Business Development Strategies for Tech Startups

Introduction 

When you hear the term "business development," what do you think of? Chances are, you're not thinking big enough. The entire goal of a startup is to grow and develop into a full-fledged, successful business, whether that’s through a valuable merger with a competitor, bootstrapping your way to the top, or investments from angel investors, venture capitalists, or even crowdfunding. With so many ways to grow a new company, it’s clear that there needs to be some sort of business development strategy in place for startups to follow.

But how do you know what those strategies are or which one is the right fit? It may take some trial and error, but understanding different growth models and knowing what to focus on in a development strategy will make narrowing down the most successful business development strategy for your startup easier.

What’s in a startup business development plan?

In order for a startup to grow, the team needs to fully understand business development and how a plan can help the company grow. From knowing your target audience to defining your company goals, a business development plan provides a roadmap that guides your company to various milestones on the path to success. A study of over 11,000 businesses found that those with a business plan experienced 30% faster growth as well as a 30% growth in sales.

So for startups that want to grow faster, make more sales, and even boost their chances of securing investor funding, it’s important to create a business development plan with the following essential components:

Target audience

Any startup needs to define its target audience, or who it wants to sell to. While it may seem smart to try to appeal to the broadest possible audience, finding a niche is actually better for business. That’s because it saves a startup time and resources by marketing and selling to a defined audience with specified needs or problems that need solved by the startup’s products. Aiming too broadly can lead to mixed and confusing messaging.

To define a target audience, a startup should consider who is most likely to purchase its products based on demographics like age, location, income, and occupation plus their behaviors, interests, and purchase intentions.

Goals

To create a business development plan, a startup team needs to know what the company is developing toward. The startup needs to have defined goals for the short- and long-term, and these goals should relate to sales and revenue but can also speak to customer base and employee growth. For instance, you may have a goal to sell to your 1,000th customer by a certain date, or to grow to a team of 50 employees by a specified month and year. 

Resources

Startups need a wide variety of resources to fund and run the business. The business development plan should outline the resources the startup currently has and what it needs to meet its goals outlined in the plan. For instance, the startup may estimate a specific amount of funding to reach its expansion goals, and the plan can outline what types of software resources or vendors the startup will need to enhance its customer service or sell products and services in another city, state, or country.

Go-to-market (GTM) plan

A go-to-market strategy is the plan a startup follows to start selling its products or services to its target market. A GTM strategy makes sure that your products and services are aligned with the right target audience and in the correct market while also making sure what you’re offering stands out from competitors. In one study by Gartner, 85% of respondents found that having a GTM strategy in place was very, or at least somewhat, effective in growing revenue and meeting company goals. 

How respondents to Gartner survey responded regarding where their go-to-market strategy is focused (Image source: Garnter)

Growth strategies

Establishing a business development plan should include methods to help expand the business in the future. For example, you could consider ways to introduce a referral program to expand your customer base, or you could outline the steps you need to take to open a new brick-and-mortar location in another city. Having the growth strategies defined within your overarching business development plan will help ensure these strategies are aligned with the company’s overall goals.

Budget & profit analysis

Before you can expand the startup by hiring new employees, buying new brick-and-mortar locations, or developing new products to sell, you’ll need to have the money to achieve these goals. Analyzing the startup budget determines how much money is coming in and what potential cuts could be made, and you should also analyze the costs of expansion and growth opportunities to determine how profitable certain growth strategies may be when considering the costs and potential profits compared to your existing budget.

Ongoing forecasting

Forecasting refers to compiling projections for things like company sales and revenue, expenses, and market trends, based on existing data. Startups need to incorporate forecasting when determining the viability of the company, but forecasting shouldn’t end when the startup is registered and starting to see some success. Continuing with forecasting will provide insights into whether certain growth opportunities are worth the costs or risks.

Optimization and business intelligence

Startups tend to work with limited resources, so optimization can help pave the way for growth. Optimization can also boost productivity by nixing any unnecessary business practices or strategies that can hold the business back. Startup leaders will need to regularly review and analyze startup operations to identify any weak points that could be optimized for better performance. 

Startups will also need to consider business intelligence, which can help with optimization. Business intelligence is the deeper understanding of a company’s data, so startups can use business intelligence to interpret company data for optimization, goal-setting, and reporting. Luckily, there are many business intelligence tools that can make this process more efficient (e.g. Gong, G2, Databox, Polymer, or HubSpot’s Marketing Analytics software.)

Startup business development strategies & growth models

With a business development plan in place, startups can better seek out opportunities for growth. But growing a startup doesn’t just happen in one straightforward path from idea to IPO. There are many different business development strategies for startups to consider that can grow the company and lead to success.

Mergers and acquisitions

Mergers and acquisitions (M&A) refers to several different moves two companies may take to combine assets and/or become one company. According to Statista, there were about 50,000 M&A deals globally in 2022, and these deals have been mostly on the rise since 1985. Some major M&A deals in recent years include Uber’s acquisition of Postmates in 2020 or Amazon’s acquisition of Whole Foods in 2017.

M&A could represent a number of opportunities for a startup, whether your company is hoping to acquire another company or merge with a larger business. Acquisition by a larger or better-funded company can also be a lifeline for startups struggling to secure funding. 

Bootstrapped growth

Startups can use bootstrapping for growth, meaning the founders of the startup fund the company rather than receiving investor money or bank loans. Bootstrapping may require the startup to operate on an incredibly lean budget, but it can also mean the startup isn’t paying back high interest on a loan or sharing some of the company equity with investors.

Venture-backed or financed growth

Venture capital for startups can allow startups to pursue rapid growth through large investments from venture capital firms. Otherwise, startups can also pursue financed growth from other types of financing, like investments from angel investors or loans with interest from banks. The process to obtain financing and investments can be lengthy, but experts predict that securing funding through bridge rounds, especially for growth opportunities like launching a new product, will be a big fundraising trend this year.

User acquisition

User acquisition refers to how you gain users or customers, and there are different strategies to consider for startups that are pursuing growth.

According to the HubSpot for Startups  2023 Global Unicorn Report, startups may want to consider whether to attract a larger number of customers spending lower amounts of money, or to attract fewer clients but with bigger spending habits — or somewhere in between. This is known as attracting “flies” (100M customers spending at lower values) or “elephants” (1,000 customers spending higher amounts). As noted in the report, some unicorns like ByteDance (which owns TikTok) use the “fly” approach, while Citadel Securities tends to pursue “elephants”.

Referral programs

One model to consider to expand your customer base is to offer a referral program that incentivizes existing customers to recommend your business to their coworkers, friends, and family. About 92% of shoppers trust referrals over other advertising methods, and 86% of B2B buyers believe that word-of-mouth referrals are the most important factor in making a purchasing decision. 

This shows a lot of opportunity for startups to consider integrating a referral program into their growth model as a way to boost their reputation and expand their customer base. For startups looking to create a referral program, a report by SaaSquatch shows that dollar credit, or offering a dollar amount value for referrals, is the most popular reward type, but there is room for startups to incorporate tiered incentives, awarding referrers and the customers they bring greater rewards for higher value deals.

Channel partners

Startups don’t have to solely sell their products and services on their own website or in their own storefront. Today, connecting with channel partners is a popular growth strategy to increase sales. The model works by providing channel partners with an incentive, usually a percentage of sales linked to that partner, for marketing or selling another company’s products or services.

For example, a startup selling security software could partner with a retailer that sells tech products, and the retailer could offer a deal on purchases of security software as an add-on for tech product purchases. The retailer makes its sale plus some commission on the add-on, and the startup is able to make more sales through a third-party company.

This method can help boost sales for the startup and its channel partners, while also providing value to the customer. When done well, it can be a big business, too. As reported by Crossbeam, as much as 95% of Microsoft’s commercial revenue flows through its partners.

Integrations

Startups often rely on several different tools to run different aspects of the business, but if these tools and processes aren’t integrated, they can stifle growth. Integration allows software, services, company departments, and other aspects of the business to function as thoroughly and productively as possible. It also prevents redundancies and miscommunications that can happen when trying to input data into different software.

For instance, companies using HubSpot for their CRM can also integrate their email accounts, content management systems, calendars, social media ad platforms, and team communication hubs so they can handle most if not all of their customer relationship management tasks all in one place.

Expanding products and services

With a young company, founders may bring only one flagship product to the table at the beginning. Resources may be too strained to try to develop multiple products or services at one time. But eventually, that product might take off and find steady or even growing sales, and that can create an opportunity for the startup to expand into other offerings.

Adapting for new markets and regions

Another growth model to consider in a business development strategy for startups is expanding into new markets and regions, if it makes sense. If there is a strong fit for your products and services in a different market or even another region, it can lead to higher sales and revenue. But this type of growth can be expensive, as you may need to build offices or find vendors in the new region or expand your main office to accommodate a larger team that can service the expanding business.

Startups may want to work toward improving their market penetration in their existing market or expanding more locally if the risks of bigger expansions are too great.

How startups are accelerating growth with AI

Thanks to artificial intelligence, startups can do more with less. Small startup teams can use AI to create images and videos, brainstorm creative ideas, write content, send emails, or even help with customer service. This allows a team to take on more work and act as if it were a larger team, making it easier for startups to scale with minimal resources. 

According to HubSpot’s report, The State of AI In Sales, AI tools are helping save sales reps alone about two hours and 15 minutes every day, freeing up their time to focus more on quality leads and making more sales. Sales professionals use AI to write messages and emails, collect information from potential customers over chat or phone, target the most promising leads, and even forecast sales to save time and close more deals (and quickly.)

But outside of sales, there are even AI tools that can help startups build pitch decks to present to investors or file business taxes. Then, there are tools like those included in the HubSpot Service Hub to improve customer relationship management and provide a better customer experience. All of these improvements across a company’s departments can contribute to increased sales, reduced spending, more efficiency and productivity, and faster growth.

Find the right business development strategy to grow your startup

As you can see, companies can tap into a wide range of business development strategies for startup growth. Ultimately, the best strategy will depend on your startup’s market, target audience, and goals, which is why building a thorough, forward-thinking business plan can help point you in the right direction of what strategy to explore. 

Make sure to utilize data through business intelligence and forecasting to determine when your strategy is working or when it might be time to shake things up. When you find the right fit, a solid business development strategy can unlock fast growth for your startup.