3 Ways to Close the Deal Without Betting the Farm
I was in a meeting last week with some startup founders who got lucky. They reached out to one of their largest corporate targets, a company that could single-handedly make their year, and they were invited in for a meeting. If you have had this luck in the past, or if you are aiming for that big client now, it is important to know how to best prepare yourself to walk in with your game face on.
Large corporations and well-established businesses know one thing—they have leverage. And with that leverage, they can get just about anything they want and can do it without paying a dime. They have size and time in business and revenues that could make you cower, and they know how to use it to push you into a deal that may ultimately lose you money.
Nevertheless, with the right preparation, you’ll get that deal and save your company from giving up too much revenue in the process. Consider the following three common tips to protecting your profit:
1. Match them in size and stamina.
Getting a list of attendees in advance of your meeting serves two important purposes. It first allows you to read up on the team and walk in knowing who you are dealing with. It also tells you how many people and at what level in the company will be in the room. This is a clear indicator as to how badly the target wants to do a deal with you. Are you meeting with a lowly associate with three months of experience? Or the chairman, the CEO, several VPs and a representative from every department you would need to roll your partnership out?
If the latter is coming to your meeting, you want to be sure to show up with a similar line-up. This has killed so many startups I’ve worked with in the past. I know that your founder and CEO is busy running in a million different directions, and I’m sure that your VP of Business Development is a swell team player. However, if you walk into that meeting without clearly matching their fire power, you have lost the deal before you started the conversation, or you have lost your negotiation power at the very least.
Furthermore, if they have a lawyer in the room (and you want them to have a lawyer), invest the money to pay for your contract attorney to join you for the meeting because a deal will be done with or without you having adequate representation.
“Having lawyers in the room is a great indication of interest on behalf of your target,” Douglas Raggio, Managing Partner of food and beverage investor Bias & Blind Spots, told me in an interview. “Be sure your attorney is present to hammer out deal points and get a non-binding indication of interest on the spot. It will stoke urgency and convey your team's ability to deliver quickly.”
2. Do your homework.
Just like when you applied for your first meaningful job, you can’t invest enough time in research. You don’t want to walk in with only a list of names of the people you will be meeting with. Rather, you want to know how long they have worked at the company, where they worked prior, in which positions, whether they have been recently promoted (or not), and what their most recent deals look like. You want to know how many companies, similar to yours, they have done deals with in the past, and, if at all possible, to speak with those companies to determine 1) how easy they are to work with; 2) what their main pain points are and 3) how quickly they move and at what cost.
As we walked into our meeting with our potential client's team last week, we knew, in advance, how long they had been in our industry, how many (or few) partners like us they had already secured, that the person leading their team was recently burned by a deal gone bad, and that he was hurting to get a win under his belt. These became key negotiating points for us later in the conversation.
3. Slow them down.
Most business development meetings I have attended move slowly with many stops and starts. However, when you catch a live one, they will move at a speed you’ve never experienced. This is because they know that you aren’t accustomed to landing a big deal and this is how they will get you nearly every time.
“Getting caught up in a tempo that’s irregular can be disastrous to any deal,” Raggio suggests . “Things get said that aren’t properly thought out, promises made that may not be tangible and any number of hype-like items that can come back to haunt you. Slow down and answer properly.”
I advise you to take a deep breath. Be sure to write down every deal point they discuss. Ask for time to confer with your team. And, slowly walk yourself through everything they are asking of you. Do they want exclusivity? For how many years? Are they asking for a 90-percent discount on your retail rate? Will they require a chunk of equity to be the first deal in the door?
Last week, the founder I accompanied was asked to guarantee several tens of millions worth of volume to the corporate target and was pushed for several years of exclusivity—all in the same breath. In passing, he responded, as so many startup founders do, “Sure. Of course.” This is the easiest mistake to make.
Only then did I stop the conversation, ask for time to confer, and return to the discussion making it clear that we would certainly entertain an exclusivity period, but for a limited time, and that we could not guarantee a volume number so early in the conversation that our analysts did not yet have time to assess.
If the conversation has gotten to this point, they want you bad. In this case, you should read the signs of your eager partner and slow them down. No one ever walked away from a deal after 24 hours of deliberation.
If you find yourself in a strong business development opportunity, it is easy to throw the baby out with the bathwater. It is at times like these, more than any other, that you must take the time to know what you are willing to give away to get the deal.