You have a wonderful product. You’ve developed an impressive marketing strategy. So how can you build a successful business around that?
Business development is the process of connecting the dots. These dots are both internal and external to the company. They are used to operate and grow your business.
Business development sets the benchmark for long-term value as it creates the links between the dots. Internal inks connect all departments together. Then they connect to external links within your industry. So what exactly DOES business development connect?
Business development connections
Internal department examples:
- Product development
- Human resources
- Customer service
Industry connection examples:
- Distribution channels
- Industry partnerships
- Technology and equipment suppliers
- Materials supply chains – sources for product building blocks
- Outsourcing – design, manufacturing, customer service, etc.
The final and most important connection made by business development is to your target audience – your customers. Several internal departments are customer-facing. They connect to your clientele.
Marketing will catch the attention of your target audience and bring them in. Your sales force will make the customer connections official by setting up and closing the deals.
Maintenance of these connections is performed by internal sales, customer service and technical support. Customer maintenance efforts should enhance customer retention and build customer loyalty.
Cross-channel customer experience standards
Business development also defines and implements cross-channel customer experience standards. These standards help your customers become accustomed to the look and feel of your company – the culture, the attitude, and the personality you portray.
Cross-channel simply means across all departments. Familiarity is a powerful customer loyalty enhancer, and it works! Effective business development in the area of cross-channel customer experience builds a successful brand. So familiarize your clients with the personality of your company through your business development efforts.
The business development process
The fine details of your business development implementation largely depend on your specific industry. The high-level approach will be defined here. Then, a deep understanding of your industry is required and will allow you to implement the approach successfully.
Dig up and study every resource available. Interview business owners and then find a mentor within your industry. Now you’re ready to start the business development process.
Have a sound strategy
Your business development process needs a sound strategy. Start by mapping all of your potential industry connections. This’ll help you understand how your company fits into your industry. So decide which partnerships best align with your business model. Thorough detail in this stage is imperative. And you must understand all options available. One missed option may end up being a missed opportunity.
Map the industry ecosystem
An industry ecosystem consists of all industry connections listed above. They depend on or interact with each other. And the number of connections depends on your industry.
In today’s world, companies compete, but also, they cooperate. So collaborative efforts among companies in an industry ecosystem are important. They also provide long-term strength for those involved. Business development of innovative connections and partnerships allows for growth and longevity. That may not be possible when going-it-alone.
Since survival depends on profits, start the business development effort by mapping the entire structure of your industry’s profit pool. Develop a clear understanding of revenue, costs and profit margins within your industry. This’ll allow you to maximize your profit potential. You’ll know what and where the profits are.
Industry profit pool size
Understand your industry’s value chain…all sources and distribution of profit within your industry. They make up the profit pool. How does the money move around?
After you map out your profit pool, you’ll understand all of the opportunities in your industry. You may also renew your business model if you find new opportunities based on your new understanding.
Can you change the status quo, now that you fully understand how and where to money travels? Can you filter more of it to you? So how do you map an industry profit pool?
Start by understanding the perimeter of the profit pool. Where does it begin and end, and how large is it? Then uncover all activities within your industry’s profit pool. Those are the activities which influence your profitability.
Always use good business judgement to interpret the available data. This is so you can creatively map the structure of the profit pool. This data comes in many forms and will be inconsistent.
Strong analytical skills are necessary in order to lay it out correctly. Also, estimations will be needed to fill in gaps. You won’t be able to capture all activities accurately.
To determine the size of your industry’s profit pool, start by reading industry reports. This’ll help you establish a rough estimate.
Then you’ll need to dive into the financial details of those that make up the profit pool. Start with the large companies first. 20% of the companies typically make up 80% of the industry, so keep that in mind as you proceed.
This effort requires hard work, so challenge yourself with this notion: If you understand the profit pool better than your competitors, your advantage can bring you more market-share.
Industry profit pool distribution
Some companies only do business in your industry ecosystem…100% involvement. Others may be involved in multiple industries. In order to determine profit distribution, you must identify all of these companies…both types. Then you must analyze their profits. An aggregation analysis will be performed on those that are 100% in your industry, and a disaggregation analysis for those that are not…adding profits or breaking profits apart.
Where do you look for this data? Start by pulling annual reports, stock-analyst reports and 10-K filing information. Then, look up company profiles from research organizations, industry associations, and trade publications. Government regulatory bodies may also have detailed reports.
If you are unable to locate profit data for a company, estimate profitability based on similar companies that have available data. In many cases, companies involved in multiple industries report their financials based on activity, making the disaggregation analysis much simpler, but be prepared to dig.
You may also perform aggregation and disaggregation analysis to product channels. The BEA (Bureau of Economic Analysis) is one source for data, and there are many others, based on your industry. This method will allow you to follow the profits from customer/product to business.
Now that you have mapped your industry ecosystem and understand how profits move within it, what are some potential partnerships that can strengthen your prospects? Imagine product or service combinations that would be effective in your marketplace.
Think of ways you may be able to enhance the products or services of a more established firm. Spend some time brainstorming along these lines…you may come up with a compelling idea. The point of this exercise is to establish a list that can be used as you develop your business, so keep it handy.
Prior to pursuing the vision you have for your company, define your core values and core purpose. These are the things that should never change, regardless of how many times you must reinvent yourself in the future. Then, be sure to ingrain these values and core purpose into everyone involved with your business. Employee training should start with learning these. The longest lasting companies of all time share this attribute…unchanging core values and purpose.
Now detail your vision for the future. Create two categories for this. Long-term and short-term. Your long term vision should reveal the broad path you wish your company to follow for the next 30 years. This is not a strategic vision, but an idea you wish to accomplish. Short-term vision will show a more narrow five to ten year path. Strategy will play a large role in the success of your short-term vision.
Quote from Henry Ford
When Henry Ford first communicated the idea of democratizing the automobile, he said:
“I will build a motor car for the great multitude… It will be so low in price that no man making a good salary will be unable to own one and enjoy with his family the blessing of hours of pleasure in God’s great open spaces… When I’m through, everybody will be able to afford one, and everyone will have one. The horse will have disappeared from our highways, the automobile will be taken for granted…[and we will] give a large number of men employment at good wages.”
Put your big ideas into your long-term vision and document them. Then document your short-term vision and detail your plan for success. Develop your strategy.
Having a process in place will allow for more deliberate, thought-out decisions which better ensures the best decisions are made. Prevent bad decisions. Your company will continue to grow without taking any steps backwards.
As an example, in order to make the most educated decisions, follow steps that take you from information gathering and alternative identification to weighing all evidence, considering all possibilities and then taking action. Running every decision through a clearly defined step-by-step process will help ensure success.
Set up the budget
Creating a budget will provide guidelines for expected income and expenses enabling you to compare financial goals with actuality. It will reveal how your business is performing. It will also enable you to plan ahead and determine any changes to consider.
During business development, all resources must be managed carefully to stay within budget. Marketing must have enough money to promote effectively and HR must have enough money for payroll. Be sure all aspects of your business stay within budget at all times. A good business development budget will anticipate surprise expenses, so plan for them.
Start by detailing all fixed expenses. These are regular bills and other periodic expenses. Then you will need to anticipate variable expenses, so document all possibilities. Finally, add all expenses together.
Next, calculate all possible income. Be sure to keep this realistic. Obviously, the income needs to be more than the expenses in order to see profit. Once you have these numbers, set up a system to track actual expenses and income, so they can be compared side-by-side. Track your budget very closely as this regulates the life-blood of your business.
Define your growth strategy
Depending on the type of business you are developing, and the industry you are in, there are many possible ways to grow or scale your business. Product lines may also scale or grow by diversification. Defining your growth strategy is an integral part of business development and will allow you to make decisions based on your growth plan as you operate your business.
Below is a list of general ways businesses can grow:
- Add new locations
- Diversification – Expand the product line
- Alliances with larger firms
- Government contracts – Utilize the SBA for this one
- Differentiate for another target audience – demographic
- International expansion
- Social media and SEO optimization
Each of these have advantages, so plan carefully. Set up a strategy that will get you there. Research the history of successful businesses similar to yours and identify the path they took to grow.
You may be able to identify areas that would have improved their success. The growth strategy in business development should reveal how you will achieve your five to ten year vision.
Organizational culture and values
What feeling do you wish to convey to your target audience as a brand? Develop your organizational culture and values. Then implement those cross-functionally…across all staff, suppliers, partners, regulatory bodies, and customers. This should be part of your company vision.
Business model validation
A business model describes how your company creates, delivers and captures value. It should be dynamic and have the ability to change rapidly based on customer feedback. It reflects the iterative reality of the early stages of business. Business models allow business development managers to keep track of every move in their pursuit of a repeatable business model.
Create an ongoing process to validate the assumptions about your business that will be used to make better decisions. This process should take in feedback from your target audience and then force course corrections based on that feedback, tracking every move. This is a large part of business development and should be an on-going effort.
The strategic objectives of a business are those goals that will have the greatest impact on future success and growth. They must align with your company vision. Prioritize these objectives by performing a SWOT (strengths, weaknesses, opportunities and threats) analysis on your business practices. It is important to have strategic objectives that will strengthen market share, finances, resources, productivity, and planning…to name a few examples.
While your customer-facing strategic objectives will help you gain market share, your operational strategic objectives deal with quality assurance, communications, finances, and other internal activities with achievement goals to be set.
Strategy is the method you will follow to achieve the objective. The objective is the goal itself. Strategic objectives combine to reflect your overall company strategy. Strategic objectives are the strategic steps you take as a company to grow and become successful.
Business development plan finalization
This has been a primer to business development and there is a great deal of work to get everything in order. Put a plan together that covers every aspect of your specific business, based on your specific industry. Use the guidelines defined here as a starting point, and then dig deep. Set up a business development unit within your company that will continue the business development process as you grow.
Do the research and document every step. Due-diligence in business development will have a very positive effect on your business operation. Cohesion within, and to those outside connections will provide a foundation for long-term success.
Thank you for reading:
Business Development – The Extensive Guide
I’ve included clickable links on certain words and phrases in my blog post to help you find other useful content that I’ve written or content from trusted sources. Please check those out too and have a great rest-of-the day!
Please subscribe to GravyGrowth.com below and RECEIVE:
The Entrepreneur’s Rapid Reference Guide
COMPLETELY FREE – It’s my gift to you!
GET YOUR FREE COPY NOW