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Is this a familiar scenario?
You’re this close to landing the biggest deal you ever
encountered. The solution you are pitching is nearly one
hundred thousand dollars and will keep you busy the
better part of the long Winter months ahead and possibly
into the Spring. You planned about 4 months worth of
consulting and are eager to begin. Now, at the final
meeting with your client, you are about to get the sweet
answer you’ve been working hard to get for months.
There’s not much else that compares to the excitement
of getting a signature on a huge deal you’ve been
working on for what seems like forever. But here you
are, actually watching the client sign your order.
You’re set. You go out
and celebrate that night with your spouse and talk about
how much you deserved this and what it meant to your
income and, of course, your business. The long hours.
The pressure. The sacrifices. But now that’s all over
and you got what you deserved. A huge contract that will
yield a lot of consulting dollars for your relatively
small operation.
The next day you order the
software from your vendor. It arrives in a couple days
and having already set up the first meeting with your
client, you set out with everything you need to begin
work. The first few weeks would include discussions and
interviews for the discovery analysis. Then the planning
phase. And finally the customizations, implementation,
training, and roll out. The plan is perfect and you are
the right man, or woman, for the job.
Reality
Hits
Did you ever wake up out of
a dream and have no idea where you are or how you got
there? Well, that’s how you feel months later when you
realize that your project is coming to a close. It is a
great success. Your client loves you. The users are
getting on board with the project and are very
enthusiastic. The program works like a charm. Everything
is coming together. Except for one thing -- Your
Business! You suddenly realize as you finalize this
long-term project that your business is totally
stagnating, and you have no idea how you got to that
point.
As if you were a prisoner
being paroled after a 20 year sentence and seeing how
society has totally changed in your absence, you emerge
to find that you have absolutely no opportunities lined
up to pursue. Worse than that, your vendors thought you
went out of business. You lost all your status as a
premier reseller, which means you lost all the
privileges from your vendor’s reseller program; such
as leads, special promotions, co-op dollars, attention
from their local field representatives, and most
important, a higher discount rate that is based on
volume sales. You also shot yourself in the foot by not
generating any leads yourself through marketing
activities you could have been doing over the past
several months. So your pipeline is dry, no one in the
area knows of your business any more, and you are back
to ground zero.
Has this ever happened to
you? If it hasn’t it could. In this example, months
ago you thought you were such a huge success, pulling in
a large deal involving huge revenue for your business.
How were you to know that at the same time you were
destroying the very business you were trying to build?
What
To Do?
If this, or something less
dramatic yet similar, has ever happened to you, then you
could be experiencing the Saw-Tooth Effect. What’s the
Saw-Tooth Effect? It’s all very simple to understand.
But not many businesses realize it until it is too late.
Here’s how it works. Draw a horizontal line. Above the
line are marketing and sales related activities. Below
the line are technical and implementation related
activities (See Figure 1). In the beginning of your
sales cycle you spend all your time above the line
marketing your business, generating leads, and finally
closing a sale (Position A). Then you “disappear”
for a finite amount of time below the line implementing
the solution you just sold (Position B). When that job
is completed, you go back to the above-the-line
activities (Position C) and start all over again. This
process repeats itself until something breaks –
usually your business.
While below the line, you
do nothing above the line. And, when above the line, you
do nothing below the line. Pretty simple and quite
binary – you do one or the other. But the problem is,
when you’re below the line, no one is above the line
generating business and finding your next opportunity
for when you rise above the line again, or re-emerge
from your project implementation.
Recommendation
This scenario is a classic
example of what happens to smaller VARs, Resellers and
System Integrators who haven’t staffed up properly. To
resolve this self-defeating situation you, as the
business owner, may need to do a lot of soul searching
to decide what it is you are really good at versus what
you really like to do. You may realize that you really
enjoy selling solutions and would benefit most by
concentrating all your energies on the sales and
marketing activities (above the line) that your company
will need to do succeed.
Let’s say that is the case and
you decide to focus on sales and marketing. You’ll
then need to hire staff to do all the technical work.
Now, you don’t go overboard and hire more people than
you could initially put to work. Let’s say you
remember how important it was to do the up-front
planning and discovery analysis, not to mention the
on-going project management. So you first hire a project
manager who is experienced with doing the planning
phase. Next, you hire a technician who would concentrate
on implementations. Your project manager, or even you,
would do the training initially until you have enough
business to sustain a full-time trainer. But first
things first.
Your plan will be to spend
your time marketing, selling, and running your business,
all above-the-line activities, while your technical
people spend all their time below the line (See Figure
2). While they are doing the implementations, you’ll
be generating new business for them to implement. You
will build and feed your “Pipeline”.
You have to go out and catch the
lion. Then you bring it back and throw it into the tent
where someone else skins the lion while you go back out
and catch the next one. The question is – Do you want
to “catch” the lion or “skin” the lion?” This
will, and should, have a dramatic effect on your
business; specifically it’s growth and success. In
time, as your business continues to grow you can start
hiring sales people, which will allow you to focus more
on running your business, or even taking some
well-deserved time off.
Summary
You have undoubtedly looked
at a saw and noticed how the teeth go up and down and up
and down and so forth and so on. But, have you ever
noticed a similarity in how your business might be
following the same pattern? Sales go up for a while,
then down, then up again and down again, repeatedly. If
you haven’t noticed, you might want to take a closer
look.
One telltale sign that you
suffer from the Saw Tooth Effect is your purchasing
patterns. Do you purchase a lot of software every other
quarter, for instance? Or, is there some sort of pattern
that has you purchasing something now, then nothing for
a while, then something again, then nothing for a while,
and so on? These are signs that you might be going
through a specific mode of operation of buying product,
implementing it, then buying more, and implementing it,
over and over again, instead of having a consistent and
perpetual flow of selling and implementing on a
continual, parallel, and steady basis. You cannot do
both selling and implementing. You never see a NASCAR
drive get out and change his own tires, do you? If they
did, they’d lose the race every time. You need a team
of specialists who focus on their own aspect of the
business.
The Saw Tooth Effect is not a
healthy business model for your company since it
doesn’t allow you to sustain a consistent revenue
flow. The scenario discussed earlier was perhaps an
exaggeration of what is happening in your business,
although I have seen this exact thing happen to all
sizes of resellers much too often. But even if it
reflects partial reality, it is something to be
concerned about. It’s all a matter of balancing
resources. Some resources should be dedicated to
marketing and selling, while others should focus on
installing and implementing. Using the same resources to
do both can cause the Saw Tooth Effect and result in
inconsistent revenue and growth for your business, which
can lead to a variety of negative effects including
harmful relationships with your vendors, not to mention
your accountant.
As you plan your business’
future, be sure to take into account the Saw Tooth
Effect and how you can avoid it. It will truly liberate
you from the prison of inconsistent business growth. |
