The Rainmakers
To whom the firm is beholden
A rule of thumb of in professional services business is that billable resources, at the minimum, must produce
3x their cost to company. Their services are the sources of revenue for the firm. Let me explain giving an example of
an advertising agency, and its client, a technology company, IBM.
As part of the contract of this firm with IBM (the account), the billable
resources are: account management person who is the firms regular interface
with the client responsible for taking client brief (understanding client communication
requirement) and ensuring delivery of firm’s services, raising of estimates and
invoices, and collection of dues.
The account management person is supported by creative teams of copy
and art, data, computer artist, production person etc. Each one’s services
are billable at a rate per hour.
There are also persons like the overall boss of the firm, the boss of
the unit, who are billable if they are actively involved in the account. The back-office
staff, like the accountant and other staff are not billable.
With that background, if a billable person, the account manager’s cost to
the company is Rs 100 per hour and he works 200 days on the account for 8 hours
a day (weekends, annual holidays, privilege and sick leave exempted), his cost to
the company is Rs 100 per hour x 200 days x 8 hours i.e. Rs 1,60,000 per year. The cost per hour is calculated backwards from the cost to the company for the billable resource.
The account manager needs to ensure he bills 3x to the company (IBM)
i.e. Rs 1,60,000 x 3 = Rs 4,80,000 per annum for his services. Likewise, the other team
members who will be on different rates per hour.
The idea of 3x is to cover the cost of the billable resources (1x), overheads
of the company (1x), like rent, electricity, back-office staff, overall unit
head costs etc., and toward a reasonable profit (1x) of ~30%. Profit essential
to expand and reinvest in the business for offering better, wider, and deeper
quality of service to the company. Healthy profits help in the growth of the
firm and the client company.
In this model, billable resources are added when business grows and
retrenched when business drops. The gestation period is an investment the firm
makes which must be made up with sufficient revenue and profitability when the
full team is in place.
Profitability comes from 100%+ utilization of the billable resource on
the client account, with every hour billed, and dues collected within the credit
period. Anything less in utilization percent or more in credit period, incurs
interest costs and wipes out the profit potential.
When investment costs are not recovered due to stunted growth of the
business, the business proposition becomes less attractive to the promoter or investor,
cramping future investment in the business. If even operating costs are not recovered
it only means shutters for the business.
The point of the long background is to highlight the importance of the ‘rainmaker’
who can bring in new business at a steady rate. The predictability of new
business acquisition helps reduce the gestation period to operationalize an
account by maintaining a bench strength.
More billable resources get added with expanding operations. Profitability
is enhanced with better management of overhead costs (real estate, fixtures, furniture,
power, facilities etc.) and back-office staff sharing, who are part of the headcount
but are not billable. Efficient utilization of the non-billable staff adds to
the bottom line. Often, back-office staff are outsourced to make the headcount revenue
and profitability look good.
Timely technology upgrades make the operations speedier and the output more
accurate. When more of the new business comes from the existing customers, there
is a reduction in new business development costs. The saving goes straight to
the bottom line further improving profitability. If there are occasion for
non-fee billing such as commission on production costs that also adds to the
bottom line significantly since there is no resource cost attached to it.
What are the rainmakers like?
They are part Golden Retriever – to sniff out where new
business exists; part Greyhound – possessing stamina to pursue their
prey; part Bull Terrier – showing little patience and tolerance for
competitors chasing the same business, forever thinking up ruses to scuttle
their moves; part Great Danes – hardworking, pulling their weight,
putting in long hours to pepper the prospect with useful information to stay top-of-mind
in the prospect’s mind; part Border Collies – herding the team in the
company to prepare presentations, propose innovations, and creative way of
addressing the client’s problem to bag the business; part Dalmatian – having
a certain presence through size, a booming voice, sharp intellect, or panache that
the prospect finds difficult to erase the image of the ‘spotted’ breed from his
mind even when the person has left his presence.
They work on triple insights: insight of the customer/client –
what are his hot buttons when pressed gets a positive reaction; insight of customer’s
customer – what will make the customer’s offering the preferred 'buy' of
the end customer; and insights of the market – what are the dynamics
that plays to the customer’s strength, and more importantly, the weakness that
can be eliminated by engaging the firm and its resources.
The bottom line in this case is the focus of the rainmaker on his own
and his client / customer’s personal needs and wants, aspiration and fears, success
and hindrances in pursuit of their respective missions.
It must be win-win – not just in acquisition of the new business – but repeat
business for the firm which saves on new business development costs. The latter
is often not the concern of the rainmaker though the success of the business
overall does add to the rainmaker’s bonus, apart from what is personally
attributed to him, when the account is acquired and the potential business size
in dollars is added up.
Want to be rainmaker? Don’t pray for rain. Pray from
the rain.
Rainmaker operates from the belief that he already has the client’s business.
A reviewer of Ernest Holmes’ book Science of Mind, explains the phenomena
of praying ‘from’ rather than praying ‘for’.
“Because
our perceptions determine the nature and quality of our experience, we cannot
experience what we do not perceive. So, we do our Spiritual Mind
Treatment from the consciousness that we already have what we want – we just
need to realize it.
“It’s
kind of like that phenomena when a person goes to the bank for a loan saying
they lack money, the bank will turn them down, but turn around and throw all
sorts of credit cards at another person who doesn’t ask, because that person
has all the money they need.
“That
contrast of praying ‘for’ something and praying ‘from’ the thing itself is
Ernest Holmes’ distinction between having faith in God and
having the faith of God. We must begin to pray from prosperity,
pray from health, pray from right relationships, and pray from perfect
creativity.
“This
is the great mystery of life. We must be clear on the ultimate truth that we
are living the life of God, as God.”
Rainmaker, the business is already
yours. Go get it.
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