Perhaps Controversial – Why It’s Difficult to Make a Bus Dev Deal with an Established Company, and How to Solve This

It is quite often difficult to get business development (BD) deals done with mid-to-large companies, despite being a good potential partner, or having a suitable product.

Why?

There are the usual reasons: hard to find the right contact; difficult to get attention; and slow processes in big companies.

However, there are other possibly more important reasons that are related to the BD personnel with whom you interact. They are not motivated by big upside. They instead seek to reduce risk. They have a lifestyle and likely a family to protect and provide for.

Most established company BD personnel are not motivated by upside, because they are not likely to benefit from it. Unlike investment bankers, who can get big bonuses, or small company people who often have significant stock options or restricted shares, these BD individuals typically work for modest bonuses, and perhaps a few options.

Therefore, they are motivated more by risk than reward. They want to preserve their job and career path, and get their routine annual bonus.

Importantly, given the typically modest reward system for corporate BD personnel, they behave quite rationally. Even many investors in these established companies only want to take limited risk for similar, logical reasons.

Also, without the potential for big upside, they want to manage their lifestyle, keeping relatively normal work hours (of course these are still most often more than 9 to 5), limiting travel as little as possible, and spending time with family and on other pursuits outside work.

So what is there to do?

Find out what specifically motivates the primary contacts. Do they indeed have a (very) low risk profile? Contrastingly, do they feel the need to do a deal to get promoted — for some organizations, deals need to be done to get ahead, creating a double-edged sword of risk. It is also not uncommon for BD individuals to want to work on interesting projects. However, beware that this may simply be “tire kicking” and not dealmaking.

Additionally, identify who in the organization has the most to gain outside of business development. This may be business unit general management needing revenue growth; marketing or product management trying to fill out their product portfolio, or R&D showing they can constructively add to the pipeline.

Reduce risk

Prove feasibility, even if out of your own pocket. Set up a milestone based process — with solid payouts at each step, rather than going for the big upfront payment. Do deals with smaller partners to prove your worth. In words of investment bankers, “deals beget deals.” Finally, it may be that a small company must be more methodical and build the business itself, whether to show customer acceptance or sustainability.

Increase risk

While it may be counterintuitive, sometimes the only way to get a necessary deal done is to create the perceived reality of greater, rather than lesser, risk. This can be done by setting up an “auction” process, be it for the entire company, or a single product. Moreover, a public announcement that the smaller company is entering the business on its own, implies unneeded competition.

Overall, understand the situation and motivation of established company BD personnel; find allies elsewhere in the company; and manage positively and negatively the company’s perception of risk around doing a deal.

© 2013 Winton Gibbons

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s