Many startups are lead by technology experts who have never run a sales and business development operation. Many of these executives cannot clearly explain the difference of the two functions. The result is they cannot structure the organization to get the most value out of each function.
Lets clear this up, because while they are different, they are both very important to the success of a small and fast-growing company.
Sales creates revenues by closing several deals a quarter against a pipeline, working within well-defined marketing, legal and finance template. Sales should drive constant growth in the organization.
BD also drives revenues but with an initially undefined pipeline, and a more creative and flexible process involving the key functions of the organization. If done well, BD can alter the growth trajectory of revenues and possibly the strategy of a company through one or two large partnerships each year.
How does a startup executive support this? By defining the growth targets and objectives.
A sales team should be able to research, define and close new accounts that can grow the business 5% to 30 % each year. For the sales team to reach these targets, it needs to close several accounts per a quarter. To do this effectively, the sales team needs a simple way to sign and approve deals. They should work internally with finance, marketing, and legal to create a cookie-cutter set of documents that can be easily signed should the deal fall within a certain set of parameters.
A good salesman can juggle about 24 deals at any given time which includes sourcing new deals and closing existing ones. Several sign every quarter while a few are lost or replaced. These targets should be reviewed and adjusted quarterly. A good sales team should maintain the constant growth rate of the company.
“Everyone wants a special deal!”
As deals get bigger, clients want more customization of deal terms, product features, and legal terms. This is where the divide between BD and sales appears.
The key for every organization is to clearly define this line in terms of deal size. When should a deal warrant engineering resources to customize the product? The answer is that the return must significantly outweigh the engineering investment, deal terms, and legal risks associated with executing the deal. To estimate the return, BD must work internally to define a formula, get buy-in, and then, define the opportunities and pipeline.
There will be some overlap between sales and BD. This can easily be managed by delineating the pipeline. In some cases, it may be good to have sales working with BD. It is often very difficult for a BD person to operate independently and succeed in closing a tier 1 deal. Having a sales person partner with BD can help with redundant messaging, back channeling, and increasing familiarity/trust with the other company. Furthermore, this tag team approach teaches sales the craft of BD. BD are the leaders of the sales organization and what the sales members should aspire to become.
BD focuses on about five targets which may result in one or two deals closed per year. These deals have one of three key objectives: change the trajectory of a company’s standard growth rate under normal operating conditions, create a new line of business, or help steer the company to an acquisition. And the deals take time to build relationships, share information such as RFPs, and set up high level CEO/investor discussions.
Because of this, the business development executive will often need assistance internally. To support this, create deal / support teams with members from product, engineering, marketing, and finance teams. The support team may need to attend meetings together, produce documents, or even help in the sales relationship process. They should plan to allocate 10-20% of their time to such deals.
Everyone in the company needs to buy in to the potential of these deals. They need to believe in the value the deals will create. Mutual buy-in will create the shared team vision and effort needed to close these deals.
Few startups do business development and sales well. But, it is an essential part of an organization. If done correctly, it can have a lasting impact on the growth and possibly outcome of a startup.
Edited by: Josh Wein https://www.linkedin.com/in/jwjwjwjw