What
is Entrepreneurship? A Look at Theory
People
use the terms "entrepreneur" and "entrepreneurship"
interchangeably. The entrepreneur is the person who starts his own business.
The exact definition of "entrepreneurship" still remains a vague
concept, though various entrepreneurship theories have defined the concept.
Early Theories of Entrepreneurship
Entrepreneurship
Theories
Richard
Cantillon (1680-1734) was the first of the major economic thinkers to define
the entrepreneur as an agent who buys means of production at certain prices to
combine them into a new product. He classified economic agents into landowners,
hirelings, and entrepreneurs, and considered the entrepreneur as the most
active among these three agents, connecting the producers with customers.
Jean
Baptise Say (1767-1832) improved Cantillion’s definition by adding that the
entrepreneur brings people together to build a productive item.
Frank Knight's Risk Bearing Theory
Frank
Knight (1885-1972) first introduced the dimension of risk-taking as a central
characteristic of entrepreneurship. He adopts the theory of early economists
such as Richard Cantillon and J B Say, and adds the dimension of risk-taking.
This
theory considers uncertanity as a factor of production, and holds the main
function of the entrepreneur as acting in anticipation of future events. The
entrepreneur earns profit as a reward for taking such risks.
Alfred Marshall’s Theory of Entrepreneurship
Alfred
Marshall in his Principles of Economics (1890) held land, labor, capital, and
organization as the four factors of production, and considered entrepreneurship
as the driving factor that brings these four factors together.
The characteristics of a successful entrepreneur include:
·
Thorough
understanding of the industry
·
Good
leadership skills
· Foresight
on demand and supply changes and the willingness to act on such risky
foresights
Success
of an entrepreneur however depends not on possession of these skills, but on
the economic situations in which they attempt their endeavors.
Many
economists have modified Marshall’s theory to consider the entrepreneur as the
fourth factor itself instead of organization, and which coordinates the other
three factors.
Max Weber’s Sociological Theory
The
sociological theory entrepreneurship holds social cultures as the driving force
of entrepreneurship. The entrepreneur becomes a role performer in conformity
with the role expectations of the society, and such role expectations base on
religious beliefs, taboos, and customs.
Max
Weber (1864-1920) held religion as the major driver of entrepreneurship, and
stressed on the spirit of capitalism, which highlights economic freedom and
private enterprise. Capitalism thrives under the protestant work ethic that
harps on these values. The right combination of discipline and an adventurous
free-spirit define the successful entrepreneur.
Mark Casson's Economic Theory
Mark
Casson (1945-) holds that entrepreneurship is a result of conducive economic
conditions.
In his
book "Entrepreneurship, an Economic theory" he states the demand for
entrepreneurship arising from the demand for change.
Economic
factors that encourage or discourage entrepreneurship include:
·
taxation
policy
·
industrial
policy
·
easy
availability of raw materials
·
easy
access to finance on favorable terms
·
access
to information about market conditions
·
availability
of technology and infrastructure
·
marketing
opportunities
Joseph Schumpeter’s Innovation Theory
Joseph
Schumpeter’s innovation theory of entrepreneurship (1949) holds an entrepreneur
as one having three major characteristics: innovation, foresight, and
creativity. Entrepreneurship takes place when the entrepreneur
·
Creates
a new product
·
Introduces
a new way to make a product
·
Discovers
a new market for a product
·
Finds
a new source of raw material
·
Finds
new way of making things or organization
Schumpeter’s
innovation theory however ignores the entrepreneur’s risk taking ability and
organizational skills, and place undue importance on innovation. This theory
applies to large-scale businesses, but economic conditions force small
entrepreneurs to imitate rather than innovate.
Other
economists have added a dimension to imitating and adapting to innovation. This
entails successful imitation by adapting a product to a niche in a better way
than the original product innovators innovation
Israel Kirtzner’s Theory of Entrepreneurship
Israel
Kirzner (1935-) hold spontaneous learning and alertness two major characteristics
of entrepreneurship, and entrepreneurship is the transformation of spontaneous
learning to conscious knowledge, motivated by the prospects of some gain.
Kirzner
considers the alertness to recognize opportunity more characteristic than
innovation in defining entrepreneurship. The entrepreneur either remedies
ignorance or corrects errors of the customers.
His
entrepreneurship model holds:
1. The entrepreneur subconsciously
discovering an opportunity to earn money by buying resources or producing a good,
and selling it
2. Entrepreneur Financing the venture by
borrowing money from a capitalist.
3. Entrepreneur using the funds for his
entrepreneurial venture
4. Entrepreneur paying back the
capitalist, including interest, and retaining the "pure entrepreneurial profit.”
Leibenstein’s Theory of Entrepreneurship
Harvey
Leibenstein (1922-1994) consider entrepreneur as gap-fillers. The three traits
of entrepreneurship include:
·
Recognizing
market trends
·
Develop
new goods or processes in demands but not in supply
·
Determining
profitable activities
Entrepreneurs
have the special ability to connect different markets and make up for market
failures and deficiencies.
McClelland’s Theory of Achievement Motivation
McClellands
Theory of Achievement Motivation hold that people have three motives for
accomplishing things: the need for achievement, need for affiliation, and need
for power. Need for achievement and need for power drive entrepreneurship.
David
McClelland (1917-1988) considers entrepreneurs as people who do things in a
better way and makes decisions in times of uncertainty. The dream to achieve
big things overpowers monetary or other external incentives.
McClelland’s
experiment reveled that traditional beliefs do not inhibit an entrepreneur, and
that it is possible to internalize the motivation required for achievement
orientation through training.
Peter Drucker’s Theory of Entrepreneurship
Entrepreneurship
Theories
Peter
Drucker (1909-2005) holds innovation, resources, and an entrepreneurial
behavior as the keys to entrepreneurship. According to him entrepreneurship
involves
·
increase
in value or satisfaction to the customer from the resource
·
creation
of new values
·
combination
of existing materials or resources in a new productive combination
What
theories do you think explain entrepreneurial drive?
An
analysis of various entrepreneurship theories reveal while what economists
differ on the force that drives entrepreneurs or the central characteristics of
entrepreneurship, they remain unanimous that entrepreneurship is a distinct
concept and a central factor of the economic activity.
References
The 7 Traits of Successful Entrepreneurs
Enter
"entrepreneurial traits" into Google, and the menu of frequent
searches will complete the query with "... of Steve Jobs" and
"... of Bill Gates," among others. These are the forces of nature
that spring to mind for most of us when we think of entrepreneurs--iconic
figures who seemed to burst from the womb with enterprise in their DNA.
They
inspire, but they also intimidate. What if you weren't born with Jobs' creative
genius or Gates' iron will? There's good news for the rest of us: Entrepreneurs
can be guided to success by harnessing crucial attributes. Scholars, business
experts and venture capitalists say entrepreneurs can emerge at any stage of
life and from any realm, and they come in all personality types and with any
grade point average.
Contrary
to conventional wisdom, you don't have to be Type A--that is, an overachieving,
hyperorganized workaholic--or an extrovert to launch a successful business.
"Type A's don't take the risks to be entrepreneurs," says Elana Fine,
managing director of the University of Maryland's Dingman Center for
Entrepreneurship, adding that the same goes for straight-A students. "Very
often it's C students who become entrepreneurs."
However,
the best entrepreneurs do share a collection of characteristics, from tenacity
to the ability to tolerate risk, that are crucial to a successful venture. An
analysis of 23 research studies published under the title "The Big Five
Personality Dimensions and Entrepreneurial Status" found that
entrepreneurs have different personality traits than corporate managers,
scoring far higher on traits such as openness to experience (curiosity,
innovation) and conscientiousness (self-discipline, motivation) and
considerably lower on neuroticism, which allows them to better tolerate stress.
Tenacity
Starting
a business is an ultramarathon. You have to be able to live with uncertainty
and push through a crucible of obstacles for years on end. Entrepreneurs who
can avoid saying uncle have a better chance of finding their market and
outlasting their inevitable mistakes. This trait is known by many
names--perseverance, persistence, determination, commitment, resilience--but
it's really just old-fashioned stick-to-it-iveness.
"Tenacity
is No. 1," says Mike Colwell, who runs Plains Angels, an Iowa angel
investor forum, and the accelerator Business Innovation Zone for the Greater
Des Moines Partnership. "So much of entrepreneurship is dealing with
repeated failure. It happens many times each week."
When
failure happens, you have to start all over again. Jett McCandless was a
partner in a fast-growing freight logistics operation. But the rapid expansion
triggered mistakes, including an invoicing glitch that left the company without
enough cash reserves. The business had to be sold for a fraction of its value.
McCandless didn't agree to the terms and was fired. He lost the company house
and car and wound up moving into his girlfriend's apartment. "It was a
very tough time," he recalls. "I came very close to going
bankrupt."
He
went on 25 job interviews and got offers for logistics positions paying
$200,000 and up. But McCandless, who grew up in Section 8 public housing,
wondered, Should I take a comfortable, secure job, or could I build something
better? "I was afraid that failure could define the rest of my life, and I
wasn't going to let that happen," he says.
So
rather than accept one of those big offers, he started over, founding a new
company, CarrierDirect, in Chicago. Hamstrung by the noncompete contract with
his previous firm, he created a wholly new space in the logistics field.
Instead of matching shippers with truckers, he switched to consulting,
providing marketing and sales for logistics companies. In two years
CarrierDirect grew to $35 million in revenue. "I'm glad I didn't take one
of those corporate jobs," he says now.
Passion
It's
commonly assumed that successful entrepreneurs are driven by money. But most
will tell you they are fueled by a passion for their product or service, by the
opportunity to solve a problem and make life easier, better, cheaper.
"Most
entrepreneurs I know believe they will change the world," says Jay
Friedlander, a professor of sustainable business who works with entrepreneurs
at the College of the Atlantic and at Babson College. "There's an
excitement and belief in what they're doing that gets them through the hard
times."
Passion
based on your company's specific mission is an intrinsic drive that provides
the internal reward that can sustain you between paydays. John Roulac is
passionate about hemp, which has a host of industrial and food uses and can be
grown without herbicide, making it a keystone crop for sustainable agriculture.
With a mission of providing a new market for Canadian hemp farmers, Roulac launched
his company, Nutiva, in 1999 with a hemp food bar. But he quickly ran into
interference from U.S. Customs officials who associated hemp, part of the
cannabis family, with marijuana.
"Initially,
they tried to harass us," Roulac recalls. "They would say our
products couldn't leave the warehouse; then they could. It was very hard to
stay in business." Two years later the Justice Department published a rule
that put hemp products in the same illegal category as heroin. "It was
either go out of business, keep going or go to jail," he says. "It
could be bankruptcy or humiliation."
Roulac
had more than $100,000 invested in the business by this point. A lot of people
told him to quit. Instead, he decided to go on the offensive and sued the Drug
Enforcement Administration. With support from the natural-products industry,
particularly soap company Dr. Bronner's, he won the suit two years later.
Roulac's belief in the power of his mission had prevailed.
"I
believed that I was on the side of truth and that there was a government agency
trying to prevent something good happening for the country," he explains.
"I feel at a core level that this is my destiny to help create a better
food system."
Today
Nutiva sells a variety of organic products, from hemp protein shakes to virgin
coconut oil. Roulac's advice when things get tough: "Dig deeper."
Tolerance of ambiguity
This
classic trait is the definition of risk-taking--the ability to withstand the
fear of uncertainty and potential failure. "It all boils down to being able
to successfully manage fear," notes Michael Sherrod,
entrepreneur-in-residence at the Neeley School of Business at Texas Christian
University.
He
sees the ability to control fear as the most important trait of all. "Fear
of humiliation, fear of missing payroll, running out of cash, bankruptcy, the
list goes on."
Jill
Blashack Strahan knows the fear factor. The founder and CEO of Tastefully
Simple, a direct-sales company for gifts and easy-to-make meals, remembers the
calls to her bank when she was three months overdue on her mortgage. "That
fear that I would lose my house almost controlled me," says Blashack
Strahan, who also had to overcome the deaths of her brother and then her
husband shortly afterward. "The night after the funeral of my husband, I
thought maybe I should give up, get a job and be a mom."
This
is where the ultimate entrepreneurial test takes place, on the mental
battlefield. You can go with the fear and quit, or push through it. "I
said no; this idea is going to work," Blashack Strahan says. "We have
the power to control our thoughts. When we commit mentally, our action
follows." She made a conscious decision to push through the fear. Her
company had sales in 2012 of $98 million.
While
many would feel powerless in the face of such adversity, "the entrepreneur
looks at the situation and knows he has some control over the outcome,"
says Jonathan Alpert, a psychotherapist and author of Be Fearless: Change Your
Life in 28 Days.
Vision
One of
the defining traits of entrepreneurship is the ability to spot an opportunity
and imagine something where others haven't. Entrepreneurs have a curiosity that
identifies overlooked niches and puts them at the forefront of innovation and
emerging fields. They imagine another world and have the ability to communicate
that vision effectively to investors, customers and staff.
Many
people would be satisfied with a couple of successful businesses, but Eldad
Matityahu saw beyond his two thriving frozen-yogurt stores. He'd been reading
about the fiber-optic space and decided he wanted in on the technology sector
that surrounded him in Silicon Valley. So he sold his yogurt shops and his
Harley and got into a field he knew nothing about. He took a job with a
fiber-optic company to learn the business and discovered his niche there.
Customers
told him they were frustrated that they couldn't have access to see who was on
their networks--important for security. "I realized there was no solution
on the market addressing this pain point," Matityahu says. "I took
the time to figure out why."
The
products Matityahu created made activity on the network easily visible and also
protected the system. He bootstrapped his company, Net Optics, with
$100,000--the proceeds from his two yogurt stores and Harley (along with a
small investment from family members)--turning down venture capitalists along
the way. In October 2013 he sold the company for $190 million.
"Entrepreneurs
often face naysayers, because we see the future before the future plays
out," Matityahu says. "You have to be several steps ahead of the
market."
Self-belief
Self-confidence
is a key entrepreneurial trait. You have to be crazy-sure your product is
something the world needs and that you can deliver it to overcome the
naysayers, who will always deride what the majority has yet to validate.
Researchers
define this trait as task-specific confidence. It's a belief that turns the
risk proposition around--you've conducted enough research and have enough
confidence that you can get the job done that you ameliorate the risk.
"You
have to have a lot of self-confidence. Be willing to take a risk, but be
conservative," says Jason Apfel, founder of FragranceNet.com, an
e-commerce site for beauty products. Apfel didn't know anything about the
beauty world when he started the company, but he believed he could create a solid
website to sell such products. "I thought selling a commodity online at
the most competitive price would work," he says. His company has outlasted
well-funded competitors and sees $145 million in annual sales.
Flexibility
Business
survival, like that of the species, depends on adaptation. Your final product
or service likely won't look anything like what you started with. Flexibility
that allows you to respond to changing tastes and market conditions is
essential. "You have to have a willingness to be honest with yourself and
say, 'This isn't working.' You have to be able to pivot," says Colwell of
Plains Angels.
While
still a student at Babson College, Matt Lauzon wanted to digitize the process
of designing personalized jewelry. After raising $500,000 from Highland Capital
Partners, he launched a custom jewelry design platform for retailers in 2008;
however, a year later there was no payoff in sight.
"In
theory, it was a perfect match, but in practice we found that we simply
couldn't change the jewelers' focus on selling the expensive inventory they had
sitting in their display cases," Lauzon recalls.
He
reached out to his jeweler customers to solicit feedback. "One of them
actually said, 'You have built something so amazing, with so much potential,
you should let people use it directly,'" he says.
Lauzon
decided to do exactly that, and with additional rounds of financing, relaunched
the Boston-based company as Gemvara.com, selling the custom jewelry experience
directly to consumers. He won't disclose sales, but he has raised $51 million
to date, including additional millions from Highland Capital, which backed his
initial concept. He has even hired away executives from the jewelry world's
biggest retail force, Tiffany & Co.
Rule-breaking
Entrepreneurs
exist to defy conventional wisdom. A survey last year by Ross Levine of the
University of California, Berkeley, and Yona Rubinstein of the London School of
Economics found that among incorporated entrepreneurs, a combination of
"smarts" and "aggressive, illicit, risk-taking activities"
is a characteristic mix. This often shows up in youth as rebellious behavior,
such as pot-smoking. That description would certainly hold true for some of the
most famous entrepreneurs of recent years.
In
fact, simply starting a business breaks the rules, as only about 13 percent of
Americans are engaged in entrepreneurship, according to a Babson College
report. Doing what the majority isn't doing is the nature of entrepreneurship,
which is where the supply of inner resources comes in.
Career Overview: Business Development
OVERVIEW
Business
development is a combination of strategic analysis, marketing, and sales.
Business development (or "biz dev") professionals can be involved in
everything from the development of their employers' products and services, to
the creation of marketing strategies, to the generation of sales leads, to
negotiating and closing deals.
The
job of the business development professional is typically to identify new
business opportunities-whether that means new markets, new partnerships with
other businesses, new ways to reach existing markets, or new product or service
offerings to better meet the needs of existing markets-and then to go out and
exploit those opportunities to bring in more revenue.
Since
the field is a cousin of marketing and sales, even when an organization doesn't
have a stand-alone business development department or employees with the phrase
"biz dev" in their job titles, you can bet that folks in sales and/or
marketing are handling business development responsibilities. You can find biz
dev jobs in all industries-at everything from tech startups to huge
pharmaceutical companies. What the work entails, exactly, depends on how big a
company is and what industry it's in.
WHAT YOU'LL DO
Your
job in business development may involve any or all of the following:
The
first aspect of the business development professional's job is typically to
identify new business opportunities.
This
means several things, in terms of what you'll do. First, you'll need to stay
abreast of what's happening in your industry-what your competitors are up to in
terms of products and service offerings, pricing, marketing strategies, and so
on. Second, you'll need to make sure you understand what your company is up to
on an ongoing basis-to understand your company's strategy, how your company
compares to its competitors, and how it's perceived in the marketplace. Third,
you'll need to understand the market for your company's offerings-who comprises
it, and how it may be changing.
Next,
as a business development professional, you'll need to think creatively about
everything you know about your company. This is the part of the job in which
you identify possible ways to improve your company's sales, which can mean
identifying anything from new market segments (or individual potential
clients), to new sales channels to sell through, to other, related products or
services in the marketplace with which your company's products or services can
be combined into synergistic, "co-branded" offerings.
The
next part of the job is prioritizing the new business opportunities you've
identified. To do this, you'll need to compare the potential returns of each
new opportunity to the costs your company would incur to exploit it. Which
means spreadsheets-lots of spreadsheets.
Finally,
you have to bring the new opportunities you've identified and prioritized to
fruition. In other words, you'll be negotiating with those at other organizations
who can help you take advantage of the opportunities you've identified. And, if
you're good at what you do, you'll be closing deals with those other
organizations to increase your company's bottom line.
One
thing you'd probably be doing as part of a biz dev career at an enterprise
software company, for instance, is identifying and signing partnership deals
with IT consulting firms that implement enterprise software for their
clients-deals that will give those firms you partner with a cut of your company's
revenue from any new sales of your software that they can bring in. Or, say
you're in biz dev at a big publishing company that's looking to deliver a new,
younger market to its advertisers; in this case, you might be involved in
acquiring a smaller publisher that already has expertise in marketing to a
younger audience, as well as established distribution channels for getting
products to that market.
Business
development involves varying degrees of sales and strategy. In some companies,
biz dev people may focus on getting new corporate sales accounts, while in
others they may lead new product development. At larger companies such as
Oracle, Cisco, or Microsoft, one of biz dev's many responsibilities may be to
decide which smaller companies the company should acquire next to ensure that
it retains its market strength in the future.
Working
in business development is an excellent way to become adept at business
strategy while gaining hands-on experience in negotiating deals and managing
partner relationships. Business development jobs are also highly
cross-functional, requiring close collaboration with various internal and
partner-company teams such as sales, engineering, and marketing to ensure that
a deal is consummated. With its focus on strategy, biz dev steers the direction
of a company-the deals forged today determine what the rest of the company will
be working on tomorrow.
WHO DOES WELL
You'll
need strong business acumen to do well in a business development career. To
understand the competitive landscape, you'll need strong research skills. To
analyze new business opportunities to pursue, you'll need excellent
quantitative and analytical skills. To negotiate with other companies you might
potentially do business with, you'll need excellent people and communication
skills. And, of course, to close deals, you'll need the killer deal-closing
instincts possessed by the best sales types.
REQUIREMENTS
If
you're interested in business but don't want to go the traditional route of
working for a consulting or investment banking firm or getting an MBA, biz dev
may be a good alternative. The best way to get into business development is by
first gaining experience in finance or corporate sales.
The
minimum degree requirement for an entry-level position in business development
is a BA or BS. For more senior positions, an MBA is often preferred, along with
five or more years of previous business development or sales experience.
Business
development positions at high-tech companies may require a technical background,
or sales experience in a related field. Strategic-planning or
corporate-development positions usually require a minimum of two years'
experience in investment banking or consulting.
Networking
with friends or alumni will give you an advantage getting your foot in the
door. If you're asked in for an interview, be ready to demonstrate your
knowledge of the company's business and show that you're familiar with its
competitive landscape. Be sure to play up any experience you have in closing
deals or managing relationships. And remember that recruiters will be seeking a
keen eye for detail, solid communication skills, and analytical ability.
JOB OUTLOOK
In the
long term, business development opportunities should grow, especially in
expanding industries such as pharmaceuticals & biotech and technology. The
growth in business development careers is being driven by a variety of factors.
For one thing, businesses are doing more and more on the Web, meaning there are
more and more opportunities for alliances, partnerships, and other business
activities between and among companies doing business on the Web, Internet
companies, and Internet services companies. At the same time, there's a growing
need for biz dev types to seek out and close business deals in new markets. And
as companies increasingly strip themselves down to only their core components,
they rely on business development to do the deals that allow them to outsource
non-core business functions.
Recently,
job seekers looking for biz dev positions have found themselves in an extremely
tight market. But as the economy improves, we're already seeing growth in biz
dev career opportunities.
Those
with an aptitude for landing and structuring deals-lawyers, for instance, or
investment bankers-have the best shot at landing plum business development
jobs.
CAREER TRACKS
In
order of increasing sophistication, the three overlapping layers within
business development are sales, partnerships, and strategic planning. Most biz
dev jobs blend all three, although one area may be emphasized.
SALES
At
some companies, business development might be better described as
business-to-business sales. In many cases, the business development team and
the sales team are one and the same.
Cold-calling
or prospecting for potential clients, members, or partners is often a task that
falls to entry-level biz dev employees. These employees often have to hone
their own sales pitch to convince other companies that a partnership would add
value to their businesses.
As in
traditional sales jobs, there's often an account-management aspect to business
development-coordinating a variety of partner relationships and deal types,
each at a different stage.
BUSINESS DEVELOPER
Companies
of all sizes in all industries are building their businesses around partnerships-and
it is business development's responsibility to initiate and manage such
relationships.
Often
the biggest challenge facing business developers is negotiating the terms of
partnership deals. Getting another company interested in a partnership is just
the beginning-drafting a contract and negotiating its terms is a process that
can drag on for months.
Once
both parties sign the contract, business development must work with other teams
in a company (e.g., product management, marketing, and operations) to oversee
the successful meeting of the terms of the partnership.
STRATEGIC PLANNER
Some
business development jobs aren't called that at all. Instead, they're called
"strategic planning" or sometimes "corporate development."
Strategic planning jobs are found mostly at large, established companies
seeking to expand and diversify their business. Just like management
consultants, strategic planners spend a lot of time thinking about top-level
strategy issues such as what new business activities their company should
pursue, how it should position itself and market those activities, and which technologies
it should invest in.
At
some companies, strategic planning may be carried out by the corporate finance
department. In such cases, biz dev jobs may resemble investment banking
functions such as mergers and acquisitions. For instance, if a company wants to
acquire a new business unit, strategic planning may analyze the market to find
a suitable business to acquire, determine an appropriate asking price for the
company, and follow through with the negotiation process.
If the
acquisition takes place, strategic planning may help integrate the two
companies. This task may be as simple as processing a stack of paperwork or as
complex as relocating and reorganizing the activities and personnel of the two
companies.
Strategic
planning may also involve institutional investment-that is, parceling out the
company's money to fund outside startups. In this way, strategic planning can
be a bit like working in the venture capital industry. For instance, when
high-tech companies invest in high-tech startups, strategic planners may
perform due diligence on potential partners, determine how much to invest in a
particular venture, and negotiate a stake in a company
8 Tips for Successful Business Development
Consider
these 8 guidelines to make sure you hire a business development person who can
take your company to the next level.
Many
founders and CEOs get to the point where they ask, “We need to hire a business
development person. Do you know anyone?” Few roles have more varied job
descriptions than business development. It’s no wonder why it's hard to figure
out who to hire, what this person should do and how to measure success. If your
company is at the stage where it's time (or you think it's time) to hire
someone for business development, these tips can help you make sure your
business development efforts are a success.
1. Hire the Right Person at the Right Time
A
person with deep industry knowledge and a strong network ready to “do deals”
can turn into a disaster if it's too early in a company’s product lifecycle.
There are three stages in the commercialization process—scouting, testing and
scaling—and not everyone is suited for every stage.
Scouting:
The earliest stage of a company. At this point, business development is about
identifying various routes to market, points of leverage and providing the
internal team with early market feedback. The ability to work with product and
engineering teams is a key skill.
Testing:
At this stage, business development will close a few deals to test assumptions
and provide measurable input before you scale the business. Analytical skills
to set up a framework for what to measure, and examining the data, will
determine if and where to scale based on the company’s strengths and vision.
Scaling:
After gathering data from early deals and validating a path to achieve your
goals, business development is ready to start replicating deals and putting a
support structure in place.
2. Know the Difference Between Business Development
Vs. Sales
In
general, the person (or team) in charge of business development will identify
and create partnerships that enable leverage for driving revenue, distribution
or that enhance the product. This is different from sales, which focuses almost
exclusively on driving revenue.
3. Consider Post-Deal Management
All
successful deals are a result of accountability and proactive management—by both
business development and account management. In most cases, the account manager
is a different person than the business development person who did the deal.
Ideally, the account manager has variable compensation or incentives tied to
meeting the goals established by both parties. If you are not ready to allocate
the resources to support a deal, think twice before signing it.
4. Focus on Quantitative, Not Qualitative
Companies
sometimes try to build a business purely around a qualitative value
proposition, which is difficult and has a higher likelihood of failure. The
market is less willing to pay for a better user experience or the promise of
increased engagement, even if they like the product and find it useful. A
quantitative value (lowers cost, drives revenue, more customers, etc.)
dramatically increases the odds of success. One way to remember this rule is
the pacemaker vs. the hearing aid analogy: If you could only have one, which
one would you choose?
5. Fail or Succeed, Emphasize Responsibility
A good
business developer will engage internal resources along the way to ensure the
company can meet the goals and expectations of a partnership. A lack of support
will almost certainly lead to finger pointing and blaming when things go south.
Everyone should own part of the success or failure from the start.
6. Assess the Opportunity
Everyone
needs to understand why the deal makes sense for your company. Does it drive
revenue, lead to new users or enable the company to enter a new market or
vertical? When the goal is clear and measurable, it makes it easier to address
issues like, “Why are we converting below projections?”
7. Make Deals Carefully
There's
a big difference between doing deals and doing the right deals. A good
dealmaker can help identify a false signal–-when there is just enough market
momentum and revenue to mask the greater opportunity. Conversely, a
less-experienced dealmaker, or one with the wrong incentives, can generate just
enough momentum to distract the company from the bigger opportunity. Many
companies have been weighed down by a bad deal they later regretted-–this is
where you want to develop a level of understanding and trust with your business
development person.
8. Get Legal Counsel
A
legal agreement codifies a business arrangement and includes commercial terms
as well as what happens if things don't work out. This requires business
development and legal counsel to assess the business opportunity vs. the
business risk and explain the tradeoffs to management.
Building
a company is hard and requires a lot of things to go well, including having a
great product and team. Watching an idea become a product and a product
generate revenue that turns into a successful company makes it all worthwhile.
Bringing in the right business development person at the right stage, and
following these other guidelines, will keep your company on the right track.
Firstly,
preheat the pot. Then pour in two table spoon of oil and wait for it to be
heated. Then put in minced onions and garlics. After those ingredient are
carameled, pour in one can of sardines and then pour in half cup of water. Mash
the sardines and then add in enough salts and MSG. Add in some chillis to make
it spicier. Stir until it becomes drier. Prepare mashed potatoes and add the
dried sardine into the mashed potatoes.
2.
Egg
mixed with potato sandwich.
Firstly,
put in some salt in the water to boil potatoes in the heater. It’s the same way
with the egg sandwich but without egg. After potatoes have cooked, mash the
potatoes and add in enough mayonnaise, peppers and MSG.