Business Development (BD) has become more and more systematised over the last decade or so, particularly in large companies where the three pillars of Search & Evaluation, Negotiation and Alliance Management have taken root. Each function is staffed independently to different levels of specialism depending on the individual company’s design.
Smaller companies however cannot devote such a concentration of resources on BD, meaning that one or two people must cover the whole range of activities needed to achieve successful transactions.
The things which cause the most headaches to business developers everywhere are the intangible activities where deduction and reasoning are not enough to ensure success. The three main problem areas are Profiling, Search and Valuation.
- Profiling is key to successful Business Development. As long as a company hasn’t formed a view of what characteristics a product, research collaboration, partner or company for acquisition must have to advance corporate development, searching will be either random or opportunistic. The company’s objectives will only be served well by a clear strategy for business development, and that requires a detailed description of the opportunity to be sought.
- Searching for opportunities – when clarified – however opens up a world of issues. Even with the World Wide Web, information is widely distributed, incomplete and often out of date. The sheer volume of data concerning patents, products, companies and research is overwhelming. To overcome these difficulties a structured plan for searching is required including the creation of a database for contact reference and communication throughout the organisation, of whatever size. Evaluation can then be undertaken against the criteria identified in the profile and the compatibility of the opportunity established.
- Valuation is where the most contentious issues lie. The robustness of the data which make up the model and the forecasting methods used to estimate cash flows are sensitive to many variables. As a consequence, significant differences in the confidence limits between upper and lower cash flow forecasts can seriously affect the estimated value. As this will be the basis for negotiating the price of the transaction, some objective means must be brought into the valuation method.
Knowing what you want will help in locating and recognising the right opportunity. Placing a value on it and achieving the right price in the negotiation come from solid data, realistic modelling and forecasting methods. |
