Doing deals is fast, fun and is a core Board focus to acquire new markets and customers, new revenue, new products, new services, new intellectual property and other resources of value.
Creating a Deal Discussion Document
In structuring a deal we need to identify value, create conversations and progress action. Whether at concept, startup, growth or exit stage of the business, conversations need to be facilitated with entrepreneurs, investors, advisors, mentors, educators, communities, corporates, institutions and government for fast growth and implemented development.
To structure a deal we need to look at the background, areas of value, determine strategy and supply execution documents such as non-disclosure agreements (NDAs), licence agreements, letters of intent and term sheets.
In analysing the background, we focus on targets – people and organisations a potential deal can be explored with – and consider previous dialog, known areas of interest, the stage of their focus (concept, startup, growth or exit), which direction they are headed and what they need to get there. This thinking sets us up for creating a deal discussion document.
Take a new page in your notebook and divide the page into three sections.
In the top section, include information details of the deal such as contact personnel, date and so forth. Reflect on how to construct an opportunity statement (target audiences objective, problem challenging them and the solution) and determine a first rough draft of what the opportunity is.
The middle section focuses acutely on areas of value, that are obvious, so when either party views the document, in essence there are no questions. Deals are not a sales pitch. Deals are negotiating a win-win scenario that helps both parties leverage the resources they have for mutual benefit.
Bootstrapping is a major part of entrepreneurship – that is, creating opportunities regardless of resources presently controlled. Remember, you do not have to control the resources yourself, you can do a deal to acquire access to the resources you need.
The other party is deliberately listed to the left of the page in the middle section. When presenting, always attempt to place the other party’s logo, name, details and presence first, above, or to the left of your own. It demonstrates focus and respect. Using dot points, succinctly define the assets, goals and needs of both parties. Then clearly state what the leverage is. Who supplies what resources for what purpose.
The final third of the page identifies, again clearly, the type of deal you are looking to do upfront. Is it pro bono work, a partnership, advisory, are you seeking investment or to create a new entity? The next steps organises both parties with what to do next and within timeframes and the paperwork component allows you to easily keep track, without having to ask, where the paperwork is at and what is needed now and next.
By following this simple structure, you can streamline the deal creation process with timeliness, communication and paperwork. Importantly, it also prevents waffle! Be comfortable holding a silent smile.
Creating Deal Strategy
Deal strategy explores where your relationship could go and the value creation process. The Deal Discussion Document defines what and why, Deal Strategy constructs how and where.
Going back to your notebook again, draw the framework for your deal snapshot with four columns going across the page, and five rows going down.
Moving from left to right across the page we have staged development of the strategy starting with the (1) concept ensuring there is a solid foundation that is investor ready from the outset. The objective of (2) startup is a cashflow positive beta version in action, while (3) growth maximises EBIT (net profit) and leverages resource acquisition. It is during the (4) exit there is strategic value creation and asset monetisation to stakeholders.
Top to bottom spans the areas of value with (1) concept focusing on the market problem identification, concept validation and vision statement. The opportunity statement is covered in the deal discussion document and also appears at the very bottom of the deal snapshot page. The (2) model looks at the revenue or economic model, refinement of the business model as well as secured value or intellectual property. (3) Structure spans the leveraged deal opportunities identified across the various stages of development as well as corporate structure planning. The (4) market process looks at the market-to-company process flow as well as intuitive and customised customer experiences. The (5) company plan refers to company-to-customer systemisation.
With a structure for each stage of development and area of value we can then fill in the boxes with how you plan to achieve each focus at each stage. The document becomes an evolving story, that is in essence, a one page business plan.
The final stage of exit may be sustainability, depending on your overall vision and purpose for the strategy focus of the document. The strategy can be developed for a single deal focus, or created big picture for the entire venture concept. You may choose to use in-house for development purposes, or find it adds extraordinary value to deal proceedings as lengthy dialog is deliberately encapsulated in single short sentences.
Share the document with team members, use as a focal point for investor meetings, acquisitions, leveraged deals, bank loans, new ventures, giving direction and focus to sales and marketing teams… any time or place where you need to articulate where you are at, where you are going and how you plan to get there – with focus, with value, with development.
This document, indeed the two documents together, are more powerful than a 50 page document.
As your deal progresses quickly to execution stage, ensure you have paperwork ready to continue the momentum you’ve created. You’ll need:
- Non-Disclosure Agreement (NDA)
- Letter of Intent
- Consultancy Agreement
- Term Sheet
- Due Diligence Checklist
Samples of these can be found on the internet. As always, remember these documents do not constitute legal advice or legal documents – you will need to have them sited. Having a draft will save you hundreds if not thousands of dollars in legal fees!
Use the structure of the 4 x 5 framework to structure your deals, start conversions and progress action.