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Monday, September 10, 2012

Bring something to the party when working with others

We certainly hope to get something good out of this!
You want to develop a business relationship with a potential partner, investor, or strategic interest.  The initial approach of sending background materials, slide show, and confidentiality agreements is completed.  Both parties are reviewing the calendar to identify possible meeting dates.  You identified key company objectives and you discussed the benefits with your team.  After selecting a meeting date, you are ready to take next steps.

Let me digress for a minute.  You host a party where everyone is to bring a dish but certain guests never bring anything.  Maybe you went to dinner with a longtime friend that never picks up a check and you always pay.  Business associates approach you for advice all the time, but when you need help, they fail to deliver.  Your previous boss demanded exceptional work from you, but never recognized your contributions.  I hope that you are seeing a pattern and get the point.  Businesses need a mutually beneficial relationship to make interactions worth the time and effort.

Coming back to the topic, you must review your objectives and determine what you plan to do for your partner or business associate, not just what you want from the relationship.  Part of your discussions must be how you both mutually benefit. 

This topic came up recently in a discussion with a friend.  The company was discussing a potential relationship with another. The other side wanted to be purchased and defined the price.  The friend was considering the acquisition and the price was fine.  The definition of price was a key factor, but the nature of the benefits of the acquisition to both sides was never discussed.  On asking the acquirer what benefits both parties gained, there was a deafening silence.  It took a few calls to define what the company expected and whether the financial advantages were enough to make the acquisition worthwhile.  Secondly, it took added time to determine what was important for the company on the other side of the transaction and determine the interest level of the other party to remain and help grow the combined company.

In a different situation, a prospective partner asked a company for a term sheet for a deal.  The deal was to take place after a study was completed.  The sides had not defined the costs contributed by each side, for the product development.  Likewise, there was no discussion of the timing of the execution of the deal, scope of the deal, or other such parameters.  Failure to engage and fully understand each side of the business would result in creating a deals structure that would not be meaningful to one or both parties.  A extended discussion was warranted to identify all the key parameters leading into development of a meaningful deal.  This included what each side was to contribute and how they might work together in the future!

It is normal to have a desire to interact with others on business.  You will certainly encounter potential business partners that want everything from you and desire to return nothing back to you.  This is part of a negotiation; i.e. “you got it, we want it.”  In the end, negotiations must have reasonable benefits to both parties or, the resulting business relations will break down. 

Next time you plan for a meeting with a prospective business associate, consider discussions designed to identify how to obtain optimal advantages for both sides.  Evaluate the other side to see if they are the type to collaborate in a mutually friendly way, or if they are more like your friend that never picks up a check when you go out to eat.  You may decide to do a deal anyway, but at least you know what each side will contribute or NOT contribute.  With luck, your expectations will become the crude reality of a failed relationship.