CEO’s Life Science SME’s: Is Your Business Development Manager a Net Cost or a Net Profit Centre?

Strange question and many CEO’s might think, “what an absurd question to ask?”

But wait and hear me out for a moment.?

In Big Pharma, one of the role of a Business Development Manager (BDM) is evaluating and negotiating deals. These may be in-licensing (bringing in new assets for development), or selling off assets (out-licensing) to a third party company who see them as an opportunity to add valuable millions to revenue and develop them further with investment.

BDM's are involved in mergers and acquisitions of assets and companies. They spend a lot of time number crunching with spreadsheets. The focus is more on negotiating rather than selling.

The basic tenet of a Business Development role is to generate business (revenue income) at a value that exceeds your cost outlay in that person.

But what is the role of a BDM in B2B Life Science SME’s?

Probably the core function is to SELL assets and services, often to Big Pharma that have a need to buy in services and products that might include clinical research capabilities, regulatory services, contract drug manufacturing, warehousing and logistics or cold store/temperature-controlled facilities, or perhaps even ‘end-to-end drug-discovery-to- development’.

For B2B Life Science SME’s, Business Development requires proactive, prospective, targeted selling of services and assets to (typically) Big Pharma customers most likely to need or buy those products or services.

When I looked at profiles of Business Development folk in Life Science SME’s and B2B service providers over the past 12 months, I made the following observations:

1.??????Many were scientists – no surprise there. After all, your business is selling scientific innovation, or services such as Regulatory, CRA, CDMO or warehousing, logistics and cold chain to Big Pharma. These are all founded on science.

2.??????Of stark significance was that many had little or no experience in formalised selling roles in their career. Many were self-taught by the looks of it, and quite possibly learnt along the way gleaned from textbooks. That's probably where they were impressed with “sell the sizzle not the sausage” and engaged in mainly transactional selling. Such transactional selling is a model that is not a good fit for selling because Big Pharma has gone beyond sizzle if you want to succeed in selling to them.

3.?????Business Development Managers/Directors are “high churn” roles with short-lived stints in numerous companies. Reasons for exit may be many.

Capability in any role follows a Normal or Gaussian Distribution.

Courtesy: Scribrr.com

BDM's are no exception. The modal value in the centre of the curve is the most frequently occurring standard of performance. That might be considered ‘the norm’ or average or accepted standard. The guys one or more standard deviations to the left underperform while the guys one or more standard deviations to the right are higher performers.

The high performers tend not to move – they are on high remuneration and compensation packages and would need to be tempted out of the job to join another employer. They probably would not even be interested in joining a small start-up outfit.

We may reasonably deduce that those that move to join you in an SME are (at best) likely to be from the pool of recruits from the modal value (average performers) and quite possibly one or more standard deviations to the left (under-performers in the role). Daunting prospect considering SME's need to set the bar high for performance in relatively short period of time.

The basic tenet of a Business Development role is to generate business (revenue income) at a value that exceeds your cost outlay in that person.

What may not be obvious, is just how much a full-time Business Development headcount costs your business.

In the UK a reasonable base salary for a modal value candidate might be ￡50k. To this there might be bonus incentives of up to 50% of pay on hitting income targets; employer on-costs such as National Insurance Contributions (NIC’s); contribution to Government Auto Enrolment Pension, and discretionary benefits such as Private Medical Cover, Car Allowance, Holiday Pay (typically 20 days paid leave), paid Public Holidays (8 in the UK and so on.

The rationale for a Business Development role is to develop the business. That is, it must bring in extra business to cover costs and contribute to profit – not eat the profit.

On that base salary of ￡50k, the total cost with the on-costs could be close to ￡100k in Year 1. If you used a recruitment firm to find you the candidate, they would take typically 25% to 30% of the candidate’s first year salary as their fee – so add another 15k and the figure goes to ￡115k in year 1.

Now how do you cost this headcount to be able to afford the person? There is only one way that you can afford such a person.

How?

The Business Development person MUST bring in the total costs PLUS a % on top to add value. Covering employment costs is not enough. You might say that on ￡115k cost in year 1 you add 30% on top to be brought in – to cover the fact that a Business Development Manager needs spending budget and needs to contribute to profit. Many BDM's will attend congresses, symposia, networking events. Such attendance costs erodes that 30% uplift?

So you set an ideal income of ￡150k for year 1 for that Business Development Manager on a base salary of ￡50k.

That headcount must now deliver 3x their base salary in invoiced income from clients.

That would be the minimum. Many would demand 4 or 5 times base salary to be generated in the form of invoiced income from clients in a BDM role.

Is your Business Development person delivering (at least) three times their base salary in invoices raised from their activities with third parties?

Surprised?

You should be. Because if the person is not bringing in ￡150k of invoiced income in this example, you are paying for the person from your bottom line.

The rationale for a Business Development role is to develop the business. That is, it must bring in extra business to cover costs and contribute to profit – not eat the profit.

So why am I highlighting this astonishing feature that may be happening right now in your organisation?

Several reasons:

1.??????Do you really understand the true cost of a BDM role and set targets for income to be delivered for the Business Development role? Is it phased - that is broken down by invoiced income to be generated by quarter? Does he/she deliver it by quarter or is there under-delivery in one quarter that has to be added to the next successive quarter making the next quarter impossible to catch up? And do you believe that next quarter it will be all OK?

2.??????Does your Business Development person(s) have a firm track-record in sales they produced at interview with confirmation of income raised for the prior employer? The only appointment decision must be made against hard figures of cash brought into the employer's business. Without such tangible evidence, you may be making an appointment on interview claims, not results delivered. I can make claims about anything. Its real evidence that matters.

3.??????Does he/she have a solid foundation across both simple transactional selling and complex selling? Complex selling skills and experience is what really matters - technique and process. Transactional selling is then usual features-to-benefits, handling objections etc. It6 is complex selling skills that marks a stand-out BDM, not transactional selling.

4.??????Is your Business Development person working proactively and prospectively to a plan that targets high value clients? Have you approved the plan and reviewed it at least twice a year for progress? Can they describe why their clients are a target client? And are they reaching out to decision-makers that are extremely difficult to meet and get in front of? Or are they relying on chance meetings with contacts they met at exhibitions, trade events, symposia, networking events and just being busy, being busy?

If more of the latter last sentence, there is a serious skills gap in your organisation of how to sell services and assets prospectively to targeted high value clients. Key decision-makers rarely attend these congresses and networking events.

Does your Business Development Manager understand who is/are the real decision-maker(s) and how to get in front of them? Are they spending time getting in front of decision-makers or are they spending time with anyone who will talk to them? If it is the latter, you have a high chance of being disappointed with the lack of results delivery.

I recently talked to some Business Development folk out there who wanted to ask for my help in how to sell their assets or services to Big Pharma companies.

All of them described their pain as follows:

1.????Unable to gain traction from contacts they approach – most simply never get a response.

2.??????Time wasting – very common. Talking to someone in a client organisation in the belief that a sale is imminent – only to face disappointment months down the line without really understanding where they went wrong and what they need to do differently. They want to know how to stop time-wasters stealing their time and wondering to themselves: "what the f&ck happened?"

3.??They lack a clearly differentiated value proposition. Their proposition can describe their competitors and any other players offering such a service.

4.???They describe frustration in not understanding how to approach a Big Pharma company. Their efforts are largely reactive and there is very little prospective proactive business development.

5.???They fail to identify and differentiate between those prospects that they have a good possibility of dealing with and those with little or no chance of doing business. Is it any wonder that many of these folk describe time wasting by many prospects?

6.?????Finally, they yearn to understand how to approach clients in this complex selling environment where numerous players are involved in the decision.

Many are simply left wondering in silence “what the f&ck happened?”

By then the CEO has a discussion on their promotion prospects outside the company, and the whole cycle of non-delivery begins again - but this time in another organisation.

This article is aimed at CEO’s in Life Science SME’s. If you want a Business Development Manager that delivers invoiced income, my observations suggest three things to consider:

1.??????Invest in formalised training and development to grow capabilities in prospecting, qualifying, selling, and negotiating deals involving complex sales. Understand how this selling needs to move away from transactional selling to consultative selling and targeted prospecting.

2.??????Consider the total real costs to the business of a Business Development role. Think about how you will test a candidate’s real credentials in a selection process that requires them to bring evidence of their results with prior employer(s) to an interview. We have always recommended the use of case studies and the use of psychometrics in addition to the traditional interviews in the selection process. Do not rely on recruitment firms - they are forwarding you CV's from a database more often than strong candidates that they know well.

3.??????If appointing a highly experienced Business Development Manager full-time is simply not going to work, then?consider a part-time BDM role to help get the business to a critical mass before appointing a full-time headcount. More of this in another article to come. When you see the figures and risks, it is a no-brainer where the part-time appointment wins hands down every time until the business reaches a critical mass.

In developing my own consulting practice with Big Pharma and with over 40 years’ experience with more than half that experience at AstraZeneca with varied roles spanning sales and commercial, training and General Management P&L of International markets, I use a process that can be learnt to develop the skills and capabilities to help Business Development Managers become more effective, more quickly and reach higher than just relying on their current (self-taught?) sales process. I started as a Medical Rep selling to doctors, teaching hospitals, pharmacists and dentists. I have a solid foundation that is transferable through my programme to your BDM folk.

It is the process that I use myself to prospect (proactively) for Big Pharma consulting projects and to win repeat business. Big Pharma is like Big Game. When you are on target it yields a lot of cash.

but to hunt Big Game, you need a telescopic-sighted snipers high velocity rifle, not a water pistol and know the technique for Big Game hunting.

My technique and process is structured, repeatable and it works. It gives a common language for Business Development across your organisation that forms a basis of agreed techniques and next steps to advance the sale.

If CEO’s of Life Science SME’s want to drive a structured Business Development process for their business and staff, and they can see a need to drive targets and phased invoiced income that is supported by training and mentoring of how to do it, then please feel free to have a free exploratory 30 minute chat and let’s understand your pain and how I can help the Business Development side of your business.

Today, selling is complex. Selling the sizzle and not the sausage is not appropriate. BDM's need to learn a structured process that mirrors the complexity of the selling environment in Big Pharma.

It is easy to throw money at roles. It is much more challenging to explore new ways to get better value with the money you are investing in Business Development.

Invest for skills and deliver better outcomes. Skills last a lifetime. Contacts last for the moment.

You can book a slot directly into my calendar copying the URL into your browser and we can chat at no cost:

https://www.calendly.com/amitvaidya2021/