How IP can make your profits fly

By Adam Blatchford, Associate, Equiteq.

Smart Scaling is all about growing revenues and profits while also building your equity value, as opposed to doing one at the expense of the other. Intellectual Property is central to that, it is a ‘win-win’ because buyers want it and it drives profitable growth in your firm.

Whether your firm generates revenues of $20m or $100m, IP differentiates you. It ensures clients buy your services, means you can deliver profitably, and makes investors love you. This blog will focus on how to achieve that in your firm.

What is IP?

In simple terms, intellectual property is any knowledge recorded and maintained as a usable business asset. In most consulting firms, this means ‘trade secrets’, such as process maps, methodologies, training systems and software tools, rather than just copyrights and trademarks.

There are three main types of IP:

  • IP to market the business
  • IP to deliver business
  • IP to run the business

All three are important, but in the context of Smart Scaling we will focus on delivery IP. See here for a deeper discussion of the three types.

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Creating a C-suite to build equity value

If you own a knowledge-led services firm in a sector such as consulting, IT services or media and you want to grow revenues to, say, $30m, it is unlikely that the expertise of the founders will be able to drive this. What you need is a team of specialist C-suite executives on board.

However, at some stage a founders-only team will put a break on growth. Here are three reasons why founders maintain the status quo and fail to see the damage it may be doing to their business:

  1. Growth creeps up on you so you don’t notice the degree to which the requirements have changed

During the start-up phase your main focus will be delivering on your particular domain expertise, but as time goes by you’ll spend more time on anything from finances to dealing with people issues.

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Equiteq advises Aecus Limited on its sale to The Hackett Group Inc.


Equiteq is pleased to announce the sale of its long-term client, Aecus Limited, to The Hackett Group Inc. Aecus is an award-winning European consultancy that helps clients optimize business process outsourcing (BPO), IT outsourcing (ITO) and robotic process automation (RPA) through benchmarking and implementation consulting.

Equiteq acted as exclusive financial advisor to Aecus Limited and its shareholders on the sale of the business having previously worked with the company for over 8 years in a strategic advisory capacity. The transaction closed on April 7, 2017.

Discussing the transaction, Aecus Managing Director Rick Simmonds commented, “We are really excited by this – joining The Hackett Group represents a fantastic move forward for Aecus. The strength of The Hackett Group’s brand combined with the breadth of complementary services will enable us to serve our clients even more effectively and will provide our people with greater professional opportunities.”

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Principles of Maximizing Profitability

There may not be a more fundamentally important topic for consulting firms than improving profits.

Shareholders ultimately want a return on their investment and buyers are looking for evidence of healthy growth, while strong profitability is required to sustain growth and equity realization.

The levers that need to be pulled to improve margin – revenue and cost – might be well understood, but the combination of activities required are often more nuanced.

We’ve identified the top strategies firms can use to start improving profits now:

  1. The leadership team must make profitability an ongoing focus

Profitability has to become embedded in the leadership team’s mindset for sustainable margin improvement to be successful.

Achieving this requires strong communication around accountabilities, clear success measures being established and tactical activities – such as margin exception reporting, resource management, and utilization forecasting – becoming integrated into regular business updates.

Once a shared understanding of what success looks like is established within this team, firms can create strategic work streams – such as market expansion or IP development – and make people accountable.

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Lift & Shift: following the rise to cloud migration

For every consultant who spotted the cloud opportunity and raced to embrace it, there will be another who is still not quite fully convinced.

Clients have spent hundreds of thousands – or even millions – on their on-premise solutions, they are comfortable with their data centres and have established long-term relationships with their maintenance engineers. They’re not ready to give all that up in one go. And, as long they resist a wholesale move to cloud, there’s a role for IT consultants and specialists to offer support for these traditional models.

But the pace of change is quickening; clients have tuned in to piecemeal migration and with software vendor innovation being cloud-focused, the largest traditional consulting firms have seen the writing on the wall, turning to mergers and acquisitions (M&A) as the only credible way of rapidly building their cloud capability.

Shaun Fröhlich is UK managing partner of Incredibleresults, and works with leadership teams to accelerate value growth.

“We are all on a spectrum,” he says. “Many believe the world is changing because of the cloud and it is spurring them on to cash in their chips on their existing business, but there is an almost equal number that remain neutral and see it as an evolution, not reason to trigger a capital event.”

Despite the cloud offering faster, less disruptive deployment and easier global enablement – while cyber-security concerns have increasingly been addressed – migration to the cloud isn’t yet wholesale for most organizations.

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The Australian M&A market outlook

A recent report from Source Global Research suggests Australia has overtaken the US and UK as the second most attractive consulting market in the world – only behind the DACH market (Germany, Austria and Switzerland).

International firms see the Australian economy as a resilient market – which is perhaps no surprise given it’s enjoyed 25 years of consecutive growth – and a strategic outpost to further their goals in Asia. According to the report, the use of consulting services and advisors in the country is now at a level that will garner considerable interests from international businesses and, we believe, act as a catalyst for a significant increase in M&A activity in the coming months.

What’s driving demand for professional services consultants?

The professional services (PS) sector is an important contributor to the Australian economy, employing more than 2.2 million people. Growth in the industry has been driven by demand from complex businesses, which rely on consultants to introduce new innovative processes to improve their products or services and simplify the way they operate.

This trend is reflected in the increased demand for the output of highly skilled labor, the growing use of outsourcing, and a range of technological advancements.

In the last decade or so, Australia has seen sectors such as financial services (FS), mining and engineering grow exponentially, which has driven demand for specialist skills and personnel, creating a high-value and service-based economy.

Geoff Stalley, Partner at Deloitte Australia, said: “Consultants and advisors are in huge demand in Australia at the moment. For instance, the energy and mining sector are increasingly relying on expert consultants to help them build more efficient models and operational technologies to manage risks and significant operating costs.”

And, as technological developments continue to increase the need for a skilled workforce, we can expect fixed wage levels to remain high, attracting even more consultants.

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