Ideas for building business development in a startup

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S e t t i n g u p t h e P e o p l e a n d P ro c e s s e s
EARLY STAGE START UP WHITE PAPER
Prepared by:
LOUANN CONNER, FOUNDER + CEO
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2. Business Development Ideas for Start Ups
Many founders and early stage CEOs confront the day when they recognize they need a business development (BD) person probably a bit less enthusiastically than necessary. The business development role is
critical, but confusion often arises as it means something different to just about everyone. This inconsistency compounds the problem for a company making a first hire because they may not get what they anticipated. For example, one company I know thought they had hired a business development person but
all her hiring material and description targeted marketing, needless to say the alignment was off.
This paper offers ideas and lessons learned that a startup company’s leadership may consider in developing this part of their organization. We will take you though the following:
• Common definitions for business development and other related roles
• Management suggestions of position
• Additional risk related factors to consider
LETS’S START WITH THE BASICS - COMMON DEFINITIONS
What is business development, and how does it differ from corporate development, marketing and sales?
This is not a frivolous question as the answer depends entirely on who you as as companies combine often merge roles or have their own international definitions. That said, consensus can be found around the
following definitions:
Business Development or Biz Dev identifies new opportunities such as partnerships with other companies that drive revenue, distribution or enhance the product. Typically the first hire, once a company is
seeking to acquire customers, is a business development person. Once the BD has identified and established a customer. a sales person is brought in to “own” the subsequent accounts. Business Development
should not be focused on sales, otherwise they will compete with the sales team.
Corporate Development involves M&A, investments, divestitures and potentially incubation of new
businesses.
Marketing creates awareness for the firm and supporting the business development and sales activities.
This role focuses on identifying the needs and types of customers, and creating the best way to get the
products and services to the customers. There is different types of marketing, strategic marketing focuses
on customers as segments, while tactical marketing concentrations on getting customers closer to the
sales transaction (in an e-commerce scenario) or handing them off to sales to convert the customers’ interest into a transaction.
Sales sells a specific product with a clearly defined price and value to an identified customer. They assume responsibility for an account Business Development identified. They drive revenue.
Given limited budgets, in a startup up overlap of these roles is likely to occur, but as a company grows,
they will become their own areas as each function starts to specialize.
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3. STARTING OUT - HIRING THE RIGHT PERSON AT THE RIGHT TIME
Given the many definitions of these roles, careful consideration is required that the person applying for
the business development role has the skill set to match the intended title. Otherwise a frustrating, expensive and brief relationship results if the business development new hire only has experience in cold
calling with a practiced script, and is really a sales person as defined in your company.
Make sure you hire the right person a the right time, map out how the business development, marketing
and sales processes will look for your organization and plan your staffing to align with the needs at each
stage. It makes no sense to bring on a big rain maker too early as the company will not be ready to meet
the commitments, and the return will not support the compensation.
What are you looking for in each expert?
Here are some desired attributes Strong network in the area(s) that the company is focusing on
Consultative style
Good attention to detail, trend spotter
Strong persuasive communicator
Good insight into industry pain points and how products can solve them
Knowledgeable about the buying process and the key decision makers and influencers
Strategic thinker: they’re looking at how these relationships can be leveraged in the future
Experienced enough to recognize false signals and avoid diverting critical time and resources
Cultural understanding (critical for global businesses)
Curious and creative thinker
Enthusiastic self starter
Team player
Good listener
How might you find someone?
Leverage your network
Research LinkedIn
If you have taken on equity partners, leverage their networks too
Use websites such as Angellist
Ask a business development professional who they would recommend
If you are looking for the first hire, most often this person assumes the lead in the business development
team and so having leadership, team building and mentoring skills is also key. This person needs to develop a cohesive team around a shared vision. She is bringing more skills than an individual contributor.
In any of these roles, the person filling them must be a powerful communicator, able to articulate the
value of the deal. No deal gets done via email, this requires some face time, and the person must be a
good representative of the company.
Consider hiring someone early on and bringing them in to develop a strong, cohesive relationship with
the leadership team. Allow them to get into the product or service and understand the drivers, and market. Ramp up time will be required for this position, so the earlier someone comes up, the soon results
will be seen.
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4. Understand What Skill-Sets are Required (and When)
You can bring on the most skilled business development or sales guy or gal with the biggest Rolodex but
if you are still iterating on your product design, this is a recipe for disaster. Strong performers generally
have a sweet spot that they are good at because they’ve had ample opportunity to hone their skills. What
are the areas?
1.: Exploring: Here the company is in its infancy and business development is about seeking possible markets, channels, etc, with no company data to use as a basis. It is at this point that the
company is starting to get some market feedback and may “pivot” as a a result. A person who
succeeds here must be able to collaborate with the technical teams and a deep understanding of
the product.
2.: Validating: By
velopment has
can offer input
sumptions made
(part of that
choices are
growth, and
to success. The
key internal
framework on
deal and concompany’s
this time, business declosed a few deals and
into validating the asin the business plan
feedback loop). Now the
where to focus to drive
analytical skills are key
BD team together with
stakeholders develops a
what to measure for each
firms it aligns with the
strengths and goals.
3: Scaling: The company nows has confidence that they have the right focus on partnerships and
customers so the goal is here to replicate success by seeking out comparable deals and putting the
structure in place.
Make sure you hire the right skills at the right time.
COMMUNICATION IS KEY
Help BD understand the company constraints and goals - the vision statement of this team needs to be as
clear as the vision statement for the product. Initially, those requirements should be taken from the business plan or planning process, but they should continue to adopt as the company incorporates market
feedback and other lessons learned. Educate the business development team on the constraints in which
they are to operate. This is true at all stages, but especially early on as the company tests assumptions to
improve or gain an understanding of what the market requires. The mission of the business development
person must be as clear as the company’s mission and alignment is critical.
Hand-offs between departments are weak links in any organization, and the hand offs between Business
Development to Sales and Marketing must convey the thought process that went into securing a customer or partnership, the message that resonated with that party, and the expected return that validated
the effort to pursue that sale or relationship and its alignment with the company goals.
Oversight of these roles requires that leaders:
Understand the challenges the BD team face
Monitor the closed loop communication
Create metrics to ensure progress is made and aligns with the goals of the organization. Make sure
the right metrics/incentives are used otherwise behaviors will drive unintended consequences.
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5. Reward both team and individual effort. From the team reward perspective, this effort is vital as it
enforces the understanding that the organization must come together to support these efforts.
Ensure the BD team receives the necessary support.
Ensure that the BD team engages in the strategy process, as companies scale these team members
may get further from the leadership and since they are the front lines of execution they must understand the drivers
Business develop is an outward
siderable time away from the
R&D, operations and leadership
What was the potential target’s
How did Partner X react to the
additional features were called
should be captured for analysis
facing role and spends conrest of the team such as
so regular dialog is critical.
response to BD’s messages?
proposed agreement? What
out? [This information
and potential future action.]
Help your business developinformation they need to make a
targets. Not everyone attends
functions, create a central remation. Equally important, not
message the same way, so
other is critical.
ment person acquire the
positive impression on her
the same conferences or
pository to share this inforeveryone hears the same
bouncing ideas off each
Make sure company expectations are established for
every engagement: Is the goal
new customers, reduced
costs, drive revenue, access new
channels? Make sure the
justification is clearly identified
before beginning the business development exercise, and have it results stated in a quantitative way versus qualitative to avoid to
produce a less subjective way to measure results. Having a formal methodology around this process reduces resistance to new opportunities and provides a way to measure the benefit that each opportunity
realized: Are we getting the return we expected when we signed up for this deal? If not, are we not approaching it as we intended to? Did something change? Were our assumptions out of whack and need to
be modified for the next time?
A company needs to be doing the right deal and not do deals for the sake of doing them. That is why
having the right metrics to measure success and progress is key. For every wrong deal, there’s an opportunity cost as resources and time could have been focused on the right deal, and momentum are lost.
Part of this work includes BD understanding how a larger company (as they are frequently the target)
views how this deal aligns with their strategic goals. This is the first priority of any BD person before they
can event start the conversation. Without obvious alignment this deal will not start.
Just because your business development person comes with a good rolodex, that may not be the right
target group. The decision maker in those big companies is not often a fellow BD person. More likely, the
influencer of decision maker is a business or technical lead that has the pain your product addresses. BD
should not focus on other BD.
Business Development knows when to walk away from a potential deal. She understands that if the effort or terms to reach a deal out weigh the ROI for the company and can make the decision to scratch the
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6. agreement. She does not let ego or sunk costs in terms of time and effort distract her from the right outcome for the company. Tight communication with leadership is critical as these decisions cannot be made
in a vacuum.
Once a deal is signed and the drops from the champagne have been wiped up, the new partnership needs
to be nurtured by business development until an account executive assumes control and ensure a good
internal handoff occurs.
PROPER INCENTIVES
With all of these positions, aligning incentives to the results, not the performances. For example, securing
a customer that ends up producing repeat business, or a partnership that allows 10% savings. Rewards
for these results may be deferred but this approach allows closer alignment to objectives for both the
company and team member. An example of a bad alignment is in sales where the reward was based
upon the number of calls made. Nothing in the requirements states that the calls lead to some business or
even be good leads. Its a lot like hits on a website, it doesn’t matter how many times people come if they
do not convert to paying customers, what good is a high number?
Misalignment, may not be felt immediately, but it will be felt. Outlining the desired outcomes and tying
the goals to them along with having consensus on how they will be measured ensures that the business
development Will you get this right the first time? Probably not, but that is why it is important to be able
to measure the results and monitor the behaviors the incentives are driving to ensure they are the ones
you expect and want. Additionally as your teams scale the metrics help to track how each person is contributing and identity high performers, people that may not be incentivized the same way and potentially
other differences that the company should take into account.
OTHER POINTS TO CONSIDER
Consistent Framework to Measure Opportunities
Develop a consistent framework to assess each business development opportunity. Each option should
be reviewed as objectively and consistently as possible. An important element of this review is considering the post-deal management - what is required to ensure success, such as the administrative costs to
maintain a joint venture relationship. If there are known deal breakers, make sure that business development is aware of them.
Addressing Risk
With each agreement some risk is assumed, does the company understand what is the risk, how it can
limit its exposure?
What if we cannot deliver, what happens to our reputation in this market? Can we afford a loss of service penalty?
What are the minimum standards we want to have in a business partner so we reduce the possibility of being left in
a lurch should things go wrong?
This sort of criteria can be established ahead of time to filter out unqualified candidates.
Post Deal Lessons Learned
Will this relationship or partnership still look rosy post contract execution? What are some of the potential pitfalls that may come from this type of agreement or aligning the company to this specific entity?
What steps should be taken to mitigate a bad (or worse) outcome and based on the analysis is this deal
still worth it?
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7. The distinction between addressing risks and lessons learned is that one is in the planning session and the
second activity is post deal, “What did we learn that we can apply to the future.” Both activities are critical.
Contracts & Legal Advise
Have your legal team involved in the process so you get a sense of what the risks are and how best to
protect your company? You may not want them or need them early in the process but they are critical at
some point to reduce a company’s exposure to risk.
Now you have a sense of what traditional business development is, ideas on how to get you first hire on
board, some steps leadership can take to improve the odds for success, and some general considerations
around risk that companies need to address.
Good luck!
Further Reading
Friedman and Partners - Rich’s Top 20 Business Development Tips
Seth’s Blog: Understanding Business Development
What, Exactly Is Business Development?, by Scott Pollack, via Forbes
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