Success of any early stage startup relies to a large degree on the ability to acquire customers and generate revenue from these customers. The ultimate key to this is a solid business development strategy.
All too often, founding teams lack the background and/or confidence in business development. To make matters worse, there is an attitude that permeates the startup community of disregard for sales and which places a disproportionate value on product development and fundraising. The ultimate effect of these compounding factors is that business development becomes an after thought. The crazy truth is that if focus were placed on business development from the start many an early stage startup’s funding woes would be less relevant either because they would have relevant cash flow from viable sales contracts or they wouldn’t face the ever present traction objection from investors.
Unlike more established businesses, there are some inherent quirks about business development as it relates to startups, specifically in the earliest of stages, which for purposes of this discussion I will define as prior to a Series A funding round. Regardless of your background or beliefs about business development, I’m here to share with you a few key things about startup business development for early stage startups that can make all the difference between success and failure.
- When it comes to startups, sales and business development should be thought of as one and the same.
When a startup is in it’s early stages, there is really no distinction between sales and business development. The reason for this is that there is no tried and true sales process that is established and repeatable. The company is still figuring out what the target market is for the product and even shaping the product accordingly.
In the words of Seth Godin, “The thing that makes business development fascinating is that the best deals have never been done before. There’s no template, no cookie cutter grind it out approach to making it work.”
If you are curious about more of Seth’s thoughts on business development make sure you check out his post here.
Everything a startup does in its early stages as it relates to sales is a function of business development. It is all exploration and discovery and development of what will ultimately become a repeatable and scalable sales process. Hopefully, that is good news for you if you are like the vast majority of people that have a negative association with the idea of sales.
2. Your business development strategy and execution should start from day 1.
Just like you wouldn’t start making a cake without knowing you have all the ingredients at home to make it, you can’t create a product or service without insights and knowledge from your prospective customers. It isn’t that you can’t build a product this way, but the truth is, if you did, there would be no guarantee at the end of the process that anyone would want what you had built.
When you are at the earliest stage of your business, you need to be thinking from a business development mindset. Who has the potential to be your customer? Who could potentially be a strategic partner? When you are actively thinking about these things you can then take it a step farther and begin interacting with these potential customers and partners. Don’t make the mistake of thinking you need a product to do this. What you need is an open mind and a desire to think outside of the box to see problems and needs within what will ultimately become your target market.
3. Hiring a sales rock star is a mistake.
As a founder, you are the person that needs to be out there interacting with customers and partners. Nobody is going to know your business as well as you do, not to mention the fact that no one is going to have the same passion and fire in his or her belly to make your company a success. In the earliest stages of your business, you need to be out there interacting in order to gain the insights and perspectives relevant to shaping your product or service in a way that ultimately leads to success. Mark Suster puts this and more exceptionally well in his blog post, Startup Sales – Why Hiring Seasoned Sales Reps May Not Work.
A key quote from Mark’s post, “The problem is that in an early stage business there probably isn’t a perfect fit between your early product and a customer’s needs. You learn that by showing them your product, watching their reactions, asking them questions about what they’d like to see improved and then racing back to the office to talk with the team about what you’ve learned and how you can incorporate it into your product plans.”
There will come a time when hiring a sales rock star will indeed make sense. But that is down the road quite a bit. It is when you have an identified target market with a product that fits a clear customer pain point and you yourself have perfected a sales process.
4. Cold calling is effective when approached right.
Don’t allow fear or the misperception that cold calling doesn’t get you anywhere stop you from what can be one of the most effective business development strategies. Cold calling is extremely effective when done right. It leads to connections with people that ultimately become customers or whom lead you to others who ultimately become customers.
You need to take the time and effort to reach out in an informed and positive way. Make sure you are reaching out to someone who ultimately you can add value to in some way. Don’t think of cold calling as a one sided street in which you are trying to get something from the person you are attempting to access. Rather, think of it as a connection that is mutual in which you are building a relationship. If you approach cold calling with this mindset, the outcome is sure to be positive because it isn’t all about you and your needs. It is about the collective benefit of forming the connection.
Check out Seven Secrets of Cold Calling Success from Entrepreneur Magazine for some more great tips.
5. Pricing is more art then science.
Pricing is never easy whether it is for an established business or for an early stage startup. The unique challenge faced as a startup is you may find yourself with a customer ready to buy before you have thoroughly researched and defined pricing as it relates to your market. With that in mind, the biggest tip is to be flexible. Realize that you aren’t going to have all the answers from day one and that is okay. It is possible that the pricing strategy you start out with will change down the road. What is most important with that in mind is to make sure that you truly develop solid relationships with your customers. If you are communicating with them and they know who you are and the stage you are at, you will be able to establish enough flexibility in your relationship that you can renegotiate pricing down the road if that become necessary.
In the meanwhile, it is a good idea to be proactively thinking about pricing as a part of your business development strategy. This article, How to Price Your Products, from Inc. has a variety of valuable points for you to consider.
I hope that you’ve found this post helpful. If you have your own business development tips for early stage startups, please do take a moment to share them by making a comment. I truly believe business development is an area not covered often enough for startups and which can make a meaningful difference in the success of startup founders.