Business development is probably the single important function of a startup CEO that determines whether your business will take off or not. It’s also an incredibly efficient growth channel.
Startups like Google, Apple, Spotify, Facebook and Uber succeeded because they managed to get important partnerships and deals early on.
Take Uber for example. It integrates with Google Maps, Spotify, Zomato etc, by tapping into their huge user bases. If Bill Gates didn’t sign IBM as a client while still running a scrappy startup, Microsoft would most likely never have become a household name.
But not every sales and development deal are equal. There are deals that keep you alive and deals that will take your business to another level. And likewise, there’s a right and wrong way to approach business development for maximum results.
Here are some guidelines to get you through the process.
Pick the right targets and understand their needs
Many first time entrepreneurs are often focused on their needs without actually considering why a potential partner or a customer should make a deal with them. Successful business development starts with understanding a partner’s goals – it is essentially the key to creating a mutually beneficial relationship.
Before you start sending emails or making phone calls, ask yourself: “What are their needs and incentives to work with you? What are their issues?”
Create a business development pipeline
You win some; you lose some – not every partnership will end up working.
What you want to do is build a pipeline of deals and maintain a large list of potential partners. You want to be actively working the phones, sending out emails, and pounding the pavement to get the deals you need to get – whether for distribution, revenue, PR, or just to outflank a competitor.
Once you have a list of potential partners and big customers, a great hack is to send it to your investors, mentors, friends and advisors to get warm introductions.
Build a hierarchy of touch points
When targeting a big company, the bureaucratic process required to get the deal done often involves multiple parties that can significantly slow down the process. Thus, you want to build a relationship on multiple levels.
For example, you may need to talk to the CEO, head of business development and the VP of finance who approves the budget. Building these multi-level relationships will provide you with more flexibility in getting things done and increase your control over the deal.
Try to get warm introductions first
The best way to approach a potential client or a partner is through an introduction from a shared connection. That’s why you want to utilize your investors, mentors, advisors, etc.
In order to do it the right way, you should provide the mutual contact with an overview of your proposal that can easily be forwarded. Then, you want to follow up in a timely manner and set timelines for the next steps (e.g. a follow-up meeting or phone call).
Make term sheet negotiations as simple as possible
The next step after the proposal stage is the negotiation of a term sheet. Usually, the key terms are the lifetime of the deal, exclusivity, payments, etc. The key is to make it as simple as possible, ideally just one page. The simpler the terms are, the fewer glitches there will be in the process, and likewise, the easier the partnership will be.
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After the deal is signed, obviously, you want to maintain a positive relationship with the new partner.