Deal Structure Considerations

Question 1

Minimum Revenue Commitment

Answer 1

• Guaranteeing a large MRC would give your partner huge motivation to drive sales
• In turn, it would give you the assurance you need to back off your own sales efforts and focus on partner success
• Examples are: assigning some dedicated sales and product headcount

Question 2

Revenue Share

Answer 2

• revenue shares and pricing floors can make a partner sale almost as financially attractive as a direct sale
• sometimes partners can charge at different (higher) levels given their market leverage

Question 3

Co-Branding

Answer 3

• Allows one partner to reap the brand improvement benefits of partnering with a larger, more established brand

Question 4

Channel-Neutral Compensation

Answer 4

• To motivate internal sales people to support their partner sales counterparts instead of competing with them, we compensated them for every partner sale in their territory
• While this cost real money, it made sense because every partner sale can open the door for us to sell a much bigger, higher-margin product

Question 5

Acquisition Insurance

Answer 5

• Consider giving large partners advance notification of any agreement to sell the company, and the opportunity to enter the bidding if they wanted to.
• Note, this is very different from a Right of First Refusal.)

Question 6

Source Code License

Answer 6

• Consider a multi-year license to view product source code and build on it
• Utilize an innovative licensing approach that protects you fully and even generates additional revenue

Question 7

Quality Trumps Quantity

Answer 7

One well-constructed partnership will have far more impact, and be far more supportable, than lots of toothless arrangements.

Question 8

Mission Clarity

Answer 8

Invest the time up front to get crystal-clear on your objectives and those of your partner

Question 9

Demand Hard Commitments

Answer 9

• Big companies are easily distracted, binding commitments focus the mind and create incentive to deliver long after the deal is signed
• This means finding a senior executive sponsor with the authority to commit

Question 10

Make Hard commitments in Return

Answer 10

• You will need to invest substantially in making your partner successful
• Commitments like sales and product support and channel-neutral compensation are worth making in return for the right commitment from your partner