A practical guide to improving margins

We recently ran two 30-minute webinars on putting margins at the centre of your business. The first of these outlined the steps businesses must take to improve margins which you can view here, while the second was a more specific look at how to implement these steps in order to improve margins in a sustainable way which you can view here. This week, we’re looking at some of the questions asked during the second webinar.

Our sales leaders are all about closing the deal and trying to increase the size of the deal. But our delivery staff are often challenged to translate that into the expected profits, can you comment on that?

When we look at the root causes of problems with margins, it’s often the lack of collaboration between sales and delivery. We commonly find this lack of collaboration can result in delivery managers discovering deals aren’t scoped properly, or the wrong skillsets were assigned.

It’s therefore important that delivery managers have early visibility of the pipeline to get resources lined up for the right client and at the right rates. That can only happen if there’s collaboration, and with both sales and delivery having access to the same information.

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Why succession planning is difficult – and how to get it right

By Penny de Valk, Associate Director, Equiteq

One thing you need to assure future owners of when preparing for an exit is leadership capability and stability, as well as the continued positive effect of this on profitability and growth. Ownership succession generally involves management succession and because buyers buy people and great leadership, it is natural for them to want to assess the quality of bench strength, as well as the planning that has gone into ensuring the right people are in the right roles. Your management succession plans throughout the company are an aspect of good governance that you can expect to have evaluated in due diligence. And CEO succession in particular will be critical. It is a key responsibility of the Board and is central to good governance.

Why the lack of planning?

So why do so many companies not prepare well on this front? Often succession planning is mistakenly just not seen as a priority against the immediate operational requirements of getting the company to grow and become profitable.

Sometimes this lack of focus relates to the size of the business. Even in some mid-size organizations, without a big HR function, there are few resources to manage succession compared to the formal talent programs enjoyed by larger organizations. Yet being a smaller organization makes it even more important, as not only is the company very exposed to key talent leaving, but those firms can also have a shallow pool of talent to draw from and are unlikely to have the rotational assignment opportunities that allow people to build their skills and experience.

Sometimes firms feel that planning around succession can be distracting for the individuals and the company and create a political tone in senior management that isn’t helpful.

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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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Thinking about expanding internationally? Four common misconceptions every business owner should know the truth about

international-expansion-cropped

By Adam Blatchford, Associate, Equiteq

For many business owners, establishing a strong local presence is only the first step on their road to success. Once they’ve achieved this, they want to continue growing the value of their firms, and many are tempted by the thought of expanding geographically beyond their home markets. It is a seductive idea littered with potential pitfalls that could not only jeopardize the business’s financial position but also significantly erode equity value.

In this blog, we look at how you, as a consulting firm owner, can make smart decisions around ‘if’ and ‘how’ to scale your business abroad, to ensure you are protecting and building your company’s value rather than hindering the attractiveness of the company to future buyers.

We’ve compiled some of the most common reasons business owners give for expanding internationally, and the potential risks that those reasons might be hiding.

1. We have exhausted our home market

There is a significant opportunity cost to international expansion; while it can provide opportunities to grow, it is usually far easier to grow in your current market where you already have relationships and credentials. So it should only be attempted if you have truly saturated your market:

  • Be absolutely certain that other factors are not hindering growth

i. Check that your proposition correctly resonates with your client’s issues
ii. Examine if you are competing with internal capacity
iii. Assess your account management to ensure you maximize your current clients
iv. Confirm that your sales focus is on the right type of client

If these issues are the true cause, rather than a saturated domestic market, then they will hinder your progress in the new market too.

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