![]()
1
The Importance of Business Development
The importance of business development in both domestic and global business is that it assures sustainability. And simultaneously creates a track to growth and expansion. This chapter creates the foundation for companies to prioritize sales and business development management and practice.
It is amazing to me how many companies do not have a structured and concerted effort in business development. It is rather a by-product of existing relationships, good customer service, or of reputation or of the persona of the organization.
All those areas are good and important, but they fail in creating a pathway to long-term sustainability and expansion. Most of these types of companies will have stunted growth and, at some point, begin to lose market share.
And even if the growth is good … the real questions are … how good could it be? Are we maximizing our opportunities?
THE CRITICAL IMPORTANCE OF BUSINESS DEVELOPMENT
A company needs to continually grow and expand. I have heard it said by seasoned businessmen for over 35 years … if you are not growing … you’re dead!
While I believe a company goes through cycles, where some cycles have “downturns” … I firmly embrace the idea that over a longer time frame, a company must be growing.
Growth is a number of areas that are expected, as follows.
GEOGRAPHICALLY
A company is best when it diversifies its markets over the entire United States and the World. Diversity in geographical locations is both a risk and opportunity management benefit to any organization.
You can take advantage of multiple locations, which potentially allows “scalability” that, in turn, lowers cost and increases margins.
Geographic diversity also allows a more balance to the variables which happen in politics and the economy which may have volatility in some areas while other areas do not.
Geographic diversity also allows for leveraging the variables that occur in other markets, which might have more favorable nuances for business development opportunities and sales.
GROSS REVENUE
Gross sales demonstrate how a company is maintaining and/or expanding market share. Its significance lies in over periods of time where that gross number continually evidences expansion, growth, and business development targets and goals being met.
Though gross revenue is not a true or only indication of the financial health of an organization … it does demonstrate a company’s ability to be competitive in a specific space. Additionally, it indicates the potential strength of customer services, sales, and business development initiatives.
Gross revenue is just that … gross revenue. It does indicate what margins are being developed, which are a much better indicator of the financial health of any organization.
Having a good balance of both strong gross and high margins is really the best scenario for a company’s financial picture.
NET REVENUE (MARGIN)
As just discussed, net revenue or sometimes referred to as margin is typically a more important dynamic in the financial well-being of any organization.
Example
A company needs to make an 8% margin on its sales in order to break even and to cover its operational expenses.
In 2018, it accomplishes that goal. In 2019, it grows its gross sales by 10%, but net revenue falls to only 5% of gross sales.
This leaves the company with a 3% shortfall. It either has to borrow money from its reserves or from a third party to meet expense requirement allocations.
This will reflect poorly on the P&L (profit and loss) and possibly the balance sheet, as well.
Decisions will have to be made on how best to maintain gross sales growth but … move margins minimally to cover expenses … and optimally to generate net profits into the company’s coffers.
It is said that gross sales are like the engine in the car that propels it forward, but the margin is the fuel that allows the engine to function … (Thomas Cook, June 2013).
PERSONNEL
A company grows from both within and externally.
Internally, they train, develop, and provide empowerment to their management teams to propel them forward along with the organization’s growth strategy.
More often than not, a company must train from external resources as they internally do not have the bandwidth, time, or expertise to manage training. More seasoned companies have dedicated personnel overseeing training as an independent silo in the company.
It becomes their pathway to career development, more authority, power, money, and security in the organization.
Additionally, the organization brings in “talent” from other organizations, which should greatly add to the diversity and strength of an organization. “New blood” with new ideas, resources, and know-how can be of great value to an organization that becomes somewhat stagnated with its existing personnel.
Personnel acquired from external resources can also be problematic, and if the hiring and vetting process is on solid foundation … the risks should be minimized.
Over the years, I have observed a number of companies that only promote from within. While I do believe existing personnel should be given certain preferences … the policy of only hiring from within is like “incest” … and it can only lead to issues, down the road.
Hiring and bringing in talent from external resources can only:
Make the company stronger.
Diversify when managed well equates to stronger gene pools among the staff and management teams.
Bring in new ideas, resources, and strategies.
Utilize varied experiences gained elsewhere to your company’s benefit.
PRODUCT AND SERVICE DIVERSITY
A company grows and expands as it diversifies its product and service offerings. It is ok to have stable and core business products and services … but these can get old real fast. Companies that lie back on their success and rest on their laurels can soon be in trouble, when they react too late.
Innovation is at the heart of...
