Business Development 101: What You Need to Know to for Your Early-Stage Startup
Do you have ongoing customer discussions that never seem to turn into actual sales? Do you have target partners or customers you would like to reach out to but don’t know where to begin? Do you have concerns your business development/partner manager is too slow in closing deals and onboarding partners? Are you intimidated by contracts?
Over the past few years, I’ve helped hundreds of startups through workshops, bootcamps, office hours, and 1:1 mentoring with these and other business challenges. One of the most critical elements for successful growth is understanding basic business development and partner management processes. While I strongly believe business development has to be dealt with on a case-by-case basis as each firm’s situation is unique, there are some high-level guidelines that can help most businesses.
There are three stages to the business development process for an early-stage startup, which I cover below.
One of the most critical elements for successful growth is understanding basic business development and partner management processes.
Stage 1: Identifying Target Customers or Partners
The first stage in business development is to identify one’s “wish list.” This could be a list of top 100 companies you would like to get onboard in the next 12 months to scale your business. Then it is important to prioritize, given the scarcity of resources in a typical early stage company and given the fact that not everyone on your long wish list will actually come on board. Determine a number of success metrics that you see as critical and filter the list of 100 to identify a priority target list of 20 customers. (If your product strategy is clear and you have a good solution in demand, it is easy to get swamped with inbound requests. While this may look like an attractive position for many businesses, it is easy to get sidetracked by such requests. Even in such ‘attractive’ situations, make sure to have a target list while you manage the inbound requests in parallel.)
Once you agree on the ‘top priority list,’ then prepare your partner briefs and pitch decks. Partner briefs are cheat sheets about who your target customers are, how their business is doing, what their goals and ‘pain points’ are, how you can help with these, and any potential risks or issues that may come up along the way. In short, partner briefs allow you to think and to prepare for your meetings and interactions with your targets.
The next step then is to prepare your pitch decks for your first meetings with your targets. While it is more efficient and effective to standardize one’s pitch decks, contract templates, etc., make sure you modify your pitch (at least verbally) for each target customer or partner to align with their needs.
Stage 2: Negotiation & Contract Work
The next stage in business development is to go out and meet your target customers—this is where pitches take place. However, before going in to pitch your solution, always do your homework when preparing for the meeting: make sure you have an agenda, you know who you are meeting (and that they are the right decision makers), check participants’ backgrounds before the meeting, etc. It is surprising how often these basics get neglected even in the most important meetings.
For startups with a proprietary solution, bring a hardcopy of your NDA to the first meeting and try to get it signed on the spot whenever possible. Also, always go into meetings knowing what you would like to get out of them at the end. For instance, you would like to agree on conducting a pilot by XX date. Or you would like to sign a sales project for YY users in that firm. In the meeting, make sure you steer towards these goals. Assuming the meeting goes well, and your target customer and you agree to do a pilot, it is imperative to follow up with a ‘thank you/follow up’ note, ideally within 24-48 hours. Again, it is surprising how rarely this gets done. People want to work with people who keep their promises and timelines; therefore, such ‘thank you’ notes will help you stand out, and will show that not only your product but also the way you do business and execute are better than competitors’. Plus, you’ll reinforce the message that you will be a good supplier or partner.
For B2B cases, attach a term sheet to your ‘thank you’ note. A term sheet is a non-binding document that summarizes the solution you agreed on, the payment model, timelines, miscellaneous items, etc. It can also be used as a segue to turn your pilot into sales or to prepare the parties for ‘Phase 2’ of a sales project. Furthermore, term sheets allow all involved parties to review what they agreed to and revise if necessary, helping to avoid potential misunderstandings or disconnects early on. Another reason to use term sheets is in case of reorgs, handovers, and similar situations, which happen often in large companies. In such scenarios, you will still have something in hand to pass on to new stakeholders rather than having to start from scratch. Finally, term sheets can easily be converted into contracts once you really shake hands and are ready to sign a legally binding document.
As for contracts, work with a lawyer to prepare a standard template rather than use your customer’s agreement form when possible. Why? Because all companies favor their terms in their contract templates. It is much easier to set the scene if you use your own template. For instance, your service levels, payment models, and other elements can be readily presented rather than having to negotiate on that with which you are proposed. Finally, have a lawyer review any contract before you sign the final version. Simple-looking terms and clauses can cause a great deal of pain later on.
Stage 3: Partner On-boarding
The final stage of the business development process is to on-board your partners once you sign the contract. This includes not only admin work—such as billing set up—but also partner or account management. Surprisingly, many businesses make the mistake (or end up having to make the mistake) of lumping business development with partner management. While it is possible for the same person or team to do these two functions, it usually comes at the expense of business growth and overall success.
A business development person is a hunter. They run fast, identify opportunities, find solutions to problems or needs, and close deals. A partner manager, on the other hand, is a gatherer. Partner managers manage relationships in such a manner that allows them to monitor progress and to conduct performance reviews to fix issues or to find new ways of growing the partnership together with their partner. They build up on what is signed up by the business development professionals.
Business development is a series of sprints whereas partner management is a long-distance run.
Business development is a series of sprints whereas partner management is a long-distance run. Combining the two slows down business development performance and diminishes the quality of partner management required to get the most out of a partnership. As such, businesses should split these functions where possible to ensure rapid, successful growth.
In my next two blog posts, I will expand on useful business development documents for startups and how startups can work with large organizations or corporates.
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