Wesley: Hello and welcome to the Partner Strategy Network podcast. I'm Wesley Coelho, and I'm here with Mark Sochan.
Mark: Hi, Wesley. I'm excited to do our partner topic today.
Wesley: Excellent. Mark is the author of the Art of Strategic Partnering, Dancing with Elephants - How to Partner with Industry Titans without getting Crushed. And today Mark is going to tell us his top five tips to avoid getting crushed.
Mark: Well, Wesley, these are some of the hard learned lessons based on my experience of having negotiated over 200 partnership deals. And I'm sharing them today so that you don't have to repeat the mistakes that others have. And first I wanted to set some context for these top five tips. in my book, the Art of Strategic Partnering - Dancing with Elephants, the premise is that a strategic partnership is defined as a high leverage relationship that amplifies your brand improves market credibility, accelerate sales, and ultimately has a potential to 10X your business. This typically means that it's the biggest companies in your industry, companies that are typically a billion dollars or more in annual revenues or what I call the elephants.
Wesley: well, let's get to the tips. Your first tip is about exclusivity. What can you tell us about exclusivity when you're partnering with elephants?
Mark: Well, on a few words, don't do it. Don't do exclusive deals. This is one of my pet peeves, I cringe when I see CEOs and executives doing exclusive deals. Exclusive is the same as buying the company. So that elephant is asking for an exclusive, that's the same as them buying the company.
You want to be a strong, independent software company and the only way to be a strong independent software companies to be able to go and actively build a healthy business.
Wesley: That's loud and clear, onto the next tip. Tip number two, intellectual property. What can you tell us about intellectual property.
Mark: Well as a software company, I mean, intellectual property, that's your golden jewels. So you want to make sure that you get a very experienced, intellectual property attorney, someone who's experienced with negotiating with the big elephants, experience with dealing with OEM licensing type deals.
So it’s very important to get that expertise. And, it can be expensive, but really important, especially down the road when you're looking at a potential, M&A event. Looking at potentially being acquired by a larger company. That's where it's going to be critical to make sure that you've got your intellectual property, properly protected.
Wesley: Makes sense. Tip number three, get money upfront. That sounds pretty good to me. What do you expect to happen with these relationships in that regard?
Mark: Well, one of the things is everyone's usually overly optimistic about, how quickly the deals are going to come together. It always takes longer to negotiate the terms. And then there's always this, I think naïve, expectation that things are going to go along perfectly. And a few months later you're going to be cashing in big fat, quarterly royalty checks.
From my experience, it just always takes longer than you think. So as a small lean, nimble company you need cash in the door to operate. Plus you're going to be doing a bunch of special integration development, most likely for the partnership. So ask for money upfront, ask for some non-recurring engineering fees or NRE, from the elephant to help you cover some of those costs and the big companies, they've got deeper resources. And so they should be able to compensate you in some way for some of that extra effort that you have to put it in the partner.
Wesley: So from your experience, that's a reasonable ask and a reasonable expectation for the majority of your strategic partnerships?
Mark: Yeah, absolutely. I mean, you might be able to ask for a couple of hundred thousand dollars, depending on the amount of custom development work that's required to be done specifically for this partnership.
Wesley: Okay. Onto the fourth. Expect problems. So speaking of being naive about how smoothly these partnerships would run, what should you expect as far as problems go?
Mark: there's, usually two things that I see. There’s usually surprises, things that you discover as you start doing the integration work, perhaps, the elephant’s software there's bugs in it, or maybe the APIs aren't quite working. And so, those are gonna cause delays, some of the delays aren't your fault.
Maybe some of the delays are your fault, but if you go in expecting and anticipating that there's going to be problems or that there's going to be unexpected changes, that's okay. Communicate proactively and then be ready to negotiate. So, what I've seen happen is often you get pressed pretty hard. You want to get the deal. So you sign up for some stuff that maybe was pretty aggressive. And then as you get into it, maybe you can horse trade a little bit and say, look, you know, can we maybe reduce the feature list? Push some stuff off to version two, gives us a little bit more breathing room to get a tighter, higher quality release done up.
Wesley: Makes sense for sure. I think it's all about how you manage those problems when they inevitably come up and making sure you're working together as partners to define the best solution as you hit those bumps in the road.
Tip number five, the fifth and final tip for today is create leverage. What do you mean by that?
Mark: look for the next partnership vine that you can swing to. When you're dealing with an elephant, you're likely just dealing with one department or one product group within a very, very large organization. And so start looking, start leveraging your relationship to find other departments, other products that you might be able to be relevant and to help, so looking for that next partnership, vine, asking your contacts for introductions to other parts of the organization that might make sense. And sometimes they might be willing to help and sometimes they want to kind of keep you all to themselves. So you might see varying levels of support for that. But, ask him/her to start looking around for what other opportunities there might be.
Wesley: Yeah. And that highlights how important your tip number one is about exclusivity, right? You can't create leverage through other partnerships if you had given up exclusivity, and not followed your tip number one. I could see how these all tie together
Mark: Exactly.
Wesley: All right. Well, thanks for the valuable tips, Mark.
And for everyone out there, come join the discussion at the partner strategy network, LinkedIn group.