Five Actions to Prepare Your Consulting Business for Sale

As we described in a recent article, the consulting M&A market was highly active in 2016, with diverse buyers pursuing rapidly growing firms with domain expertise in “hot” horizontals and verticals such as Cloud Services, Healthcare, and Digital Transformation. We expect an active consulting M&A market to continue in 2017. For consultancies evaluating a potential sale transaction, here are a few steps you can take before going to market that will make the process more seamless, maximize the number of buyers interested, and ultimately, drive value for you and your shareholders:

1) Build a Team: We see many founders of consulting firms who lead a fantastic business, have meaningful industry/client relationships, and are truly exceptional at what they do. The problem? They haven’t trained the next layer of leaders. Acquirers are often scared away by key-man risk. To avoid this common pitfall, focus on diversifying key-man risk by mentoring the next layer of leadership, and having them lead the management of client accounts. Proper incentive mechanisms and opportunities for growth will inspire employees to step up to the plate, and start sharing the responsibilities of company leadership.

2) Invest in Infrastructure: It can be tempting in a consulting business (especially when preparing for sale) to make the company as profitable as possible by hiring only billable employees. However, it is important to build a “well-oiled machine” and repeatable business processes. Firms need adequate infrastructure – HR, finance, recruiting, and training; access to databases; proprietary processes; and other tools – to do their best work. Invest in the processes that make your business run smoothly, and it will make the jobs of your billable employees highly repeatable, efficient, and in turn, more profitable.

3) Have a Clear Vision of Who You Are and What You Provide: Oftentimes, consultancies take on a wide variety of projects for the sake of revenue.  As a result, their portfolio of services and solutions can be confusing to acquirers. Streamline your service offerings to focus on your strengths, and organize the business accordingly. It is also helpful to retool your sales strategy and financial reporting to mirror your service offerings, so the market can clearly understand who you are and why you are the best at what you do.

4) Enhance Brand and Market Awareness:  Brand and market awareness provides tangible value – and acquirers will pay more for it. There are a few ways you can boost your brand and market awareness in a relatively short timeframe. One: apply to industry lists. Whether it is in Forbes or your local business letter, getting your company’s name published helps demonstrate market awareness. Two: modernize your web presence. An easily navigable and interesting website is extremely valuable in today’s digital world. Three: create content. Thought leadership content, such as blogs, whitepapers, and webinars, are a great way to demonstrate your company’s expertise and innovative thinking.

5) Get Serious About Company Culture:  Consulting businesses are all about human capital. Established promotion criteria, utilization and “burn-out” monitoring, continuing education, and competitive compensation packages can help you hire and retain best-in-class employees, and establish your firm as a premier consulting business.

We hope these tips are helpful for you in 2017 – reach out to us for more advice on preparing your consulting business for sale at info@clearsightadvisors.com.