Many founders and CEOs get to the point where they ask, “We need to hire a business development person. Do you know anyone?” Few roles have more varied job descriptions than business development. It’s no wonder why it's hard to figure out who to hire, what this person should do and how to measure success. If your company is at the stage where it's time (or you think it's time) to hire someone for business development, these tips can help you make sure your business development efforts are a success.
1. Hire the Right Person at the Right Time
A person with deep industry knowledge and a strong network ready to “do deals” can turn into a disaster if it's too early in a company’s product lifecycle. There are three stages in the commercialization process—scouting, testing and scaling—and not everyone is suited for every stage.
- Scouting: The earliest stage of a company. At this point, business development is about identifying various routes to market, points of leverage and providing the internal team with early market feedback. The ability to work with product and engineering teams is a key skill.
- Testing: At this stage, business development will close a few deals to test assumptions and provide measurable input before you scale the business. Analytical skills to set up a framework for what to measure, and examining the data, will determine if and where to scale based on the company’s strengths and vision.
- Scaling: After gathering data from early deals and validating a path to achieve your goals, business development is ready to start replicating deals and putting a support structure in place.
2. Know the Difference Between Business Development Vs. Sales
In general, the person (or team) in charge of business development will identify and create partnerships that enable leverage for driving revenue, distribution or that enhance the product. This is different from sales, which focuses almost exclusively on driving revenue.
3. Consider Post-Deal Management
All successful deals are a result of accountability and proactive management—by both business development and account management. In most cases, the account manager is a different person than the business development person who did the deal. Ideally, the account manager has variable compensation or incentives tied to meeting the goals established by both parties. If you are not ready to allocate the resources to support a deal, think twice before signing it.
4. Focus on Quantitative, Not Qualitative
Companies sometimes try to build a business purely around a qualitative value proposition, which is difficult and has a higher likelihood of failure. The market is less willing to pay for a better user experience or the promise of increased engagement, even if they like the product and find it useful. A quantitative value (lowers cost, drives revenue, more customers, etc.) dramatically increases the odds of success. One way to remember this rule is the pacemaker vs. the hearing aid analogy: If you could only have one, which one would you choose?
5. Fail or Succeed, Emphasize Responsibility
A good business developer will engage internal resources along the way to ensure the company can meet the goals and expectations of a partnership. A lack of support will almost certainly lead to finger pointing and blaming when things go south. Everyone should own part of the success or failure from the start.
6. Assess the Opportunity
Everyone needs to understand why the deal makes sense for your company. Does it drive revenue, lead to new users or enable the company to enter a new market or vertical? When the goal is clear and measurable, it makes it easier to address issues like, “Why are we converting below projections?”
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7. Make Deals Carefully
There's a big difference between doing deals and doing the right deals. A good dealmaker can help identify a false signal–-when there is just enough market momentum and revenue to mask the greater opportunity. Conversely, a less-experienced dealmaker, or one with the wrong incentives, can generate just enough momentum to distract the company from the bigger opportunity. Many companies have been weighed down by a bad deal they later regretted-–this is where you want to develop a level of understanding and trust with your business development person.
8. Get Legal Counsel
A legal agreement codifies a business arrangement and includes commercial terms as well as what happens if things don't work out. This requires business development and legal counsel to assess the business opportunity vs. the business risk and explain the tradeoffs to management.
Building a company is hard and requires a lot of things to go well, including having a great product and team. Watching an idea become a product and a product generate revenue that turns into a successful company makes it all worthwhile. Bringing in the right business development person at the right stage, and following these other guidelines, will keep your company on the right track.