biz dev 101 - an interactive workshop on how deals get done

Scott [email protected]

@slpollack

Biz Dev 101An Interactive Workshop on

How Deals Get Done

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1.Intros2.What is Biz Dev?3.Strategies4.Tactics5.Biz Dev: The Game6.Debrief

What We’re Gonna Do Today

Class Rules• Everyone participates• Your questions and opinions make the class

better• Your BD network starts here

60 min

45 min

15 min

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Intros:• Name• What you do• Why you’re here• What you want to get out of

today’s class

Please allow me to introduce myself

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What is Biz Dev?

How would you define business development?

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The Only Definition of BD You’ll Ever Need*

Here’s how I define it:

business development:\biz ● ness duh ● vehl ● up ● mehnt\ noun or verb

Creating long-term value for an organization from customers, markets, and relationships.

* Not true. Comments/edits welcome.

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The Circle of Life

Creating long-term value for an organization from customers, markets, and relationships.

Customers: people who give you money for your products and services

Markets: where current and prospective customers reside. Relationships: the

foundation and heart of long-term value.

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What exactly does a “biz dev person” do?

Customers: Find new ones and extract more value from existing ones.

Markets: Figure out where new customers “live” and find a way to reach them.

Relationships: Build and leverage relationships founded on trust and integrity to facilitate opportunities.

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Biz Dev Functions: Sales

“Business development” can serve as a sales function.

• Long-cycle sales vs. transactional sales• Consultative products vs. commodity

products• Mature companies vs. startups• B2B vs. consumer clients

Examples:

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Biz Dev Functions: Strategy

Biz dev people determine the best path to reach customers or enter new markets.

• Build develop in-house (product development, employee training, etc.)• Buy purchase assets or resources from

another company (buy a product, buy a company)• Partner work with another company for

mutual benefitWhat are some examples of

Build vs. Buy vs. Partner?

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Biz Dev Functions: Partnerships

Partnerships are often the best way to create value for customers and enter new markets. • Why partner?

• Upside: can be fastest / easiest / cheapest/ most efficient / best / only way to reach new customers and markets

• Downside: you have to give something up (money & control)• CEO of American Express: If I could do it all myself, I wouldn't

have partners. • Types of Partnerships

• Channel or Distribution partnerships – they have access to a customer group that you don't

• Product partnerships – together you can create a new product or improve/enhance an existing product

• Brand Partnerships – co-brand or cross-promote products or services to jointly improve on a business opportunityWhat are some examples of each type of

partnership? Can you think of other types of partnerships?

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Biz Dev Functions: Relationship Management

Manage relationships with large customers, partners, industry peers (conferences, speaking engagements, etc.), and more

• Function and Skillset• Some Biz Dev folks are entirely focused on Account Management or Relationship

Management with existing partners or customers. • But relationship management is a critical and underlying skill for everyone in any type

of BD role.

• Good relationships are built on mutual trust and integrity• Respect more than friendship – being nice/funny/charismatic/etc. is always

helpful (people buy from and work with people they like) but a strong relationship is based on respect.

• Do what you say – nothing erodes trust and integrity more than flakiness or dishonesty

• Proactive communication – "I just got your email. I wanted to let you know that I'm on it and will follow-up in 3 days…”

• Balance of customer/partner advocacy vs. company strategy– know when to push for your customer/partner’s interests vs. when to stand firm.

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Biz Dev Strategies

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Biz Dev Strategies in Action

Introducing: The Widgetco Corporation• Widgetco is a mid-sized

manufacturer of widgets, a core part of the inner-workings of grandfather clocks.

• During a recent all-hands meeting, an engineer made an off-hand comment about how she fixed her wristwatch using a Widgetco Model A34 Widget.

• Widgetco’s CEO now thinks there’s an opportunity to sell widgets to the watch industry.You are Widgetco’s Business Development

division and this is your first day on the job. What do you do?

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Biz Dev Strategies in Action: Step 1

Step 1: Identify the Opportunity

• Where are there opportunities for us to create value from customers, markets, and relationships?

• Usually that means finding a way to reach new customers or improve relationships with existing customers.

• Ask questions about your own business• Are there gaps in your offering vs. competitors? Are customers clamoring for

something new? Are there opportunities to sell a product to new customers?• Good (and bad) ideas can come from anywhere

• Biz dev teams, CEOs, tech people, competitors, janitors, and your mother can all can inspire ideas.

• It’s up to the Biz Dev team to evaluate the opportunities.

Widgetco – Identifying the Opportunity• An employee inadvertently identified a possible opportunity for the company to

sell its existing products to new customers. • Since Widgetco focuses on grandfather clock parts, and does not currently sell to

the Watch industry, this means entering a new market.

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Step 2: Assess the Opportunity

• Size the opportunity• How can you measure the revenue potential of the opportunity? How big is the

market?• Can start with “back-of-the-envelope” calculations and rough approximations

• Assess your resources• Product: do you have the assets and expertise to produce the product, or do you lack

anything critical?• Distribution: do you have a way to sell your product?• Other Strengths/Weaknesses: what else should we consider?

Widgetco – Assessing the Opportunity• Market sizing = 150M watches sold in U.S. per year * 2 widgets per watch

* $.43 per widget * 7% penetration rate = $9MM/year revenue opportunity

• There are no changes to the product, so there are sufficient resources to produce the product.

• Widgetco's sales team only knows grandfather clock manufacturers. They have no existing relationships with wristwatch manufacturers, who are notoriously difficult to sell into.

What are other resources to assess when evaluating on opportunity?

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Step 3: Formulate the Options

• Evaluate the paths that can be taken to pursue the opportunity• “Build vs. Buy vs. Partner” is a useful framework

• Option 1: Build• What would it take to pursue this opportunity in-house? If resources are lacking,

what would it take to create them?• Option 2: Buy

• Are there “off-the-shelf” solutions that can enable us to pursue this opportunity more quickly or easily?

• Option 3: Partner• Can we work with one or more companies to pursue this opportunity together?

Widgetco – Formulate the Options• Option 1 – Build: train our sales team to sell to watch makers. Will take 18

months and $1MM in tradeshow & conference attendance fees (for customer travel, industry networking)

• Option 2 – Buy: Hire a new sales team from the watch industry. Will take 3 months and $5MM

• Option 3 – Partner: Strapco is a nearby company that makes leather wrist straps for watches, and has relationships with every major watch maker. A cross-selling distribution partnership could drive sales in 6 months with no upfront costs but an estimated 30% rev share (effective cost $2.7 MM)

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Step 4: Make the Decision

• Depending on the decision-maker, this can be a straightforward financial modeling exercise or a decision based more on intuition and gut.

• Build strategies are often the slowest way to enter a market, but provide the most control over the result.

• Buy strategies can be the riskiest and most expensive approach, but also the fastest.

• Partner strategies require giving up a degree of control and stake in the final result, but offloads some of the risk onto the partner (“Shared risk, shared reward”).Widgetco – Make the decision

• Option 1 – Build: train existing sales team = 18 months and $1MM slow speed of entry to market but leaves $8MM opportunity ($9MM/year revenue - $1MM upfront cost).

• Option 2 – Buy: hire an experienced sales team = 3 months and $5MM fastest entry but largest upfront cost resulting in $4MM opportunity ($9MM/year revenue - $5MM upfront cost)

• Option 3 – Partner: work with a distribution partner = 6 months and $2.7MM compromise on time and money but shared risk resulting in $6.3MM opportunity ($9MM - $2.7MM rev. share)

What should Widgetco do?

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Biz Dev Tactics: Partnerships

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Biz Dev Tactics: Forging a Partnership

Recap: The Widgetco Corporation• Widgetco, a maker of grandfather

clock parts, has decided to enter the watch market.

• After assessing the options, Widgetco is confident that partnering is the best option to reach new customers.

• Widgetco has no relationships in the watch industry, but leather watch strap-maker Strapco is a viable prospective partner.

You are Widgetco’s Business Development division and this is your first second day on

the job. What do you do?

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Biz Dev Tactics: Forging a Partnership: Step 1

Step 1: Find a contact

• Warm leads– building a network takes time and effort, but it pays dividends when you’re able to get a warm introduction to a prospective partner. Tap the networks of you, your colleagues, friends, industry peers, and anyone else to find a contact in the target company.

• Cold calls / emails – finding a contact via Googling or LinkedIn is easy, but getting them to answer is harder.

• Industry events – conferences, tradeshows, and other industry events are great places to build your network over time and possibly establish contacts for immediate opportunities.

Widgetco – Find a contact• Sally James, an accountant on the Widgetco finance team, met John Samuels

from Strapco at an regional accounting conference two months ago.• Sally can make an introduction to John, even though he doesn’t focus on

sales or strategic alliances.

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Step 2: Get a meeting

• Get an introduction – warm leads are significantly more likely to convert than cold

• Have a value prop for the meeting – do you homework and know their business - what's in it for them?

• Keep your message concise – 4-5 sentences that clearly demonstrates the value that meeting with you would have.

• Know your audience – if you know your first contact is not the decision-maker, ask for a referral.

• Make it easy for the prospect – travel to them and suggest a timeframe but remain flexible.

Widgetco – Get a meeting“Hi John,

Thanks for the introduction, Sally. John, great to be introduced.

I was hoping you could help me connect with someone on the Strapco team responsible for sales and/or strategic partnerships. Widgetco is exploring opportunities to offer our widgets into the Watch industry and believe there may be opportunities for collaboration. We believe a partnership between Strapco and Widgetco may provide a significant revenue opportunity to both companies.

Might we be able to setup some time to meet next week or the week after?”

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Step 3: Interest-Building Meetings

• Keep it simple – you don’t need a 50-slide Powerpoint deck to demo your product. Keep the conversation high level and focus on the opportunities you see for partnership.

• Let the conversation flow – don’t force the agenda. Allow ideas to evolve from the discussion.

• Raise the interest level – your goal is not to close the deal upon first contact. Your goal is to raise the level of interest with each meeting.

• Confirm the decision-maker – make sure the person who ultimately signs the contract is in the room.

Widgetco – Interest-Building Meetings• Widgetco has a product that can provide significant benefits to Strapco’s current

customers (watch manufacturers)• Cross-selling Widgetco’s line of products can reinforce Strapco’s value to current

customers and provide new value to attract new customers.• Widgetco’s unique product + Strapco’s strong sales channel relationships = clear

opportunity for a distribution partnership.

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Step 4: Close the Deal

• Timelines vary – don’t expect a signed contract overnight. Deals can take weeks, months, or years depending on the companies involved, the complexity of the relationship, even the personal motivations of the employees on either side, etc.

• Have a position on key terms –consider the impact of exclusivity, revenue share terms, division of costs, resource allocations, etc. Estimate the position the other side may take on terms and determine how to react during negotiations.

• Know when to hold ‘em – “concede according to plan” and be comfortable with compromise as long as it still serves your overall goals.

• Know when to fold ‘em – the more alternatives you have available to you, the more strength you have in your negotiation since you can always walk away from the deal.Widgetco – Close the Deal

• Strapco is interested in partnership to offer their customers a more varied product line• Although Widgetco wanted a 70% /30% revenue share, they’ve agreed to give a 50/50 split in exchange for exclusive distribution (e.g., no other widget manufacturers can work with Strapco)• After a tough negotiation, Widgetco maintained the right to sell widgets via other

watch parts providers, and has several new partnership ideas in the pipeline…

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Biz Dev: The Game

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Biz Dev: The Game

Here’s how it works

• Two teams, each representing a different company• Each team gets10 minutes to prepare for the first Partner

Meeting.• Each Partner Meeting lasts 5 minutes. • After each meeting, each teams gets a 5 minutes Internal Strategy Session to debrief and plan for the next meeting.• Teams will continue to meet until a deal is signed, the negotiations fall apart, or time runs out.

Your mission: Get a signed Letter of Intent outlining the terms of a

partnership deal.

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Biz Dev: The Game – Letter of Intent

This letter confirms your and our mutual intentions with respect to the potential transaction described herein between ___________ (“Company X”) and _______________ (“Company Y”). This document, in and of itself, does not represent an enforceable legal contract.

Description of the Partnership• E.g., Company X and Company Y are entering into product partnership whereby Company X will create a new

develop a new product utilizing Company Y’s proprietary technology.

Key Terms:• E.g., Company Y will provide Company X with exclusive distribution rights to the product for 2 years. Company X

will receive 30% of the revenue generated on every sale of the product.

ACCEPTED AND AGREED

Company X Company Y By: By: Title: Title:

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Contact Info

Thanks for coming!

scott@slpollack@slpollack