The MVP of Deal Making
If you’re an entrepreneur—especially in the technology space—you’ve most likely heard about the lean startup movement.
In simplified terms, it’s finding a way to launch your company in the quickest, most affordable, and viable way. This includes creating a beta version of your product that is both minimum and viable—known in lean startup circles as a Minimum Viable Product (MVP).
The purpose of an MVP is to allow you to launch your product or service into the market as quickly as possible to hear what your market thinks before you spend a lot of time and money building what you think they want or need. It also allows you to make sure you’re targeting the right market.
I implemented this philosophy in my second startup, long before “lean” was in fashion, so I agree with this approach and have seen it work over and over again. Therefore, I started to think more about lean principles and how they might apply to strategic partnerships and sales. That’s when I decided to test out my theories on my business development team here at Palo Alto Software—except I’ve changed the MVP acronym to mean Minimum Viable Partnership.
What is a Minimum Viable Partnership?
Palo Alto Software is a software company that creates content and tools that help small businesses and entrepreneurs grow their businesses faster by being thoughtful about the way they budget, forecast, pitch, plan, and track their growth.
When we seek out partners, we’re looking for other businesses that share our mission—to help small businesses succeed. We also look for partners that share our market—small business owners and entrepreneurs starting and growing businesses.
The purpose of launching a Minimum Viable Product is to allow you to launch a product or service into the market as quickly and efficiently as possible to hear what your market thinks before you spend a lot of time and money building what you think they want or need.
A Minimum Viable Partnership is similar; it allows you and your potential partner to gauge your respective market’s interest in your products and services before launching into a bigger, more strategic partnership, as well as test out how well both companies’ partnership cultures mesh.
I’ve helped put deals together that took months and months, yet when the deal was done, one or both markets didn’t respond as both parties had hoped, resulting in a waste of time, money, and potentially reputation.
This is why I developed this MVP approach to doing deals.
Tenets of a Minimum Viable Partnership:
Note: These tenants apply nicely in the online sales and marketing space. Actual implementation may vary for other industries and markets.
1. Missions and markets must align—this establishes trust among markets
The more that both companies speak to and serve the same type of customer base, the more successful the partnership will be.
This is for obvious reasons: You’re both familiar with the pain these markets experience as a result of not using your products and services; therefore, you know how to speak to them, respond to them, and hopefully, gain trust from them.
It will also make much more sense to your respective customer bases, and increase conversion rates, when they are presented with content or an offer from your partner if the products share a similar niche.
For example, I have not seen offers work well where company X sells mobile apps and presents their customers with an offer from company Y, who sells auto insurance.
Gust is the world’s largest network of angel investors that connects companies seeking funding with investors who invest in their market sector.
When most of our partners host a webinar with us, we/they get somewhere between 300 and 700 people to register. This webinar was different—we had 5051 people register!
It was a perfect example of how two companies—who serve the same market, the same mission, similar cultures, and who are trusted by their markets—can work together to achieve great things.
2. Draft partnership agreements—not contracts
It can take several months, if not years, to get a contract written and approved (usually by a legal department or two), so I suggest going down the contract road only when you’re confident the two companies add value to each other’s market and bottom line.
Partnership agreements are great because they are actually mini contracts that outline the who, what, when, where, why, and how of a deal.
They clearly state timelines and responsibilities. All agreements should have termination clauses (just like contracts) in case one or both parties are not satisfied with the way the deal is going. We prefer 60 or 90 day termination clauses.
3. Choose a partnership idea that can be implemented quickly—in under three to five weeks, preferably
The whole idea of a Minimum Viable Partnership is to launch something quickly and gauge how each party’s customers respond. And, because these deals are thrown together quickly, you sometimes have to implement two or three small ideas in order to allow for a fair market response.
For example, judging the viability of the partnership from just one small deal may not be smart if there are outliers negatively or positively impacting the deal (i.e. timing, season, political/social events, weather, day of the week, competing offers, etc.).
Below is an example of an MVP deal we’ve done with many partners that has allowed us to quickly test the viability of our partnership:
- Content Deals: Blogging for each other, featuring the post(s) in newsletter(s), and offering educational webinars for each other.
- What We Track: Traffic to post(s), source of traffic, clicks within post, social shares of posts, comments on post, newsletter send size, open rates, click-thru-rates, conversion rates (if applicable), social shares from newsletter, opt-out rates, webinar registrations, webinar attendance and stay rates, types of questions proposed during and after the webinar, and views/shares of the recorded webinar once posted online.
4. Be clear about what you’re measuring—and both agree on it
The example above is how we measure the success of content deals. We make sure that our partner also has the ability to track and measure content we share on their marketing properties.
I have a saying, “if you can’t measure it, don’t make it.” This is a good mantra for my team when we are considering a deal with a partner. We may love the partner and their market, but if they can’t confidently tell us tracking details, we can’t engage in the deal.
Don’t make any assumptions about what you’re each measuring – talk about it and document it. For example, you may think X% open rates indicate success in a deal, yet your partner is only measuring Y% conversion rates as the deciding factor. A sure-fire way to bomb a deal with a partner is to not establish and agree upon specific success metrics.
5. Be confident in your ability to track the partnership—and both demonstrate this
Talk about the types of tools or techniques each partner will use to deliver results. Discuss previous deals that both went well and not so well. Talk about why you think they did or did not go well. This gets both parties into the mindset of setting expectations and focusing on delivering and reporting on results. Below are some examples of tools we use to measure the success of our deals:
- Google Analytics: Web traffic and activity
- Exact Target: Newsletter activity
- GoTo Webinar: Webinar activity
- Optimizely and Crazy Egg: Landing page activity
- Bit.ly and Hootsuite: Social activity
- KISSMetrics: App engagement
6. Adopt a fail fast or scale fast mentality—and stick to it
It helps significantly if the two companies have similar cultures—that is, company culture as well as partnership culture. You may think that this MVP approach doesn’t work with very large organizations due to long deals or sales cycles and red tape, but I’ve found that large companies actually prefer the MVP approach as opposed to trying to find a complicated or tightly integrated deal structure out of the gate.
MVP allows you both to quickly test the waters and “date before you marry.”
While “dating” is important, you also don’t want to be engaged forever and not tie the knot. By this I mean, find a way to scale the partnership quickly if things are going well. And vice versa, if things are not going well, or not going at all, then find a gracious way to exit the relationship.
Examples of things not going well include:
- It’s difficult to get the decision-maker onboard
- It’s difficult to get straight answers about how metrics are tracked
- They don’t understand or share your philosophies for targeting and serving your customer base
- Meetings are missed and/or rescheduled regularly
- They don’t deliver or do what they indicated
- Timelines are regularly missed
- You deliver on your end and they are stalling on their end
On the contrary, if things are going well, you’ll want to find a way to scale the partnership more quickly and move beyond content deals (dating) and into more strategic deals (marrying) where you’re both bringing qualified and paying customers to each other’s door step.
Share your ideas for scaling fast or failing fast below in the comments.