Startup Growth Secret #1 (article series)

If you’re a Startup Founder, there’s a pretty good chance that your background is technical. What might surprise you is that 40-50% of your peers are NOT technical — like me, as I have a sales and marketing background. After mentoring many non sales and marketing Founders, I’ve found that they lack ABSOLUTELY CRITICAL knowledge and skills that are needed for startup success. This is the first article in a series that will help you gain this knowledge.?

This article will focus on helping you understand the critical area of business development. Wait, business development — that’s just a fancy term for sales, right? No, it most certainly is not! Often founders will come to me after they’ve made a few sales and say, “Please help me, I need to hire a salesperson now — how do I find a good one?” And then I say, “But do you really need to hire a salesperson?” It may seem odd that someone with a sales background might take this position, but let’s talk about why. First, you may think you want growth but that’s not the only goal — you’re after rapid growth. You’re after efficient growth, meaning that you’re after growth with the lowest possible Customer Acquisition Cost (CAC). And sometimes, this means that you should utilize a growth method known as Business Development, aka “Biz Dev”, aka “BD”.?

What is BD??

BD is a process of finding strategic growth opportunities, for example by cultivating partnerships or other commercial relationships, or identifying new markets. Let’s focus on the idea of finding partnerships. If you take a look at your market, ask yourself, “Which companies have a large footprint and relationships with many of the buyers that I’m targeting? Might it make sense to partner any of them?”?

Why consider BD??

There are many benefits to using business development to grow your startup. First, it can help you reach new markets that would be difficult to access on your own. Second, it can help you increase your sales and marketing muscle. Third, it can help you more rapidly gain trust and accelerate revenue growth, sometimes dramatically. Third, it can help you grow more efficiently, i.e. with a lower CAC.?

Why avoid BD??

BD will not make sense for every situation. You need to weigh the pros against the cons like brand and partnership risks, exclusivity or semi-exclusivity, margin compression, and channel conflicts.?

What’s in it for them??

As a startup, the pros are fairly obvious to you, as we’ve covered. But what’s in it for them? There could be many different pros for them such as gaining an additional source of revenue or a cutting edge new technology that helps them modernize their portfolio. In an ideal situation, your product is very complimentary to theirs which might even lead to their eventually acquiring your startup.?

Decisions, decisions

If you decide to create a partnership, there are many types to choose from. One entity make make an investment in the other or co-invest in a project. Other such types of partnerships include: alliance agreements, joint R&D agreements, co-marketing agreements, minority investments, equity joint ventures, or even mergers and acquisitions. If distribution is a consideration, you might choose from many different styles of distribution such as Dealers, Sales Agents, Value Added Resellers, Independent Sales Reps, Affiliates, Referrals, Alliances, Wholesalers, Retailers, or Consultants.?

How to pick a partner

If you’re struggling with how to think of partners that might make sense, consider the following questions:?

• Which possible partners already have wide penetration, trust, and relationships in your market??
• Who has a large sales force??
• With whom can you partner to create a “whole product”??
• Can you embed your product or service in a larger company’s product??
• Would this allow us to enter new markets??
• Would this help us develop new products??
• Would there be an opportunity for joint marketing??
• Might we be able to take a strategic investment from this partner with the possibility of eventually being acquired by them??

Questions, questions?

There are questions you’ll want to consider about a potential partner to ensure it’s hitting all the right notes for you:?

• What would be achieved in a partnership? Raising revenues? Lowering costs? Generating new ideas and innovations? Would both parties substantially benefit? Does the value created equal more than what you could achieve separately??
• What would add the most value to your company? Who has this value??
• Who already has relationships with many of your prospects??
• What value would you bring to a partnership??
• Write a skeleton of a model as to how this partnership might work.?
• Do both organizations have similar values??
• Do you feel like the potential partner is entering the conversations in good faith, is putting forth goodwill, and is demonstrating flexibility??
• What risks would a partnership present? Would both sides have risk??
• What would be expected of both partners??
• How would you get out of this partnership if it wasn’t working??
• What mechanisms do you have to enforce responsibilities??
• What KPIs will you select? How will you measure them? How often??
• Will your partnership be invisible to the customer??
• Will the realized value be distributed fairly??
• How will you negotiate unforeseen events? Does your plan include an arbitration clause in case unforeseen events can’t be negotiated??
• What will be the partnership decision-making process?
• Will the partnership sunset based on a horizon?

A personal example

My partner and I built a company called LeadCrunch (now Rev) which used AI to create better B2B leads. These agencies bundled LeadCrunch's services together with their own and sold them to their enterprise clients. We then focused on building this channel which quickly became about a third of our business.?

If you're a startup founder, I encourage you to consider using business development to grow your business. It's a powerful tool that can help you accelerate your business with efficient growth.