There has always been a lot of confusion around “what is business development?”. I recall a Venture Hack event in the past where a speaker remarked, “there is no such thing as business development”. While the speaker was making the statement for shock value, it does illustrate the confusion around business development.
Historically, with startups, confusion reigned because no one wanted to be called “sales”. Apparently, this didn’t sound executive enough or there was some perceived negative connotation with being a sales person (these people obviously have never seen the pay check of top sales people). To avoid the term sales, people called themselves “business development”. In the last few years, this positioning has evolved even further. Now, startup sales people call themselves Chief Revenue Officer (CRO) or some equivalent.
To unravel the confusion, it is necessary to start with the conceptual difference between sales and business development. Sales people should be focused on customers, and driving quarterly revenue. Sales people are paid on commission for driving revenue, and will instinctively avoid “time sucks” where short-term revenue possibilities don’t exist. Also, a well-run sales organization is supposed to be “coin operated” with standardized sales materials, pricing models, etc. The more efficient the process, the more success you will have with selling.
On the other hand, business development is focused on strategic partners who are not customers, and is less focused on driving short-term sales. Business development requires latitude for building a long-term relationship where revenue might take time to develop. Business development is also a different skill set. The relationship between the companies and deal structure needs to be defined. There might be a revenue model or only coordinated sales efforts, or there might be only interoperability between the parties.
Different variations on business development:
—GTM Partners (Outbound Sales):
—Technology Alliance (or strategic alliances)
Do startups need business development? Driving sales is the most important thing. The sales/business development/CRO person needs to do what it takes to drive sales. One argument is that startups should outsource business development, because it is not a core competency for a startup. On the other hand, one trap for startups is to neglect proper business development, because they have a sales person called “business development”. These are distinctly different activities. The startup will not scale or achieve exponential growth without proper business development activities.