Venture Capital

How to Streamline Your Deal Management Process

Last Updated:
October 12, 2023

Deal management describes the systems, people and processes that get you through the deal lifecycle, from introduction to close. In the private markets, your deal management process can often be the difference between securing an awesome proprietary deal and taking it off the market, and being caught in a competitive battle.

Executed well, deal management process (and deal management software!) can be your source of competitive advantage. The better you are at streamlining each step of the process and enabling your team to move quickly, the faster you’re able to come to a decision – which enables you to spend less time on unattractive deals, and beat others to the punch on the deals you want to win.

In short, an effective deal management process can help you to close deals more quickly (and more of them), directly impacting your success. What can you do to streamline the process? Here are a few of our tips:

Avoid Deal Management Process Pitfalls

First of all, it definitely helps to define some of the most common pitfalls associated with the deal management process. Here are some from our experience:

Lack of a Clear Strategy (or a Strategy at All!)

Effective deal management begins with a clear strategy that defines what you are looking for. This begins with your overall company goals, then moves into the specifics around the deal parameters that help your team know what to look for.

While this sounds simple, it is quite common for different deal team members to have a slightly different interpretation of what ‘good’ looks like.  This dynamic is especially true in the more qualitative aspects of company assessment (e.g., what does a ‘good’ moat look like?).  Without that shared understanding, members of your team will likely spend hours each week sourcing, assessing, preparing materials for, and discussing companies that will struggle to get through your investment committee.  Over-investing in clarity around the firm’s strategy at all levels pays dividends in the long run.

Manual Workflows and Systems That Don’t “Talk”

Once that strategy is defined and clear to all, execution of it becomes paramount.  And yet, most firms are awash in confusing spreadsheets that need to be manually updated. Manual updates mean that you’re not certain as to whether you’re looking at the most up-to-date version, it’s easy for human error to occur, and it’s hard to make real-time decisions.

Additionally, many firms are still using a mash-up of systems that don’t “talk” to one another. This means that where data is needed between more than one system (say, from your spreadsheet to your CRM), once again, someone needs to manually enter information.  While data entry in one-off cases doesn’t seem like a big deal, the costs are a dangerous combination of meaningful and largely hidden.  In the best case, it costs you time and money to spend a highly compensated, focused deal professional’s time doing that work.  The costs ramp up when there’s a mistake that needs to be cleaned up, or (worse) when the data is left uncorrected.  In fact, studies from the work done in Total Quality Management suggests that the cost of correcting incorrect entries in bulk is 10 times cost of the initial data entry – and balloons to 100x the cost if no action is taken.

Lost Pipeline Visibility

Sometimes a mash-up of systems also creates a lack of visibility over the pipeline as a whole. You might have information at different deal stages or housed in different areas or systems. In short, you can’t see at a glance where everything stands.  Not only does this create inefficiency in the short run (as you perform your day-to-day deal-making activities), but it also robs your team of the ability to look backwards and reflect in the long run.  With data housed in a number of different systems, it can be different to collect the metrics you need to understand how to improve your deal sourcing and deal management strategy. Some examples of some of the insights that would be trivial in the right system:

  • How many deals are you seeing on an annual basis?
  • Who is sending the best set of opportunities that you want to pursue your way?
  • What deal parameters are you seeing most commonly (e.g., where are deals you’re excited about pricing at)?
  • What ‘market share’ do you have of the deals that fit your team’s focus areas?  What deals are you missing?
  • Where are our deal approval processes taking too long (and costing us a shot at investments we would have ideally made)?  Similar to a sales cycle analysis that sales managers would undertake, this enables you to figure out what operational constraints may be causing you to miss out on attractive companies.

Collaboration Challenges Across the Team

Another hazard of “old-fashioned” deal management tools is that they are often clunky when it comes to working collaboratively among your team. Many of these challenges stem from lack of access to the most to date information, mixed with needing to work across multiple systems (chat, etc.) to assign tasks, manage the workflow, and share notes.

This inefficiency also impacts the sourcing process – there are several moving parts to monitor when you want to keep a consistent and productive deal pipeline. You need to be in the know with industry news, including funding announcements and key events. You need to be able to track and monitor your key sources for deal flow.

Without the technology in place to source all of this information centrally, attempts are often piecemeal and can miss critical information. Even when you have got technology in place, it needs to keep information organized and centralized, rather than losing context as it is spread across different digital homes.

Many teams in the private equity and M&A world were distributed even before the global pandemic – and with a larger number of teams moving towards remote work,  these challenges have become even more frustrating to work through.

Poor Relationship Network Management

“Who you know” is still one of the most valuable sources of any deal in the private markets. However, one pitfall found in many firms is that their relationship networks are often not managed well. They don’t have clear oversight of who is connected to whom – essentially every firm has a story about how they’d been struggling to get in touch with a company they were interested in, and only later realized that a teammate had a strong connection from a prior life.

It’s often a huge task to ensure that the referral sources, executives, and other key relationships are being maintained.  Without doing so, it’s easy to slip off the radar when opportunities arise and wonder how you didn’t get that call.  But usually, this is done with team members poring over spreadsheets, trying to dig into a sales-based CRM, or hoping they’ve stored the data within their Microsoft Outlook contacts list.

Unclear Ownership of Tasks and Processes

While automation can accomplish a lot, deal management systems still require team engagement to be successful. One pitfall of an inefficient system is that sometimes ownership is unclear, or key tasks are overlooked because they simply drop off someone’s radar. When systems rely on a lot of manual-based tasks, this happens easily. In a fast-paced environment, team members need notifications and reminders to help them ensure important action items don’t fall through the cracks.

Streamline Your Deal Management Process

If there’s a key phrase we’d associate with streamlining the deal management process, it’s “reducing friction.” That is, any point in your systems or processes where there are associated difficulties, inefficiencies or lapses in key information. Here are some ways to do that:

Centralize and Automate Data Collection

Use a system that pulls key deal information into one place. For example, you should be able to do a quick check for industry news and events, without having to conduct a lengthy internet search. Smart systems for data collection can automate this, bringing that information into one view.  This also goes for team communications – effective deal management software can integrate with your email and calendaring systems, and provide the team with a 360 view of your engagement with companies, key relationships, and more.

Modern cloud-based software enables multiple team members to engage on deal-related information in real-time,  removing a number of common friction points of working with stale data or not being able to access important files.  Having the process in a consolidated place also enables you to establish ownership of tasks (with automated reminders) and ensuring that those jobs don’t get lost in the noise.

Fit Your CRM Around Your Workflow

Every firm tends to have slightly different ways of operating, but a common need is to have oversight of the deal pipeline. You need a system that allows you to customize so you can visualize it in your own way, matching stages and information to your own process.

One common trap we see teams fall into is using systems built for sales teams (and for a sales process) to try to manage a deal process.  The end result is a workflow with incorrect assumptions built into it – the wrong stages, a bunch of unnecessary data fields that create clutter – that make it challenging to make quick decisions.

Instead, map out each step of your ideal workflow, and then find a vendor who has a flexible deal management system that enables you to shape it around your process.

Your Systems Should “Talk”

You might use more than one system (for example, a CRM tool and a separate deal room software), however, you should have a central view of relevant information. This can be achieved via automation when you have systems that integrate or “talk” to one another.

Additionally, key events associated with your deals should be automatically tracked and recorded, then kept accessible in that central “home.” For example, any meetings, investor details, key contacts and relevant history should be tracked automatically.

System integrations help to improve the efficient management of information and to speed your pathway to closing the deal. Integrations make key tasks such as due diligence much more streamlined as information can be pulled into a central view.

You Should get Value From Your Relationship Network

Instead of your relationships sitting dormant in a spreadsheet or a sales-based system, an ideal deal management software should help you use your network to make deals happen.  That starts at the beginning of the process, by helping you get referrals, through regularly engaging key people in your relationship network. You also need a simple way to see who has what connections among your team members, to help you break into potential clients.

Done well, these systems can also help alert you to events happening with those people to help you engage at the right time, and with the right message.

Final Thoughts

You can streamline your deal management work and reduce friction by building and iterating on the right process.  One critical part of streamlining that process is choosing the right deal management solution, that gives you the functionality you need to win in competitive markets.

Would you like to check out how we can help you to streamline your deal management process? Request a demo here.

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4Degrees is tailored for the sourcing, relationship, and pipeline activities that drive your business.
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