How to increase the value of your consultancy
If you’re thinking of one day selling your consultancy, or just want to plan for the future, Jonathan Kirk and Jack O’Hern offer advice on making your business more valuable.
There are only four fundamental ways to grow your consultancy:
• Increase the number of clients (of the type you want);
• Increase the frequency of project;
• Increase the project value or ‘average sale’; and
• Increase the effectiveness of each process in your business.
All of these will make your business a more attractive proposition for an acquirer, should you choose to sell.
That sounds straightforward enough. However, growing the consultancy and planning for the future can be an uncomfortable process of seeing your business as it really is. Inevitably, some of the things you hoped and anticipated about your design consultancy are unlikely to be the case. It’s time to face some uncomfortable questions. Is your business worth anything near what you think it is? Are you indispensable to the business or simply hindering progress and halting a succession plan? Are you running a business, shaping and growing it for the future, or do you simply have a job within the business?
Knowing where you want to go is vital, but knowing where you are now is equally important. Consensus about how to reach your destination is key. Too many consultancies seem to drift, lacking business objectives and a robust plan of attack. If you have other shareholders or key players, do they share your vision and aspirations, and are they prepared to shoulder the burden in achieving an end goal? Who are the rising stars within your business? Are you an attractive proposition to those rising stars in order to retain them?
There are some clear building blocks to getting your business to a point where it becomes more viable. Firstly, you need to know about the strengths of your client relationships and how you are perceived by them, warts and all, so that you can fine-tune accordingly. An independent annual client survey tells you about your perceived strengths and weaknesses, reveals any gaps in your skill-set relative to clients’ current and future needs, highlights client-development opportunities and acts as a barometer for the loyalty of your clients.
Secondly, is your positioning (point of difference) as sharp as it could be? Specialist or generalist, and what are the implications of this? Needless to say, the positioning should have an internal reality, not just something that sounds good to say at pitches. Allied to this, your business development approach is key. Not just your new business plan of attack but a structured and systematic approach to client development. How is client development embedded into the culture of the agency?
Thirdly, potential acquirers will be looking for business maturity and this is to be found in your defined approaches to the various functions of the consultancy. What is your approach to client service? (Great client service is as much about how you organise yourselves). How do you approach specific areas of consultancy such as brand positioning, brand architecture, brand naming or innovation? What is your role in the business – technician or owner? Do you have a grown-up HR approach? Are you paying too much in tax, as a business, or personally? Defined approaches help to position the consultancy as a mature business. They help to ‘professionalise’ the business and that shines through externally.
Of course, all this takes time and effort. It’s a stage-by-stage process to building the agency and its value. It needs to be planned and implemented, not just hoped for as another year goes by. Executed properly, you have a business that is ready to sell, or you have a business that is worth keeping.