For many years, in both small and large enterprises, business development (BD) has been the catch-all title, group reporting structure or loose agenda for a talented person. The role may not directly relate to territory sales or to marketing strategy, yet these are often the two groups the BD professional spends the most time with. A good BD can help increase the value of your business and its marketability for future sale.

The need for BD has always existed, but figuring out where it fits in is the problem. Senior leadership’s changing needs can alter their definition of BD. Also, if there are changes at the top, then a new person or team could become business development.

Key Business Development Strategies and Processes

Revenue Generation:

Either in the capacity of special account structure management, increasing current revenues from existing customers, or pioneering new product and service introductions, new markets, new geographies, and new initiatives.

Question: Could certain functions be served by other current sales people inside or outside the sales organization reporting structure, instead of the business developer?

New Market Strategy:

BD is usually at the middle of new market strategy development or execution. Here, the role cuts across product or service development, market or customer intelligence gathering, new introductions or introductions of new techniques. It also impacts branding or new strategy around the classic "4 Ps of Marketing" (place, product, promotion, price) into existing, mature or declining product and services portfolios.

Question: Does marketing see this as a resource, a threat, or something else? Why is the BD person actually outside of the sales and marketing groups?

Corporate Strategy:

Sometimes the C-Suite needs a sounding board with someone (or a group) not specifically part of the day-to-day functions or tactical execution. BD professionals are researching, information gathering, intelligence analyzing, competitive matrix building, model analyzing kinds of people. They need to have a variety of skills they perform well along with some domain expertise in a few areas. Domain expertise people tend to manage everyday tasks and events using their specific knowledge of engineering, finance, and sales revenue generation. It's a numbers-driver meets relationship developer strategy. Corporate strategy can range from what it takes to drive growth above peer levels to identifying resources, to acquisitions, to joint ventures or other strategies.

Question: Could the C-Suite not rely on the SVP, CFO, COO or Director of Sales and Marketing leadership for trusted information and insight?

Take Away

The short- and long-term growth needs of the firm rely on rapid information and market intelligence processed consistently with current and planned strategic goals. Hence, the definition of the BD professional comes with internal and external roles. Some firms will look at business development as a sales adjunct, some will look at as a corporate development and strategy function and some will make it more marketing-centric. Much of that decision resides in the C-suite and what the short and longer term strategic goals of the firm are. The role will evolve into a combination of functions, or with a specific focus, but it can be a combination of strategy-sales-marketing-corporate development.

Business Development:

This is the process by which a firm commits talent and resources to the goal of enhancing performance of the current business, revenue streams, and asset utilization. It is typically conducted in a cross-functional manner so as to organize and evaluate opportunities to grow, defend, and transform a business with both organic and M&A growth measures as its strategy. The balance of tactical versus strategic function, and new versus existing business focus, becomes the strategy and decision of the C-Suite.

The BD function provides a company-wide way of looking at the business with deadlines that are not specifically driven by day-to-day or quarter-to-quarter needs and performance. It is a full-time strategy function with current business growth measures driving its need, mandates and ongoing resourcing. The function or execution has typically been a part-time one led by less than optimally integrated functional leaders. This typically leads to less-than-optimal results and a turf protection approach. Most business development grows from CFO-COO-Director of Marketing functions. Many times, these are considerably structured silo functions with month-on-month driven metrics and timelines for their mandates.

Who Guides the Business Developer?

The CEO and/or trusted executive committee of the C-suite ultimately will value/fund/define/measure and provide cover to this leader/strategy role. Consider why the BD role needs a leader with some autonomy and periodic or long timelines not tied to day-on-day results and execution metrics:

  • Who would manage the evaluation and first-level diligence of a vital supply chain partner who we learn at tradeshows is for sale? Impact on current and future business? Possible maneuvers?
  • On January 2nd, the sales team runs to execute a revenue generation plan based on current customers and current offerings for identified market opportunities. Even if new information comes in, they should not react to the information and change the plan on January 3rd to hit the numbers. This is reactionary thinking – the information has not been vetted and the sales team will be confused.

How it Worked in the Past

Let us speak to functions and tools. A generation ago, a firm had two broad choices to serve the function and frame the opportunities:

  1. Outsource the research and information gathering that will comprise a new business development strategy. Who will do it? How do they know it if they do not live it? The data can be valuable depending on what is asked. Execution will be tricky.
  2. Conduct research among internal and external resources managed by an internal champion with the gravitas to ask hard questions and have a mandate that is unique to the needs of hte company. This approach makes for continuity and evolving influences. But the sources of data could be limited due to budget constraints or knowledge of what is available. Often this meant that trade magazines, tradeshows or the reverse engineering of others could work.

The problem with these approaches is that they are acting on information and data that is already dated at best, and may even be irrelevant.

Future Thinking

Today, industry specialists are more focused on professional methodology. Additionally, electronic media sources, studies and online collaboration are critical on the strategy side. For the customer intimacy and relationship development area, the use of firm-wide integrated CRM, focused databases, email engagement, Skype and virtual coffees allow more rapid development and enhancement of a valuable relationship.

What does BD, as a primary organic growth maneuver for a middle market company, mean to the current deal market environment?

Companies between $50-$250M in revenue have little margin for error and must innovate constantly for growth - if not only to maintain what they have. This is, of course, technology, product and end market-dependent (though forward-looking and not the rear view mirror). Companies peak when BD strategies dry up and retrenching happens. They stagnate. Markets are fluid, responding to consumers needs quickly, and if you don't have the information to act on and resource the agendas, the market will turn your company offerings into commodity offerings ... and there's not much you can do about it. Business development strategy is ongoing and evolutionary. Use it.

To the Middle Market Investor:

  • A well-organized playbook of BD and strategy must be evident in planning, company DNA, and internal/external communication. Otherwise, there is really no one that a private equity (PE) investor is growing with. Buy and build in mature industries with stagnated performance is most likely going to result in mediocrity and flat results. It is not hard to determine why a company is doing poorly. The question is: could they have controlled it better? To be seduced by low cost add-ons is dangerous.
  • Generally, the PE investor holds in five year periods. One can build process, but, if time is short and investment in senior management or BD talent is needed, this can be costly and time-consuming. Its intelligence gathering is comprehensive and costly - even if you only have $5M in EBITDA on day one to work with.
  • Finding technology that you can scale rapidly can save some time.

Business development is costly in human talent acquisition and strategy execution. Without investing in it, the growth options are limited. Driving value and being competitive in the market are difficult without it, so plan ahead and implement the right business development strategy for your business now.