If a high percentage of your company’s revenue is undertaken personally by you or your fellow equity holders, you’re a Rainmaker.
You’ve got a strong ability to influence customers, but you may be lowering your company’s value.
Did you know almost half of all business owners will hit the same stumbling block?
Avoid the downhill trap of becoming the Rainmaker and make the transition to Architect of your business.
Introducing The Rainmaker
Early in a company’s evolution, Rainmakers are essential. Their ability to secure new business and maintain customer relationships generates revenue rather quickly. However, research from the Value Builder System suggests a plateau is on the horizon. This isn’t a damaging revelation but quite the opposite. Encountering the Rainmaker’s Dilemma is an indicator of a successful business. Without highly skilled, driven, and motivated owners, most companies fall flat.
The Rainmaker’s Dilemma isn’t due to a lack of expertise or effort but a lack of time. There is a finite number of hours in the day to bring money in the door. If an owner continues to be the only Rainmaker, they will eventually reach their capacity. The analysis suggests that once maxed out, a Rainmaker’s revenue growth stalls, and the transferrable value in the business also flatlines.
Data from the Value Builder Questionnaire, a survey designed to assess how valuable a company currently is, analyzed the role of the owner by studying responses to two questions:
- How much of your company’s revenue do you personally generate?
- Do you know all your customers by name?
The analysis showed two defining characteristics of a Rainmaker.
The first is an owner who generates 75% or more of the company’s revenue. These are owners who serve as their company’s economic engine and are likely the primary sales and marketing resource. Having conceived the original vision for the business, they can often pitch their product or service effortlessly.
The second indicator of a Rainmaker is an owner who knows all their customers by name. These are owners who are exceptional at developing and maintaining customer relationships.
The Rainmaker’s Impact on Company Value
Companies with Rainmakers are deeply impacted when exiting the business.
The Value Builder data shows that only 8% of Rainmakers have received a written offer to acquire their business. This demonstrates that companies with Rainmakers are less liquid and less valuable, making them more difficult to sell.
Only 15% of companies with Rainmakers receive a premium offer (greater than 6x pre- tax profit) to purchase their business. This demonstrates that the majority of Rainmakers are getting lower acquisition offers.
To solve the Rainmaker’s Dilemma, owners can evolve into an Architect.
Like Rainmakers, Architects take advantage of their unique skills. The critical difference is that they leverage their strengths to build systems and processes that effectively replicate what they do. In addition, these activities have a longer payback period, often taking years to bear fruit. Once implemented, Architect activities are proven to have an immense impact on company value.
For owners identifying with the Rainmaker’s Dilemma, there are nine strategies to kickstart the transition to becoming an Architect. Download the Rainmaker’s Dilemma eBook for actionable strategies to maximize the value of your business.
Podcast: Solving The Rainmaker’s Dilemma
Tune in to Succession Stories Podcast E72 to learn more about the challenge of the Rainmaker’s Dilemma, traps to avoid, and actions you can take to increase your company’s value. Host Laurie Barkman is joined by Amy Franko, strategic sales expert and author of The Modern Seller.