In international business development, aligning your investment with the complexity and potential value of an opportunity is essential. Underinvestment can result in missed opportunities and stalled market growth, while overinvestment risks draining resources and diminishing profitability.
According to the American Productivity & Quality Center (APQC), best-practice companies generally allocate 5-10% of projected revenue to business development and sales costs for new market entry and/or new opportunities. This benchmark provides a quick and useful starting point. However, the complexity of the sector, plus issues such as market-entry barriers, regulatory challenges, and competitive dynamics may see this initial target reach as high as 15-20%.
Setting the tone for Governance
The “Go No-Go” decision is rarely managed well. Market entry or related business development strategies vary widely from companies who engage based on a single conversation, to those who are unable to temper their desire for more data before making a commitment.
Establishing clear and simple guidelines that balance market conditions, risk tolerance, cultural fit, and the market or opportunity potential, provides management with the opportunity to establish governance parameters around the “Go No-Go” decision.
The principle behind these guidelines is the importance of situating the market entry and/or opportunity discussion within the context of some core information associated with each of the above areas. For the purpose of this discussion, we will focus solely on the need to establish a budget that is appropriate and can be revisited and adjusted if and as required.
The quick test of a value that will range from between 5% to 20% of the projected revenue provides an immediate signal on the maturity of the opportunity. Too often the “Go No-Go” decision precedes the availability of enough information to quantify the opportunity specific to your company. At this stage companies may pass on a viable opportunity or find themselves over or under-investing in the business development process.
If you are unable to answer the question it does not mean you abandon it. Rather, it is an indication that you need first to invest more time to collect and quantify information that will support an early – but defendable – view of the market or the opportunity and how/why this may align with your company or product offer.
Organizations that feel all opportunities are equally important, generally over-engineer the small and simple opportunities and under-resource the more complex solutions. In an age of resource scarcity, with regard to resources and budgets, it is a significant failure of governance to under-resource a complex opportunity because you are tying up valuable resources in over-engineering a relatively simple solution elsewhere.
The ability to quickly assign a business development budget not only prioritizes discussions such as the above regarding resourcing, travel, and related issues, but may also influence the nature of the commercial solution.
Entering into a business development process with an awareness that you have delivery models ranging from a light-touch licensing agreement to establishing a local presence is critical to scoping and defining the priorities of the business development cycle.
A well-funded business development (BD) process is crucial, as it supports market research, local relationship-building, compliance measures, and customized market-entry strategies. Higher percentages may be warranted in highly competitive or complex markets, while relatively straightforward markets with low regulatory hurdles may require a leaner approach. In either case, aligning investment with the opportunity’s value and complexity helps ensure effective market entry while managing financial risk.
Case Study: A Disciplined Investment Approach Pays Off
A U.S.-based engineering firm’s entry into the Brazilian market illustrates the benefits of a disciplined, benchmarked approach. Recognizing the regulatory and competitive challenges, the firm allocated 8% of projected revenue to BD activities over three years.
This budget allowed the company to conduct thorough market research, build essential local partnerships, and tailor compliance strategies for the region. The structured, well-funded approach supported a profitable market position within two years, enabling the firm to capture valuable market share.
Conclusion
Ensuring your investment in international business development is aligned with the complexity and value of the opportunity can be the difference between success and failure. Creating the conditions for an informed decision at the “Go No-Go” stage helps companies avoid costly mistakes, establish an effective market entry, and build a sustainable international presence.
A disciplined approach enables companies to balance finite resources between multiple opportunities, scale the investment to the potential return, and also consider commercial models aligned to the potential revenues, plus other market conditions.
PGTS Inc. 