The “deal memo” is an outline of proposed terms for providing services to a prospective client or products to a prospective customer, or both to a strategic ally.  It is a Hollywood term that has come into use in other industries.  It is a useful, short-form way of verifying what you have proposed or agreed in a meeting, before you move to a long-form proposal or contract.

I don’t write proposals, and teach my entrepreneur-clients and consultant-clients to avoid this as well.  Too often I have seen people act as “vendors” and provide a full outline of their strategies and tactics (as a proposal), only to have that valuable information ripped off and implemented without them.

Instead, I write a deal memo that outlines what will be offered, the value it will provide, the start date, the deliverables and their timeline, limitations on the scope of work, the cost and the payment schedule.  This deal memo is never longer than a single page, written in authoritative language in bullets.  It is polite but clear.  With this page in hand, any misunderstandings, confusions or objections can be discussed or re-negotiated before concluding the agreement.  And, if you build a template or two that will apply to most of your offerings, it is a quick way to sort out the tire-kickers from the prospects you can actually close, saving you lots of time in proposal-writing, contract-writing and re-negotiation (all these can work as a bottleneck in the operations of successful companies).

I write a contract (not a proposal) only after this discussion and the resolution of details is complete.  And I send an invoice for the first upfront payment with the contract.

Two of the elements are most important, the two that are most often left out of negotiations, proposals and contacts:

• The value that will be delivered.  Of course you understand the value of what you are offering.  You are very close to that information every day.  You know what happens if you don’t deliver that value.  Although your clients or customers may agree that your offer and deliverables are valuable, they may not be able to articulate them — to themselves or to their management which must approve the deal.  You need to do that, in writing, to support your value-based pricing.  Defining the value the clients or customers will receive from these deals will settle their minds, will give them ammunition for moving the deal through their bureaucracy, and will defend your price to all concerned.
• The limitations on the scope of work.  Specifying what is not included in this offer at this cost is critical to good relations with your clients or customers.  Addressing these limitations in your discussions, and writing them into the deal memo at the beginning saves misunderstandings later.  All clients or customers will push the limits as far as they can, to get what they want or what they believe they deserve.  For you to maintain your profit margins, this “scope creep” must be defined, addressed and controlled.  Of course you can provide more when asked, as long as there is additional payment for it.

Because you provide clarity early in your relations with prospects, you will save time by not pursuing non-clients or unlikely customers, and will save time and money writing long-form documents that get you nothing (and give away your expertise).  Mastering the use of the deal memo will add back time and profitability to your company.