Why giving exclusivity can win sales, and how to craft an exclusivity deal

Edited excerpt from When Should You Allow Exclusivity in Deals? by Mark Suster:

I’ve heard many investors and some executives repeat the mantra, “Never offer exclusive deals,” and since this blanket statement is generally bad advice I thought I’d offer the less conventional but I believe more practical version of why exclusive deals can actually be a huge bonus for a startup and why I actively encourage them.

Sales is all about knowing the key values of your buyer: What are they trying to achieve in working with you, why do they care about your solution and how will it help them economically? If you know that at senior levels the buyers often have an enemy in mind in each of their big moves in the market you can use that to your great advantage.

The beauty of these types of buying motives is that exclusivity comes at a cost to the buyer and they often don’t mind paying up to get it. As a startup this is often the one true source of strong leverage in a negotiation to get a better price, get a longer-term commitment, get PR commitments and so forth.

To craft exclusivity agreements, make them time bound, and name the competitor who you’re not allowed to sell to. If they won’t name the competitor, specify the industry or geographical region as narrowly as you can. In exchange for exclusivity, you want larger contracts, longer-term contracts, more commitments to success, and funding for accelerated development.

Notes:
(1) Cf. How to make bus dev meetings with large companies successful and avoid time-wasters.
(2) Cf. Why startups should reject most partnership opportunities.

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