7 drivers to get your firm into the premium value zone

Man hands are operating abacus

To the uninformed it seems implausible that a consulting firm could have hardly any value at all. After all, these are knowledge based ‘people businesses’. How does a buyer place a value on an asset that could evaporate if everyone leaves the day after a deal is signed?

Whatever your business model, whether it’s pure consulting or otherwise, the likelihood is that there is insufficient tangible value to be found in your P&L or balance sheet. It’s the inclusion of the intangible assets that provide this value and they can’t be found in any financial statement.

The only way a buyer is going to pay a premium price for your business, is if these intangibles are converted into confidence and belief that the next 3 years provide almost guaranteed growth.

Firms that inspire this confidence can cite 7 clear drivers of sustainable growth, underpinned with facts and data.

1. We know exactly who our strategic clients are

Do you know the ideal profile of the companies in your target market(s) where you have the greatest right to win against the competition?

If so, your buyer can then get excited about your focus, how he can take you and your IP into his clients that look the same, leverage your capabilities and increase fee income per client.

2. Here’s the rate of penetration to date and space we can fill

Have you built and maintained a database of current and potential strategic clients covering the entire addressable market?

Your knowledge of target market size and current penetration will demonstrate how you’ve scaled so far by design. A buyer can see year by year penetration rates, win rates and how that’s improved. He can also understand the white space left to fill into the future.

3. This is our database of decision makers and relationship growth

Have you researched and populated your database with a dataset of contacts comprising the decision makers and influencers in each target client?

A buyer will be able to take this data and understand how you have sold to and grown accounts. He will see that not only have you acquired great strategic clients, but you have both the data and relationships to continue the momentum.

4. Here’s how our UVP is growing our average engagement size

Are you selling a Unique Value Proposition that appeals to decision makers with big business problems and deep pockets?

If so, your buyer will be able to see how you’ve grown your UVP over time, resulting in very attractive engagement sizes he wants to replicate across the globe.

5. This is our growth and retention rate by strategic client

Are you very sticky to your clients, relationships last a long time and lifetime fee income per client is growing?

In an ideal world it would be a great asset to show 3 year contracted business to buyers, however in the real world the next best thing is to show client sell-on growth and long term retention rates. Buyers of consulting firms treat this as a proxy for contracted business and recurring revenues, suitably discounted, but still a big asset.

6. Look at our historic and future scale plan into adjacent spaces

Have you moved from cell to cell in your service/market matrix, by filling only the adjacent spaces symbiotically from your core?

When the buyer sees this picture, he can see not only the quality of your strategy, but also salivate over the blank canvas of white space to fill, once his brand and coverage is added to your capabilities.

7. Look at our historic forecast accuracy

Has your 12 month revenue forecast been honed over time into a reliable view of reality, with a margin of error to +\- 20%?

When you present your business to a buyer, no matter how well you’ve performed historically, he will treat your forecast with extreme caution. However when you show him the forecast data alongside all the imperatives above, his belief in the future will soar.

Key Takeaway

The only way a buyer will gamble on a high risk firm is if he mitigates his risk by paying a very low price up front and/or an earn-out highly contingent upon future results. However he will pay a premium for a firm that looks like a rock solid financial risk, irrespective of synergy value, which will drive the price up even further, increase the up-front payment and alleviate earn-out terms.

What Next?

These drivers are embedded within the Equity Growth Wheel, the model that enables firms to both evaluate current valuation and growth risk, plus an execution plan for performance improvement to sale readiness and exit. If you’d like to confidentially discuss your particular situation, please let us know and we’d be happy to help.

this blog is the condensed version of an in-depth article on this topic which you can access here. 

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners prepare for sale and sell their business. Register here to gain full access.

Growing equity value webinar series: Market proposition

Close up of businessman holding graph in palms

Lately, we’ve been running a series of free 30-minute webinars to help attendees grow the equity value in their consultancy firms and prepare for a sale of their business. Attendees at each webinar submit questions, and we’re going to be sharing and answering these questions in a series of blog posts. This week we’re looking at the questions asked during the webinar on what you need to know to attract the right clients and buyers.

1. How would a specialized consultancy firm, such as a law firm, go about quantifying its unique value proposition (UVP)?

The UVP has to answer the question ‘why should I buy from you?’ so start thinking about ways you’re differentiated from your competitors along industry, geography and services lines. In terms of industry, perhaps you focus on one or two industries and are recognised experts in say, construction law, or oil & gas exploration. In terms of your geography perhaps you’re able to offer international clients representation in their major jurisdictions. And in the case of your services think about what might set you apart, perhaps you use technology to automate low value-add services so that your clients pay Lawyers for the work only they can do, or perhaps your firm offers a flexible fee structure, or ‘subscription pricing’ for a steady stream of work, or even fixed fees when you know you can leverage your own IP and juniors while still maintaining quality.

As to quantification, think about the way a prospect can relate to the benefits and therefore what kind of quantification is meaningful. What’s the pain point that gives rise to the need for your service, and how will that situation be improved by using your services? List out all the benefits, quantitative and qualitative then get some feedback from your current clients about the relative priorities. And on that point, the process for developing a UVP should start by looking at what you’ve successfully sold in the past, then inviting your clients to give you the unvarnished truth about why they chose you and the benefits they received. And if that conversation isn’t as comfortable as you’d like, well, all the more reason to do the exercise!

You can read more about the power of a UVP for consulting firms here.

2. When looking to attract new clients, is it better to emphasize the benefit of the services provided or demonstrate the firm’s technical competence?

While doing both is important in the sales process, it is important to prioritize the emphasis on the benefit of the services when speaking to prospects because you will have plenty of time to demonstrate your technical competence at a later stage in the process. When approaching potential clients, they are very interested in finding out the benefits of using your products and services as opposed to your competitors.

So, you must first outline the benefits of your services to clients, and then reassure them that you have the technical competence to deliver these outcomes.

3. Should we have a UVP for each service offering or just one for the whole company?

We advise you to do both. You need to have an overarching UVP for the company and then one for each service you offer. This is because there is a process of attracting, nurturing and converting prospects, which move from the broader lens of the firm, and zooms in on the individual services your firm provides.

For more information on why it is important to focus on clients with the specific needs your UVP addresses, read our blog on the importance of focus for consultancy success.

Finally, as with all of our webinars in this series, our key takeout is presented in our Start, Stop and Continue strategies. To immediately improve your market proposition in your consultancy:

Start: Explain in three jargon-free sentences what you do, and the benefits you deliver

Stop: Putting your technical expertise at the start of your sales messages

Continue: Creating content that showcases the benefits of your services (e.g. videos, articles, case studies)

To sign up to listen to a recording of this webinar, please click here. To view other webinars in the series, please click here.

Are you a member of Equiteq Edge? It’s full of content to help consulting firm owners prepare for sale and sell their business. Register here to gain full access.

The Power of a Unique Value Proposition (UVP) for a Consulting Firm

lightbulbs croppedIt’s an irrefutable law of business that a product with an ineffective value proposition is going to under-perform, no matter how good the product. If you can create a winning unique value proposition (UVP) not only will prospects flock your way, but you’ll also find acquisitive firms on your doorstep willing to pay a premium price for your company. 

What’s a UVP? 

A UVP is a bit like a brand. At one end a brand is a company logo and visual identity, at the other end it’s the total embodiment of a company’s products, personality and the experience of its customers. Likewise, at one end a UVP is a simple marketing statement, at the other it’s a sales promise, fulfilled through the delivery of the service. In reality the UVP forms a part of the brand.

Here’s how to construct a UVP for your firm and individual products:

Unique: What makes you different?

Identify the unique combination of markets and people that you serve. This could include looking at vertical industry sectors, style or method of service delivery and the quality of client experience. 

What value do you deliver?

Create a powerful perception of valuable outcomes and benefits, rather than features and costs. Provide credible examples that will hit their emotional and logical interests. For example, prove the financial outcomes, KPI improvements and personal benefits you deliver.

What’s your proposition?

Present offers to start the relationship that the prospect finds easy to digest, empathises with their burning need, and create a proposition that is hard to say “no” to. A proposition should address needs, be easy to action and have a high gain outcome.

The output of a UVP exercise should be worked into your sales and marketing process. Also a high level UVP statement that’s succinct and easy to understand is very important. Do this and not only will it have impact but it will be easy for you to communicate and be memorable. People will be able to refer business contacts in your direction because they can clearly pass on your message for you.

Five reasons why you want the strongest UVP you can get:

1. The market awareness of your company

By standing out in the crowd with a strong and unique message to market alignment, you have to work less hard than your competitors to grab attention. This means that competitors need to spend much more on marketing than you to get the same result.

2. The potency of your sales messages

Because of the emphasis on value, you are able to exploit your market awareness and pull more leads than your competitors who are more focused on product and service messages. Therefore you gain a stronger pipeline than your competitors.

3. Converting your prospects into clients

Faced with a decision between a value based proposition and a more service based offer, your prospects are more likely to choose you because you’ve pressed the important buttons. So your cost per client acquired is lower than competitors.

 4. Charging a premium price for your services

The more uniquely niche and targeted your proposition, along with claiming the value high ground, the more you can push your fees up because clients are less sensitive to cost. This means that your profits go up too.

 5. Attractiveness for a buyer

With a strong UVP, you’re more likely to get on the radar of acquisitive firms looking to fill a niche in their growth strategy. Without a strong UVP, you may make the long list, but not the short list, even if you have the best fit, you could go unnoticed!

Finally, an example to bring the power of our message home to you: imagine Equiteq has been commissioned by an acquirer to find them a firm like yours in your consulting sector. Unless you’re already known to us, or someone in our network, we have to start with our database of UK consulting companies and the profile of the target firm provided by the acquirer. Using our search technology, you would almost certainly make the first cut of 1000, you may make the long list of 328 firms because you’d get matched on the high level factors like company size and industry sector profile, but unless your website tells us that you fill the unique space required by our client, you could be left behind.

In conclusion, if you develop a strong UVP for your company and its services, you win all ways round. You get healthy sales revenues, lower costs, higher profits, increased equity value and you get yourself firmly on the radar of acquisitive companies willing to pay a premium for your firm.