Category Archives: Rant

Biz Dev: It’s not what you think. It’s more.

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I recently read a lengthy piece from James Cohane’s personal blog describing, in his terms, a definition of Business Development (usually called “Biz Dev”).  You’re welcome to look at it here.

Instead of rehashing James’ comments in this post, I thought I’d add my own analysis to the discussion.

For me, the term Business Development implies “all outbound activities that help a business achieve its mission and objectives subject to its Core Values”.  Yup, that’s a pretty broad definition, but, in my mind, it’s also very focused.  Here’s what I mean:

Business Development is Sales

The sales function of any organization attempts to change behaviours of its prospects and customers to act more favourably towards the organization.  These efforts can result in direct sales of your products/services or in introductions to other channels that will create direct sales of your products and services.

Most Biz Dev “sales” are complex in nature and as a result require a much more sophisticated approach than what one normally thinks of “sales”.  Rookies or Product Pushers need not apply!

In order to attain these results, your Biz Dev team needs to have the relevant sales skills so that they will know when to recognize opportunities and to create value for your clients and yourselves.  What are these skills? Most of today’s consultative sales programs (my favourites are Huthwaite and FranklinCovey) teach relating, questioning and positioning skills to their students so that when presented with a particular challenge they can problem solve to attain win-win results.

So while Biz Dev professionals aren’t “pure” sales, they need sales skills.  If they don’t have these skills, then the might be able to do Research.

Business Development is Research

While not necessarily and outbound activity, Biz Dev professionals need to be able to find stuff: companies, people, and products.  They need to be able to use the internet, they need to be able to read legal documents and they need to be able to assemble a mosaic of information from a whole bunch of disparate data.  Generally their research results are used for two categories:

Product Research

Looking to launch a new product or find out how your existing product is being used?  Market research is done by your marketing team (if you have one), but competitive intelligence gathering is done by the Biz Dev team.
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If your team has the right skills, they’ll execute channel checks by calling customers, sales channel partners and vendors or suppliers.  Once they’ve done their job, you’ll know what people think about your existing products and what they’re really seeking to help them solve their biggest problems.

Partner or Target Research

Looking for a distributor in Topeka, Kansas or place to build a plant in Burgas, Bulgaria?  Your Biz Dev team should be able to find the contacts in those locations and help your executive or Corporate Development team get the deals done.

Business Development is Corporate Development

In my view, corporate development activities are outbound activities that provide long-term strategic value towards to the accomplishment of a company’s vision and mission.  These include business unit acquisitions and divestitures, and the development and management of strategic partnerships.  The results of these efforts appear to be episodic as the Corp Dev team may close two or three transactions a year, but all create significant impact to the business within the first few quarters.

Sadly, most businesses don’t have a Corporate Development team so the Biz Dev group fills this function.  So these Biz Dev professionals have to be well versed in the areas of sourcing transactions, due diligence, transaction execution and ongoing management of relationships.  Smaller companies without dedicated Corp Dev teams will rely on their Biz Dev professionals to manage relationships with consultants to help them with these transactions.

Conclusion: Business Development is Multi-Faceted

So today’s Biz Dev professional has to be one part sales, one part research, one part investment banker.  They have to be sensitive to the mission and objectives of the company as well as its culture and must ensure that their activities assist the entire organization.

Biz Dev professionals in smaller companies are generally alone and thus have to be able to multi-task, even when those tasks compete and conflict with each other.

Sounds like a lot of skills wrapped into one person.  Well you’re right, the best Biz Dev professionals have both street and book smarts combined with some real life experience.  They’re not as unique as Unicorns, but they’re pretty darned close.  The good news is that you’ll know if you’ve got one in front of you when you’re talking to them as they’ll be confident and understand their role and opportunity to help you sooner than you’d realize.

So tell me, what do you think?  Is Biz Dev really multi-facted or is it over-rated?

What’s that Worth?

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As I’ve been making the rounds to various connections discussing the new direction that we’ve taken with our business, I get asked the question, why would I pay for a valuation analysis or report when I can do one myself or my investment consultant/bank will do one for me?  So here’s the short answer: because you won’t know what it’s really worth.

I’m not making a self-ingratiating pitch for my services when I say this, I really mean it.  If you or your investment consultant/banker try to pitch the value of your business to a potential purchaser or investor, they’re going to most likely ignore the work and create their own estimate of value.  I know.. I’ve been that Investor.

While on the buy-side, I recall a case where a family had hired a credible independent consultant to assist them with their extraction of the division that they started from their troubled parent.  Not only did this consultant put together a proper financial package (including a proper DCF model), he completed a valuation and transaction structure that made sense.  My colleague who worked on the deal with me felt that it was the best transaction we had seen all year (and we had seen hundreds by this time).  We didn’t have to go digging for all the problems or challenges with the transaction because they were described to us in the consultant’s valuation report (we of course verified the details).   Our investment committee passed on this deal (arrgghh!), but I ran into the CEO a few years ago and he told me that he got his deal done, the way he wanted and was extremely happy with the transaction and the performance of this consultant.

While it’s true that you and your team have a better sense as to what your business is really worth than anyone, this is not the true fair market value, it’s what we call value-to-owner.   

As for your investment banker, well what can I say, they’re certainly in a better position to expose the fair market value but in most cases, they are paid on the successful completion of a transaction and could be considered biased by whomever you’re seeking funds from.  And frankly, the work I have found from most sell-side investment firms is lacking in depth and clarity.

Here’s something else that I learned from my 109 year old grandfather… you get what you pay for.  So if you’re doing your valuation internally, the output is only as good as your team (which I’m sure is awesome) and if you’re relying on an Ibanker or consultant, who is paid on contingency, then the numbers are harder for skeptical investors to believe.

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A lot of the VCs and PE Investors with whom I keep in touch routinely talk about how their primary criteria for their initial investment are 1) Quality/Credibility of the Management Team and 2) Quality of Assets.  The quality of the market opportunity is a distant third; most of these successful and sophisticated investors know that it takes the Intellectual Property and the smarts of a good team to create long term value.  That’s what they’re really betting on, not a specific product or market opportunity.

So why not have someone take a look at this?  I know, you don’t want to spend any dough.  I get it, I’ve been there.  But you know what? If you’re serious about that transaction or capital raise, you’ll have a lot more credibility to have a proper calculation or opinion of value completed by a competent, independent, third-party.  The actual cost is significantly less than the amount of the capital raise or transaction and can be used for multiple purposes (if you request such).  Oh unless you’re a large multi-national conglomerate, then the cost is certainly less than those success or placement fees you’ll be soon paying.

If you’re dead serious about growing your business with smart money or getting out altogether… the value of an independent assessment of business’ value is worth way more than the actual cost, it gives you a basis to begin negotiations and shows investors that you’re serious about completing this deal.

Don’t believe me?  Go raise your capital or complete your buy-out without an independent valuation and then next time call me, I’ll do the valuation and when you get better terms as result we can talk about how you’ll pay.