Selling Your Consulting Business – How to increase value and saleability

Last month I discussed the topic of selling your consulting business, specifically the various stages of saleability, and the options and potential buyers that may be available for each of these stages of business. This month I will review some of the methods you can increase the value of your business and move up to a more favourable stage of saleability.

• Remove owner dependence by reducing the owner’s responsibilities. This can include eliminating, automating and delegating these responsibilities. This process can sometimes take a couple of years to implement, beginning with hiring an administrator and ending with a fully built out sales force. This is especially important for businesses that may be subject to a significant key person dependency, such as sole proprietors and personal corporations, where the principal/owner really is the business.
• Cross train employees in multiple skills and disciplines, utilize long term contracts and a staff retention program to reduce the risk of key person dependency.
• Renew or update leases and other financial commitments to include renewal periods totalling ten years. This can help satisfy future lender requirements.
• In collaboration with your team members, formally develop a company mission and team vision. This helps to develop and foster a unique operating culture for your business.
• Update all legal contracts with employees, suppliers and clients. If no such documents are in place, or coverage is limited; formalize these arrangements into legal contracts.
• Conduct a company wide audit to identify, and rectify any single points of failure. These can include too much dependency on a key employee, supplier, partnership or system (such as IT or other systems within the business).
• Develop a ‘Value Map” (a visual tool to plan what problems or needs your product or service addresses so that you can find a match between your product and your customers) to identify key steps in your client acquisition process and product/service delivery. Where possible design these steps to be automated or easily replicable, to assist in scaling the company.
• Review all aspects of your sales and billing cycles; including deposits, pre-payments, staged billing, recurring payments and charges (where possible) to account for 100% of your product/service prior to delivery.
• Formulate a training and transition plan to meet the desires of the current owner(s) and to help ensure the success of the new owner.
• For some smaller companies, especially sole proprietors and personal corporations, you may find that the potential pool of buyers is very limited, and your business may be unsellable in its current configuration. In these cases, the only feasible option may be to divest assets and close the business – unless you can make changes to move up to a more favourable stage of saleability.
• Lastly, it may be beneficial to consult with a mergers and acquisitions specialist to assist and advise you through this complicated process to ensure the highest sale value and to attract the right type of buyer.  

Thanks again to Scott Duke of Opn Road (www.opnroad.io) for his insight and expertise on mergers and acquisitions in the field of (environmental) consulting.

Bill Leedham, P. Geo., CESA
Bill is the Head Instructor and Course Developer for the Associated Environmental Site Assessors of Canada (www.aesac.ca); and the founder and President of Down 2 Earth Environmental Services Inc. You can contact Bill at info@down2earthenvironmental.ca