When the owner is the rainmaker, accounting for 76 to 100 percent of sales, the business will lose out to its competition.
John Warrillow, the founder of The Value Builder System, maintains that business owners don’t do enough to make themselves dispensable. It sounds contrary, but not all traditional business concepts are valid. When it comes to sales, John calls it the “owner’s dilemma.” The owner’s dilemma is that they are good at closing, but being the rainmaker will hurt their business.
Startups enjoy brisk growth as revenue ramps up quickly and the owner executes the sales. However, the owner runs out of energy or hours in the day, and sales plateau. The owner must keep up that pace just to stagnate.
A Cartesian plane creates a four-box quadrant. For this exercise, “gratification” is on the x-axis (horizontal), and competency” is on the y-axis (vertical). Populate the quadrants with actions you can perform to contribute to your company’s success. The items on the right-hand side are tasks that offer immediate results. Projects that take more time to reveal a benefit plot are on the left. The things on the top are those that you are good at. Items on the bottom are not those in your wheelhouse.
Entrepreneurs often fill the upper-right quadrant (highly competent skills with immediate results) with rainmaker activities (sales, customer relations). This is where many owners spend the bulk of their time. The prevailing wisdom is that you should focus on your strengths. However, once you get to about a half-million dollars in sales, you are getting in your own way by not prioritizing essential strategies.
Once sales growth hits a wall, the value of your company hits the ceiling. If you are like many small-business owners, 80 percent of your net worth is tied to your business. Don’t you want to increase the value of your biggest asset?
According to Value Builder, rainmakers received just half as many written offers as those who didn’t personally perform sales. Only half as many rainmakers received offers greater than six-times EBITDA (earnings before interest, taxes, depreciation and amortization), compared with their liberated counterparts.
Revisiting the Cartesian plane, continue focusing on your highest competencies. However, instead of focusing on instant gratification, consider projects that deliver deferred development. This includes designing marketing funnels, defining sales processes and creating brand initiatives. These are all the things the rain-making business owner is good at — sales and marketing. Instead of performing the sales personally, the owner builds the architecture of a sales engine.
When the owner moves from rainmaker to “architect,” the company can break beyond the sales plateau, increasing the profits and the company’s worth. According to Value Builder, more than twice the number of architects commanded a multiple of six times EBITDA, compared with rainmakers. So, how do you transition from being a rainmaker to an architect?
In 2008, D.J. started a home improvement business in Holyoke, focusing on renovating kitchens and decks. After the first year, D.J. hired laborers. After year three, he expanded from a Facebook business page to a showroom with a storeroom in the back. By year eight, D.J. put desks in the storeroom and delegated tasks where he had low competencies, such as accounts payable and scheduling.
D.J. prided himself on knowing every customer’s name, but that didn’t add to profits. At year 10 (now 2018), he prioritized creating a marketing funnel to bring in leads. D.J. had already plateaued in his sales capacity, so, more leads would have been more than he could handle. So, before that, in 2017, D.J. began his path as an architect.
D.J. identified the discreet sales steps and then documented the sales process. Then he moved two warehouse workers into the showroom to follow the sales scripts.
D.J. limited the complexity of the home remodeling solutions. Instead of unlimited solutions, the number of offerings were reduced to 12. This helped customers in their decision-making by focusing on their options. It also allowed the salespeople to improve by making the script repeatable. When something is repeatable, it can become perfect.
In the showroom, D.J. displayed videos of finished jobs, including customer testimonials. Satisfied customers performed the heavy lifting of selling. The “salespeople” were then able to act as trustworthy customer assistants. Do not introduce your people to customers as salespeople; introduce them as product experts.
By 2019, D.J. had shifted from closing all the deals to half of them. He never attended a customer meeting alone. That way, he could hand off the follow-up to his associate. D.J.’s goal is to perform no sales, but it’s a process, not an event. In 2020, when demand for his services took off, D.J.’s company closed deals it wouldn’t have been able to if it was suffering from the owner’s dilemma.
It’s OK to participate in some of the sales, especially if you’re fine owning a lifestyle business where you’re happy to have merely created a job for yourself. But, if you want to increase revenue and have more freedom, then you need to architect a plan to scale sales.