I love business development deals because these are the one plus one equals three business arrangements that can make a business grow extremely fast.  A business development deal is generally one when you partner with another business to create a business channel that benefits the businesses of both sides.

Now, these deals can be a lot more complicated then a straight sale deal where one side is buying something from the other so it is very important that you have a competent business lawyer helping you to structure and document the final deal.

But, there are two factors that you should focus on at a business level from the beginning to best end up with the optimal deal for you.  Here they are:

1. Align the Incentives. Create a business structure where the business incentives are aligned.  In these types of deals, the more you can get away from diametrically opposed positions, the more likely the arrangement will be successful.  So, you should create the business obligations and the economic components in such a way that both sides are better off when the one side performs as planned for.

All too often, a business development deal starts off as a win-win but then when it gets into negotiations, things can get messed up as aggressive negotiators come in.  Keep in mind that many times it is not the lawyers that cause this but business people that start to get a little too greedy or have the wrong thinking that they offer more because they bring more to the table. This may be the case, but if the end result makes it a suboptimal deal for the other side, everyone loses.

Bottom line- think creatively and create a business arrangement where both sides are incentivized to act in a way that will create value for both sides.  A related, second tip that I have seen make a big difference when it comes to business development deals is to assign an actual person on each side of the partnership to manage the arrangement and give those persons incentives to build the relationship and create ROI. When you have specific people with specific obligations for its management and success, it increases the chances of a more profitable deal.

2.  Always Have Break Up Planning.  When you are working on a business development deal, always be asking yourself internally what happens if the arrangement does not work out and what can happen that will cause it not to work out.  This is especially important if there EXCLUSIVITY is involved which means that the deal will prevent your business from doing any kind of other business deal (no matter how big or small).  Here is where a lawyer can help but it is reasonable for each side to have some downside protection planning in the legal agreements.

You should always know the what is my worse case scenario and plan for it as best as you can in the legal documents.  This is usually done with proper mediation, arbitration and termination provisions.  Other areas include planning for who owns what after a break up and what rights each side will continue to have.

I had a client once who, prior to retaining a lawyer, signed a horrible deal with a so called business partner.  The contract was so one sided in favor of the other party. It allowed the other side to limit what my client could sell to competing businesses and yet contained no obligation on the other side’s part.  Even worse, it gave the other party a right to renew the agreement over a very long period.  This in effect, tied up my client to ever expanding their business with other parties.

You should always have a legal out no matter what.  You do not have to exercise it and will not if both parties are mutually benefiting but without proper downside planning, you could be significantly affecting the future of your business.