More BD Resources = More Chaos

Pulling Hair OutI’m a firm believer that business development activities should be focused and with a stated purpose/objective and expected return.  But what most companies do is hire one or more BD reps and send them out in the jungle to see if they can find anything interesting, which I guarantee they will do.  The problem is the more BD resources you have the more “interesting” things they will bring back, regardless of whether they are consistent with your company vision/direction or can be supported by available company resources.  This often leads to chaos because no benchmark is applied for deciding which interesting things should actually be worked on.  So instead, too many things only get minimal attention and suddenly the company’s focus is lost or diluted.  Eventually someone screams “stop the madness” and all but a couple of the truly justified BD projects are shut down.  But unless the BD staff is shrunk, this same chaotic loop will continue over and over again.

Please realize that I’m differentiating sales from business development.  So if your go-to-market (GTM) model is based on securing outbound OEM relationships for your core technology and you have a team of people who are responsible for gaining these relationships, I’m considering that OEM sales rather than business development.  However, if your primary GTM is direct sales or e-commerce and you have someone out in the jungle seeking OEM, joint-development or co-marketing relationships, I call that business development.

 

I’ve already complained about how often PR is disguised as strategic business development (read here see related article titled “Disguising PR as Strategic Business Development“).  Here I’m postulating that the more BD resources you have the more chaos will come to your company.  Instead, start with a single BD rep and send them into the jungle with a purpose and criteria for success.  In doing this, think through the implications of success on the engineering, marketing, sales, operations and support teams ahead of time.  In other words, if the BD rep brings back a solid commitment for _____ (whatever opportunity you sent them into the jungle to find), are you prepared to make the investment to see it through?  And if you decide to send them on a more generic exploration (see what’s out there), just be sure to apply some disciplined decision-making when they bring things back.  In other words, just like you should be doing when deciding about new features to add or new markets to enter.

This also brings up the subject of compensation for business development reps.  If they have any variable component to their compensation plan (ie – bonuses or commissions), make sure they are tied to meaningful and desirable outcomes and not just activities.  In other words, don’t pay them a bonus for getting meetings with a prospective strategic partner.  I actually don’t even recommend paying a bonus for gaining access to a partner program or getting a joint press release published unless these things are significant milestones along the way to achieving real business results.  For milestone bonus payments, I prefer more significant accomplishments like a signed LOI or MOU (letter of intent, memorandum of understanding) for a truly strategic project that will make a difference to the company’s performance.

To make a point, let’s take this compensation concept to an extreme.  If the BD rep only gets paid a bonus once an exploited opportunity actually starts returning results to the company (ie – revenue), they will quickly realize that it’s a waste of their time to go on a hunting expedition for a bunch of things the company will not respond to or not be able to delivery on.  With this, your BD reps will be the ones proactively confirming the decision criteria that will be applied to the opportunities they uncover and confirming there will be available resources to work on them.

Check out my other blog articles related to business development here.  Also please take my survey below and when you’re done you’ll be able to see how your responses compared to others that have taken the survey.

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Author: Gordon Daugherty

Over the past 15 years Gordon has seen nearly 1,000 startup pitches, advised more than 200 entrepreneurs and been involved with raising over $45M in growth and venture capital. Throughout his 28 year career in high tech, serving twice as President and three times as CMO, Gordon has both an IPO and a $200M acquisition exit under his belt. Now his emphasis is purely focused on helping startups and early stage tech companies. Through his Shockwave Innovations advisory practice and as Managing Director for Austin’s Capital Factory startup accelerator, Gordon is an active angel investor, VC and startup advisor.

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