Early Stage Business Development
Rob Go of Nextview Ventures had a blog piece about basic marketing for start-ups that I thought was pretty accurate and it prompted me to think about doing something similar for business development. http://robgo.org/2012/10/08/very-basic-startup-marketing/
So here goes, directed to startup founders and early stage CEOs. What is business development for startups, really? You think you should be doing it but you’re not sure exactly what it is or means.
1. What are your objectives?
You are severely resource constrained, but partners and alliances can be a very powerful accelerator for your business. This is because you probably don’t have a huge sales team, and some potential partner already has the customers you want. By working together with them, you may be able to acquire those customers more quickly and without the need for a huge sales team.
- Find channel partners to produce more revenue
- Make your product more salable by integrating it with the other pieces customers will want
- Find other products to sell along with yours (you control the customer)
- Find an acquirer (usually starts with one of the above), also called “date to marry”
2. Who is your team? Do they have the skills? Do they have the time? How are they compensated? Many times, CEOs ask sales people to take on this task and there are a number of reasons why this can backfire. It can also work great if you carve off dedicated resources, give them a different time frame (business development deals take longer than other deals), and a different compensation plan.
3. Prioritize your possible partners
There are a ton a possible partners out there, and your board and advisors will be throwing more names at you (“You guys should partner with XYZ Corp.”) Be brutal in prioritizing based on the factors that mater most to you, either revenue impact, market share, brand name, etc.
4. Outreach- like a sales pitch
This IS sales, so prepare like it. Get a warm intro to the partner if you can. Know what your value-add is to the partner and what your company will do for them. Do your homework. Have a special pitch prepared that is different from your normal pitch.
Start with a basic term sheet, but be conscious that you may want to replicate this so be wary of highly beneficial terms like exclusivity, equity, market standoffs, “most favored nation,” and the division of effort between the two companies required to get the products to work together
6. Tools & Process
Know how you plan on tracking the leads that come in, either your system, their system, or both. You may need to change your CRM or other tools.
7. Revenue generation
You may be joint-selling, but most likely one company will be primarily responsible for turning leads into paying customers. Whichever that is will need marketing and sales support, product marketing, training, pricing, dispute resolution, etc. They will need a “go-to” person or people for all of these things. Typically this is a Relationship Manager. It may be the same person who closed the partnership, but it may not. This “down stream” activity is THE key difference between BD and sales and why great BD people can wear so many hats.
How is the partnership doing in generating awareness, leads, and revenue? How much has each party invested? Has each party done what they said they would, when they said they would?
9. Rebalancing your efforts
Periodically, it makes sense to think through your biz dev strategy and look at all of your partners. Certain partners will be more important than others. Make sure you treat them that way and be prepared to terminate those that don’t perform, or at least to allocate fewer resources to them.
Done right, business development can be a huge accelerator to early stage companies and provide important leverage to your overworked team.