-house?

Buy

Build

• What resources could you acquire to pursue this opportunity?

• Who could you work with to pursue this opportunity? What would each partner contribute?

Decide • What are the most important factors affecting your decision?

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Getting In the Door

Communicating Value

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Who?

•Who will care about the value you can offer them?

•Who will be personally motivated help?

•Who will be in the right position to take action?

Communicating Value

The 2nd Stage of Business Development: Communicating Value

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The Communicating Value Stage

Having Value

Communicating Value

Delivering

Value

You

Having Value

Communicating Value

Delivering

Value

Them

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Your Communicating Value Stage = Their Having Value Stage

Having Value

Communicating Value

Delivering

Value

Having Value

Communicating Value

Delivering

Value

You

Them

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Companies have plenty of options to create growth.

$$$

Build

Buy

PartnerThem

YouAh, Screw It

M&A

Vendor

In-house

Outsource

$$$

Create a product

Enhance our brand

Cut costs

Reach new customers

Enter a new market

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In order for someone to choose you, you must provide more value

than every other option.

Or waste a lot of time trying.

$$$

Build

Buy

Partner

Them

YouAh, Screw It

M&A

Vendor

In-house

Outsource

$$$

Create a product

Enhance our brand

Cut costs

Reach new customers

Enter a new market

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Individual Organization

Build

Buy

Partner

•Appeal directly to prospective customers for sales/marketing

•Need buy-in from internal teams (product, engineering, etc.) or 3rd parties with access to audience (ad agencies, media owners)•Secure support and funds from internal teams (procurement, corporate development, etc.)

•Negotiate pricing with vendor contacts

•Requires support of the broader organization to sign and implement a deal

•Find advocates who will champion your partnership

Decisions are made by individuals & organizations

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GROWPLAN Exercise: Getting in the Door

• Which companies and individuals are relevant to your growth opportunity?

• What value do they have to offer you?

• What value do you have to offer them?

Who are your targeting?

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The Individual Mind

• Gateway to the organization• Ideas are filtered

through personal motivations

The Organizational Mind

•Gateway to the value•Ideas are filtered through structure, culture, and processes

Value Received

Value Perceived

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Structure Culture Process+ +

How is the company

organized?

Who do you need to talk about a partnership?

How are decisions made?

Who has the power to say “yes”?

What are the steps to securing

a deal?

What hurdles may get in the way?

The Value Perceived: The Organizational Mind


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The Organizational Mind: Structure

The structure of a company determines who you need to reach and is different in every company.

• Where will your value resonate?• Does your partnership fall neatly into one business

unit/division/team, or across multiple groups?• Who would benefit most from the value your partnership can

provide?• Who evaluates partnerships?

• Does one team oversee BD for an entire company or division, or are the responsibilities fragmented?

• How flat or fat?• The more layers of management, the slower and more

bureaucratic the organization is likely to be.• How many people need to weigh in on your partnership?

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The Organizational Mind: Culture

A company’s culture determines how opportunities are evaluated and decisions are made.

• How are decisions made?• Do individual managers have authority to make decisions

autonomously, or are they made "by committee"?

• How do they view innovation and risks?• Does the company pursue iterative “test & learn” initiatives

or do they only commit to large-scale opportunities?• How many public partnerships can you name?

• What are the office politics?• Do you have sponsors/advocates with enough clout and

influence to sell-in a partnership idea as needed?• Who has a personal motivation to advocate for the deal?

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The Organizational Mind: Process

The processes to evaluate and approve working you can help or harm your deal.

• Who else needs to approve?• Are there other individuals or groups that must weigh-in?• Review panels, CEO/CFO/Board of Directors, other

stakeholder teams, Privacy, Compliance, PR, etc.?

• Is the timing right?• Does the opportunity fit into the budget cycle?• Is it within their priorities/goals for the quarter/year?• Do they have sufficient resources to pursue the opportunity

now?• Are they in “hunting” mode or “barn-building” mode?

• Can they execute?• Are there constraints/requirements that would make it

difficult to execute?• How long will it take to bring an opportunity to market – is it

worth the time?

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How to Read the Organizational Mind

• Do your homework• Press: key divisions, initiatives, and “who’s who” highlighted in the media• Company filings: 10-Ks breakdown business units, key initiatives, etc.• Second-hand research: “Best Places to Work” surveys, job boards• Guesstimate: structure and bureaucracy is often a function of size: number

of employees, departments, initiatives, etc.

• Ask your network• Informational interviews: get in the door not to pitch, but to learn.• Paved paths: Other partners, vendors, service providers of the company• Get out there: Events, tradeshows, conferences in the industry

• Build an Advocate• Advocates: people who champion the prospect of your partnership• They are resources: can help you navigate an organization’s structure,

process, and culture

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Self-Actualization:• Personal growth• Believe in the value to company/customers/economy

Esteem• Build a personal brand• Being seen as an innovator

Love/Belonging• Networking across the company• Recognition and promotion

Safety• Status quo vs. taking risks• Effort required

Physiological• Goals / targets• In the job description

The Individual Mind: The Psychology of Motivation

To build an advocate, you must appeal to an individual’s personal motivations.

Maslow’s Hierarchy of Needs

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The Individual Mind: Types of Advocates

Org

an

izati

on

al R

ele

van

ce

Personal Motivation

Hig

h

HighLow

Decision Maker Influencer

NavigatorEvaluator

Low

Navigators have no direct influence over a decision but can

help shed light on how the Organizational Mind works within

a given company.

Influencers are stakeholders whose perspective can inform the

direction of strategic decisions.

Decision Makers have sufficient authority, role definition, and

organizational clout to make the final call on decisions.

Evaluators evaluate the potential fit for an opportunity. They are often members of a Business

Development, Product, Marketing, or other team charged with evaluating the best path for

pursuing growth opportunities,

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Hit my goals and make my bonus

Resume builder

Promotion opportunity

Value to the organization

Opportunity A

Fear of risk-taking

Belief in the idea

Value to the organization

Opportunity BMotivation

Demotivation

Interest Threshold

Level of

Moti

vati

on

Individual Value + Organizational Value


The Value Perceived does not always match the Value Received

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GROWPLAN Exercise: Reading Minds

The Individual Mind

&

The Organizational Mind

• Where in the company will your value be relevant?

• Who are the types of people that may be relevant advocates? What job title, what role?

• Why would someone be personally motivated to help you drive in this opportunity forward?

• How will you find them?

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Recap: PowerStack Systems• PowerStack, an early-stage startup

that produces and sells mobile phone charging station kiosks, has decided to enter the quick-service restaurant market.

• After assessing the options, PowerStack is confident that partnering is the best option to reach new customers.

• PowerStack has no relationships in the quick-service restaurant, but payment processing POS market leader FoodPoint is a viable prospective partner.

We are PowerStack’s Business Development division and this is our first second day on

the job. What do we do?

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Step 1: Find a Contact • Explore the organizational structure

• Who plays a relevant role within the organizational structure?

• Look for signals of interest• Whose job title may suggest a relevance to the value you have to

offer?• Who has put out public signals that they could be interested in

working with companies like yours (blogs, Twitter, speaking engagements, attendance at events, etc.)?

• Who has signaled interest in the value you can offer (Job title, blog, etc.)

• Find potential advocates• Your burden of proof of the value you offer may be higher for

Decision Makers or Evaluators than Navigators or Influencers

The Communicating Value Stage – Step 1

PowerStack – Find a Contact• Tweet from FoodPoint VP of Manufacturing:

“Interesting stuff. RT @FastCompany POS system makers evolve their defenses in the age of Square. http://www.fastcodesign.com/3044522/pos-systems-makers...”

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Step 2: Craft a Value Hypothesis• What is your Value Hypothesis for your partner?

• Value Hypothesis = a testable assumption of the value offered to another party

• Outreach to targets as an experiment, not haphazard “pitch-and-pray”

• Consider both the Organizational Value and Individual Value• Does this opportunity mesh with the company/division/team’s

strategy? • Why is it worth their time and energy to take a meeting?• Why might the person you’re speaking with get personally

engaged?


PowerStack – Craft a Value Hypothesis• What we know about FoodPoint VP of Manufacturing:

• Interested in direction of innovative, mobile technology (e.g., Square)

• Title suggests clout but role suggests more likely to be a Navigator, not Decision Maker for distribution partnerships

• What we know about FoodPoint• Article speaks to need for new revenue streams across industry.

• Our Value Hypothesis:• A distribution partnership to enable FoodPoint to cross-sell QSRs on

PowerStack kiosks would provide significant Economic Value and Option Value for the leader of an industry facing uncertainty and change.

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Step 3: Get a Meeting

• Warm vs. Cold Intros – warm intro can help engender a response, but you still need to offer value to get in the door.

• Keep your message concise – 4-5 sentences that clearly communicates your Value Hypothesis and why it’d be worthwhile to take a meeting.

• Know your audience – if you know your first contact is not the Decision Maker, ask them to be a Navigator or Influencer.


PowerStack – Get a MeetingHi Sally,

I was hoping you could help me connect with someone on the FoodPoint team responsible for sales and/or strategic partnerships. PowerStack is exploring opportunities to offer our mobile charging kiosks into the QSR industry and believe there may be opportunities for collaboration. We believe offering PowerStack kiosks to FoodPoint customers opens up a new $6.4M revenue opportunity from existing customers while also providing an improved offering to attract new types of customers.

Would you be able to help connect me with the right person? Alternatively, happy to chat further next week.

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Step 4: Negotiate the Deal• Validate your Value Hypothesis – initiate the conversation with your

Value Hypothesis to demonstrate the potential opportunity but allow ideas to evolve out of the conversation.

• Raise the interest level – your goal is not to close the deal upon first contact. Your goal is to raise the level of interest with each meeting.

• Align on a high-level deal structure first–you won’t get agreement on specific deal terms until you’ve first aligned on the broader concepts.

• Have a position on key terms –remember the value that you need from the Having Value stage when agreeing to concessions.PowerStack – Interest-Building Meetings

•Value Hypothesis: Enabling FoodPoint to cross-sell QSRs on PowerStack kiosks would provide significant Economic Value and Option Value.•High-Level Deal Structure: FoodPoint’s sales team would sell PowerStack kiosks to QSR customers in exchange for a revenue share.•Having Value Stage Assumptions:

• Economic Value: 30% revenue share (on $6.4M/year revenue)•Option Value: Opportunity to learn about the QSR market.• Brand Value: Establish a reputation within the fast food restaurant market.

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Key Deal Terms

• Revenue Share: How the any revenue produced from the deal is allocated. • There are many ways to structure revenue shares:

• Percentage splits: e.g., 70%/30%• Fixed bounties: e.g., $25 per newly acquired customer• Tiered splits: e.g., 50% of revenue for the first 1000 units, 60%

for 1000-2000 units, etc.• Performance-based triggers: 50/50 split, plus $100K bonus if

1000 sales are made within 6 months

• Costs: How costs are allocated for implementing, maintaining, and growing the deal. • Clearly articulating how costs will be split avoids confusion and

disagreement down the line.• Costs to discuss can include: operational costs, new product

development costs, marketing expenses, legal fees, etc.


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Key Deal Terms (continued)

• Exclusivity: Determines whether one or both partners are allowed to enter into similar arrangements with other partners.

• Provides competitive advantage for some time but can limit a partner’s interest in expanding upon an opportunity (“a marketplace with one seller”)

• Term Length: Length of the contract term, which often determines not only how long the partnership will remain active, but can also affect how long other elements of the agreement remain in place (such as exclusivity).

• Shorter term length provides more flexibility to a partner to explore alternative options (Build, Buy, or other Partners) at the end of the term.

• Longer term length requires a stronger case to be made for the value that will be returned over that term.


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• Termination - Determines how a contract can be ended.• Either naturally (when a term ends and the contract is not

renewed), or prematurely (when a partner wants to cancel the partnership)

• Some partnership agreements allow early termination without cause, others for a very specific set of circumstances (and a termination outside of those circumstances may be cause for financial penalties to be paid to the other partner).

• Right of First Refusal – Provides early access to a new opportunity, such as a new product line, before providing access to other partners.

• Branding – Considerations around whether and how a company’s branding, logos, and trademarks are used.

• Can determine whether or not a press release can be made, how promotional materials will be created, and whether logos and brands can be used on a partner’s marketing collateral.

• Can have a major impact on the Brand Value created from a partnership


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• Investment – some partnership “operating agreements” are associated with strategic investments. • Investments from corporate venture arms can provide access to the

company resources, but can also constrain future investment/partnerships (e.g., conflict of interest).

• Operating agreements tied to investments may enable the investment recipient to offer better terms on the operating agreement, such as a more favorable revenue share.

• Operational Details – additional terms that detail how a partnership will be launched and supported• Even after a deal is signed, many partnerships require a continued

investment in resources such as product development or marketing.• Defining how marketing plans, product refreshes, sales force

training, and customer servicing will be handled by each partner allows for upfront agreement to avoid misunderstandings once in market.


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Begin with your Value Hypothesis

There needs to be interest on both sides before you

can get into details

Win-Win Now or Lose-Lose

LaterYou can close a bad deal but you can’t keep one

alive if it doesn’t deliver on the

promise.

Don’t Negotiate Emotions

It’s very easy to take things

personally, but best to focus on the end solution.

Understand value needs

to create options

Create new paths around

roadblocks

Root out causes for objections

Explore why an objection is

raised – are they for organizational

or individual reasons?

Concede according to

a planKnow what you’re

giving up, and trade items of low value for items of

high value

Small wins breed big

winsGetting a smaller

deal through to closure can be easier than a

large deal, and helps you get the

next one.

Set the anchors

“Never set the first price” is bad

advice. Frame the negotiation with

(realistic) boundaries.

How to Negotiating for Value

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You and your best friend walk into a bakery to buy a

blueberry pie.

There is only one blueberry pie left in the bakery and you both want it.

Negotiate for the pie.

Negotiations Warm-Up Drill

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Step 5: Close the Deal

• Get other stakeholders involved – aim to get other stakeholders – executives with veto power, bureaucratic review boards, other teams who will support the deal (e.g., sales, product, marketing, customer service, etc.) – involved as early as possible.

• Timelines vary – don’t expect a signed contract overnight. Deals can take weeks, months, or years depending on the companies involved, the complexity of the terms, time of year, will and competence of the employees, etc.

• Narrow the focus – if delays arise, a narrowly-defined deal may be better than no deal at all. Similarly, pilot agreements may get organizational support faster before “full” launches.

• Draft a terms sheet – consolidate the terms into a single “terms sheet” that articulates the primary points of the deal.Know when to fold ‘em – the more alternatives you have available to you, the more strength you have in your negotiation since you can always walk away from the deal.PowerStack – Close the Deal

• You decide how the story ends in Biz Dev: The Game

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GROWPLAN Exercise: Getting In the Door

Getting In the Door

• Who will you contact?

• How will you reach them?

• What is your Value Hypothesis?

• What is your 4-5 sentence pitch?

• What worked and what didn’t?

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Biz Dev: The Game

Here’s how it works

• Two teams, each representing a different company• Each team gets10 minutes to prepare for the first Partner

Meeting.• Each Partner Meeting lasts 5 minutes. • After each meeting, each teams gets a 5 minutes Internal Strategy Session to debrief and plan for the next meeting.• Teams will continue to meet until a deal is signed, the negotiations fall apart, or time runs out.

Your mission: Get a signed Letter of Intent outlining the terms of a

partnership deal.

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Biz Dev: The Game – Letter of Intent

This letter confirms your and our mutual intentions with respect to the potential transaction described herein between ___________ (“Company X”) and _______________ (“Company Y”). This document, in and of itself, does not represent an enforceable legal contract.

Description of the Partnership• E.g., Company X and Company Y are entering into product partnership

whereby Company X will create a new develop a new product utilizing Company Y’s proprietary technology.

Key Terms:• E.g., Company Y will provide Company X with exclusive distribution rights to

the product for 2 years. Company X will receive 30% of the revenue generated on every sale of the product.

ACCEPTED AND AGREED

Company X Company Y By: By: Title: Title:

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The Evolution of Relationships

Delivering Value

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The 3rd Stage of Business Development: Delivering Value

How?

•How can you ensure it was worthwhile?

•How will you deal as priorities and circumstances change?

•How will your relationships evolve over time?

Delivering

Value

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The Delivering Value Stage

Having Value

Communicating Value

Delivering

Value

Implementation

Preparing for launch and

launching the deal into the

market

Steady State

Managing the day-to-day partnership

throughout the term of the deal

Evolution

Planning for inevitable

changes that will occur in the relationship

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Having Value

Communicating Value

Delivering

Value

Implementation

Preparing for launch and

launching the deal into the

market

Steady State

Managing the day-to-day partnership

throughout the term of the deal

Evolution

Planning for inevitable

changes that will occur in the relationship

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Recap: PowerStack Systems

• PowerStack, an early-stage startup that produces and sells mobile phone charging station kiosks, has just signed a partnership deal with FoodPoint, a point-of-sale solutions provider.

• After a lengthy but cordial negotiation process, PowerStack and FoodPoint are ready to bring their distribution partnership to market.

We are PowerStack’s Business Development division and this is our second day third month

on the job. What do we do?


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Step 1: The Implementation – Engage Key Teams• Get supporting teams engaged

• Functions related to your ongoing partnership - marketing, product development, engineering, customer service, sales, etc. – may be housed within a separate group under the organizational structure.

• Product managers, marketers, sales reps who hold the keys to promoting a Distribution or Brand partnership will be vital allies in the Implementation stage,

The Delivering Value Stage – Step 1

PowerStack – Engage Key Teams• Key supporting teams to engage

• Jim – PowerStack VP of Sales• Sally – FoodPoint Director of Marketing• Pamela – FoodPoint Director of Customer Service

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Step 2: The Implementation – Create a Launch Plan• Agree upon a launch date

• “Nothing gets people focused like a deadline.”• This may be decided during the contract negotiation, but even if

not it should be clearly communicated and agreed-upon.

• Map out the necessary steps to launch• For each necessary step preceding the launch, answer:

• What is the tasks that need completing?• When does the task need to start, and when must it be

completed?• Who will be responsible for the task?


PowerStack – Create a Launch Plan• Launch date: March 1st

• Key tasks• Jim to create training materials for sales force by January 4th

• Jim to schedule date for sales training on January 10th

• Sally to mockup promotional materials for product one-sheets by February 2nd

• Pamela to update customer service phone scripts by February 10th

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Step 3: The Implementation – Agree on Metrics• Know what you’re measuring

• Define and agree on the metrics to measure the value defined in the Having Value stage.

• Set the goal posts• Determine what will be considered success vs. failure for each

metric


PowerStack – Agree on Metrics• Key measures

• Economic Value: 100 customers in first month; $1M revenue in first quarter after launch.

• Brand Value: 10 headlines from press release

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Step 4: The Steady State – Create a Feedback Loop• Establish a Feedback Loop

• Identify your primary relationship contact and establish your lines of communication

• Setup regular meetings with the core and extended support teams to keep tabs on progress in the implementation.

• Invest in a relationship with your advocates• Respect matters more than friendship – being

nice/funny/charismatic/etc. is always helpful (people buy from and work with people they like) but a strong relationship is based on respect.

• Find a balance of customer/partner advocacy vs. company strategy – know when to push for your customer/partner’s interests vs. when to stand firm.


PowerStack – Create a Feedback Loop• Jim from the PowerStack sales team and Sally from FoodPoint marketing

team will be relationship leads• PowerStack and FoodPoint agree to have a weekly meeting in the run up

until the launch, followed by bi-weekly updates after that.

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Step 5: The Evolution – Preparing to Change• Evolve or die

• All partnerships come to an end – either they transform or they fade away.

• Look for smoke signals• Faltering metrics leadership changes, changes in strategy, etc.

can all suggest that change is afoot• Look for opportunities to expand and extend your existing

relationship – within the current partnership and across the rest of the company

• Start the journey again• Return to the beginning of the Having Value stage, and create a

new GROWPLAN.


PowerStack – Create a Feedback Loop• After a wildly successful partnership, PowerStack and FoodPoint are

prepared to make their announcement: FoodPoint is acquiring PowerStack Systems

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What’s Next

What’s Next?

1. Follow your GROWPLAN

2. Stay Connected

3. Feedback

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Contact Info

Thanks for coming!

[email protected]@slpollack

http://www.startofthedeal.com

http://www.startofthedeal.com/

Documents

GROWPLAN: An Interactive Workshop on Business Development