Welcome to the Owner Institute Newsletter where we talk about getting owners working on and not in their businesses.

In this week’s issue:

• The "Darth Vader's Admiral" problem

• Why founder sales can't be replicated early on

• When and how to build a non-founder led sales function

Quick Hits

1. 📅 The U.S. Chamber of Commerce is set to host its Small Business Day event on May 1, 2024. The hybrid in-person/virtual event will feature discussions on growth strategies, AI applications, industry trends, and policy updates. More information and registration here.

2. 🗣️**SBA announces major reorganization which is set to reduce its workforce by 43% and return to pre-pandemic staffing levels.

3. 🏦Fed Maintains Interest Rates: The Federal Reserve opted to hold interest rates steady, a decision that impacts small businesses' borrowing costs and economic outlook. No relief on those 7a loans yet!

Deep Dive:

Why Hiring a Sales Person Too Early Will Fail (And What to Do Instead)

Fair warning: If you're struggling to grow past $1-2 million and think hiring a salesperson is the answer to working fewer hours, you're not going to like what I'm about to say.

I've watched dozens of business owners make this exact move while trying to escape the daily grind. Hell, I did it myself. And it almost always ends the same way - with a fired salesperson, wasted money, and a business that's still completely dependent on you.

I call it the "Darth Vader's Admiral" problem. Sounds like a cool job until you get force-choked six months in.

The Expensive Cycle of Sales Hires

Here's how it usually goes:

1. Your business hits $1-2 million with you as the primary (or only) salesperson

2. You're drowning in work and think, "I need to clone myself"

3. You hire a sales person with a hefty base salary and commission structure

4. Six months later, they've closed little to nothing

5. You fire them and start over

I went through THREE salespeople this way. Each one was a great person who I genuinely liked. And each one failed spectacularly.

Why Early Sales Hires Fail

The problem isn't (usually) the person you hired. It's when and how you hired them.

Here's why early sales hires usually fail:

1. You're selling YOU, not a product

At the early stages, especially in service businesses, clients are buying YOU. Your reputation, your expertise, your relationships. That can't be transferred to a hire.

2. You have no sales system

You're probably selling based on intuition and relationships. There's no documented process for someone else to follow.

3. You're expecting miracles

The people who can build a sales function from scratch while closing deals while keeping it authentic to your vision exist but they are making $2m a year ant Oracle or Salesforce. They're not coming to work for your $1-5M company.

4. You're hiring too junior

Desperate for help, you promote a go-getter from within who has never actually sold before. They're set up to fail. They aren’t you and they aren’t that Oracle sales person either.

What To Do Instead

So if hiring a salesperson isn't the answer for building a business that runs without you, what is? Here's the path that actually works:

Stage 1: Optimize your time ($0-1M)

Don't try to hire a salesperson yet. Instead focus on effective delegation:

• Get an assistant to handle your calendar and email

• Delegate all non-sales tasks

• Create simple follow-up systems

• Say no to non-ideal clients to focus on better ones

Stage 2: Document and systemize ($1-5M)

Before you can hire someone, you need to know what actually works:

• Hire a sales admin to do all the logistics to free up your time

• Track every lead and what happened to it. Get a CRM system

• Identify your actual sales process (not what you think it is)

• Create sales collateral that explains what you do

• Start building a reputation beyond just you

Stage 3: Hire for support, not replacement ($5-10M)

Don't try to replace yourself yet:

• Bring on junior people (beyond the admin) who can handle parts of the process. This helps scale founder sales

• Document your sales conversations. What works? What doesn’t work?

• Start to document and refine the sales process that works

• Keep doing the critical customer/client meetings yourself. You’re still the closer but you don’t have to be in every step of the way

• Create clear metrics for what success looks like

Stage 4: Hire a professional sales leader ($10M+)

Now you're ready for a real sales hire:

• Look for someone who's built and led sales teams before

• Expect to pay well (base + commission)

• Give them authority to build their function

• If they don’t measure, don’t hire them

• Be prepared for 6-12 months of paying their salary before you start seeing results

My Expensive Lesson

At my company, I tried to shortcut this process. I promoted talented people from within who had great client relationships but no sales experience. I expected them to figure it out on their own.

It was like throwing them into the deep end without teaching them to swim. And then being surprised when they drowned.

The worst part? These were valuable team members who could have thrived in the right role. Instead, I set them up for failure by asking them to do something the business wasn't ready for.

The Real Solution

The uncomfortable truth is that until your business reaches a certain size, YOU are the sales department. There's no shortcut around that.

Your job isn't to replace yourself in sales too early. Instead, focus on:

1. Making your selling time as effective as possible

2. Building systems that can eventually be transferred

3. Growing to a size where you can afford a true sales professional

4. Creating a path for that person to succeed

The good news? If you follow this path, you'll actually grow faster than if you rush to hire. And when you do eventually bring on that sales leader, they'll have something to work with instead of starting from scratch.

Remember: Everything in your business is your fault. You either hired it, did it, or allowed it to happen. Sales is no exception.

In this episode of the Small Business Black Holes podcast host Alan Pentz sits down with Tyler Hortin, co-founder of Lion Energy, who shares his journey of growing a bootstrapped emergency power solutions company from its founding in 2012 to $100 million in revenue, focusing on sustainable growth, product innovation, and strategic decision-making.

In this episode you’ll learn:

• How to scale a bootstrapped business through disciplined reinvestment and strategic product development;
• The essential balance of managing growth while maintaining profitability in a capital-intensive business;
• Why quality control and extensive product testing are crucial for maintaining customer trust and reducing returns;
• How to navigate the transition from product-focused to technology-driven business model;
• The framework for making strategic decisions about product development and R&D investment;
• Why distributed power storage solutions are becoming critical infrastructure beyond environmental benefits;
• How to manage the crucial challenge of scaling your team alongside rapid business growth;
• The importance of balancing multiple sales channels while maintaining product quality and customer experience.

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