The Power of Becoming a Visible Expert

becoming a visible expertHere’s something everyone intuitively understands.

If you create a strong presence in your market and become recognized for your expertise, you’ve got a platform for growth.

What’s less obvious is how to create that platform.

I just read the newly released report, Visible Expert Research Study: Management Consulting Edition, by researchers at Hinge that sheds light on how consultants can create a platform for growth.

The Hinge Research Institute studied more than 530 professional services firms to understand consultants’ challenges and their top marketing priorities. The results point the way for firms that want to grow.

The Hinge Research Institute studied more than 530 professional services firms to understand consultants’ challenges and their top marketing priorities.

The study focuses on what Hinge researchers call “visible experts.” These are people with high market “visibility and acknowledged expertise who can command influence within a specific target audience.”

The report outlines the impact of visible experts on a consulting practice, how buyers find them, what tools they use to raise their market visibility, and how consultants can accelerate their progress to becoming a visible expert.

Three of the report findings stand out.

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Want to Sell Your Consulting Practice?

how to sell your consulting firm

If you are hoping to sell your consulting firm, either now or in the future, it’s important to understand how the size of your firm can impact your ability to sell it.

This guest post by Tony Rice, founding Partner of Equiteq, shares his insight and research on why the size of a firm matters when an owner wants to sell it.

Equiteq, a leading Mergers and Acquisitions (M&A) advisor for consulting firms, helps firm owners grow profits, revenues, and equity value. They also guide firm owners through the process of selling their firms for maximum value.

Does Firm Size Matter?

How large or small should your firm be before you sell it? Mostly, that depends on the result you’re hoping to achieve with the sale.

Firm size does not equal value.

For example, you don’t want to grow your business to a level that could make your firm less attractive to buyers. Nor do you want to live with the false hope that your <$1m practice will sell easily.

Firm size does matter, and it is an important variable (among many) in preparing your firm for sale.

There isn’t one answer about the importance of firm size to a sale, but it is possible to consider the question from different market perspectives.

Does Consulting Firm Size Matter to the M&A Market?

No.

As you can see from the chart below (from our 2014 Consulting Sector M&A Report), firms of all sizes sell. The chart is based on the value of the deal, not the annual revenue of the acquisition.

consulting firm sales and acquisitions

However, based on the way valuation multiples in the consulting sector work, it is a reasonable assumption to make that valuation roughly equals revenue.

If you consider firms smaller than $5m to be “very small,” about 40% of the market volume is in this size category.

If you consider firms bigger than $30m to be “mid-market to big,” then only about 20% of the market volume happens above that threshold.

However, there is a caveat. For small firms, it’s often the case that money doesn’t actually change hands.

The probability of selling a sub $5m to serious buyers with cash up front is low, unless your firm has significant assets a bigger buyer can leverage.

In the small-firm part of the market, it is more likely that a merger is taking place, not a sale for cash. In instances where cash is involved, buyers would be more likely to offer a relatively small proportion of the sale price up front.

Does Firm Size Matter to Buyers of Consulting Firms?

Yes.

Regular buyers of firms are sensitive to size. These buyers are firms in the Big 4, or others who make one or more acquisitions a year.

These are the serious buyers who are willing to offer significant amounts of money for desirable acquisitions.

A ‘typical’ deal with one of these buyers could include 50% to 60% in up-front cash, The rest of the price is often paid in cash or shares over an earn-out period of 2 or 3 years.

These buyers are looking at acquiring firms in the size range of $10m to $50m revenue.

Gear firm size to your personal and financial objectives by planning ahead to be ‘sale ready.’

Firm size is important to these buyers because firms that are too small are generally high risk (financially unstable). Even if the acquiring firms have great assets, the value of those small-firm assets isn’t usually enough to make an impact on the growth objectives of the acquiring firm.

Of course, there are exceptions. Small firms that are rich in tangible intellectual property that a buyer can leverage rapidly through its organization are often seen as worthy acquisition opportunities.

Similarly, if there is a new market that the buyer wants to get into and the market is not mature enough to have yet created firms of scale, then smaller firms would be attractive.

Does Size Matter to You, the Seller?

Maybe.

It depends on why you are selling and what you want from the deal.

If there are vital reasons why you want to get your firm into a new home and money is not the main driver, then size may be less important.

However, if you are running a $5m firm and the shareholders want to realize $20m in value, then it is important to grow the firm to that target value before trying to sell it.

However, beware of scaling up just for the sake of getting bigger. A smaller, $10m firm may be more valuable to you, and more sellable, than a $50m firm.

Larger firms need buyers with deep pockets. Usually, these buyers are more interested in specialist firms than generalists. So, if you’ve grown your firm by diversifying your services, it’s possible your firm would be viewed as a generalist firm. That could make your business less attractive to potential buyers.

Also, beware of the law of diminishing shareholder returns. To continue to grow, there comes a point where the founders have to dilute their holdings to attract and compensate senior people to run an increasingly complex business.

It is possible to grow profitably and still make your firm unsellable, or less valuable to founder shareholders.

The unfortunate result is a dilution in owner equity for the founders and a corresponding reduction in the value they’ll receive for selling the business.

Key Takeaway Points

  • The probability of selling a sub $5m to serious buyers with cash up front is low, unless your firm has significant assets a bigger buyer can leverage.
  • As a rule of thumb, strive to reach $10m revenue or above (profitably of course!) to attract serious buyers willing to pay cash up front.
  • Gear firm size to your personal and financial objectives by planning ahead to be ‘sale ready.’
  • Firm size does not equal value. It is possible to grow profitably and still make your firm unsellable, or less valuable to founder shareholders.

Interested in growing and selling your consulting firm?

Equiteq Edge is Equiteq’s online resource and information hub aimed at shareholders, prospective shareholders, investors, and corporate development executives in the consulting industry.

Bringing together a global community of experts, Equiteq Edge provides analysis of market conditions, advice from those who have sold their firms, and intelligence from buyers themselves. Register for Equiteq Edge free of charge here.

The Hidden Laws That Determine Relationship Success

Andrew Sobel
Andrew Sobel

The guest post below by Andrew Sobel is adapted from his book (with co-author Jerry Panas), Power Relationships: 26 Irrefutable Laws for Building Extraordinary Relationships.

Andrew Sobel helps companies and individuals build clients for life.

He has written eight acclaimed books on business relationships, including the international bestsellers Power Questions: Build Relationships, Win New Business, and Influence Others and Clients for Life: How Great Professionals Develop Breakthrough Relationships, which have been translated into ten languages.

We live in the most connected age in history.

And yet, we have fewer real relationships than ever. For many, the acquisition of hundreds of social media contacts has replaced the cultivation of deep, meaningful relationships with clients, colleagues, and even with friends and family. But the problem is deeper than that. It is genuinely tougher to build the trusted relationships you need to thrive in your career.

There are three major challenges that all client-facing professionals now have to confront.

There are three major challenges that all client-facing professionals now have to confront. First, how do you access and connect with senior executives who are time-starved and have put up walls to protect their time?

Second, how do you become relevant to prospects and clients who won’t give you a second chance if the first conversation doesn’t light a spark? And third, how do you build a trusted, personal relationship over time so that you have a seat at the table when issues in your area of expertise are discussed?

To overcome these challenges you need to leverage what we call the Relationship Laws. Just as an airplane must respect the laws of physics in order to fly, your behaviors must align with these Laws if you want to sell effectively and build clients for life.

Here are some of the Relationship Laws that will help you connect, become relevant, and build deep, personal relationships with clients.

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Meet the MasterMinds Podcast: John Jantsch on Duct Tape Selling

duct tape selling
John Jantsch

No one should be surprised to hear that the world of sales has undergone a fundamental transformation over the past few years.

In spite of this reality, you can still find sales “experts” who are preaching the same old sales tactics.

So I was excited to see that John Jantsch, adviser to entrepreneurs and small businesses, took a modern-day approach to selling in his new book, Duct Tape Selling: Think Like a Marketer—Sell Like a Superstar.

If you’re not familiar with his work, though I’m guessing that most of you are, Jantsch is also the author of three other books, including Duct Tape Marketing: The World’s Most Practical Small Business Marketing Guide.

His web site and blog at DuctTapeMarketing.com was chosen by Forbes as one of the 100 best websites for entrepreneurs.

Here’s what caught my eye when I read Jantsch’s new book. He makes a profound point that today’s sellers must think more like marketers if they want to thrive.

He’s telling us that today’s sellers know that they’ve got to attract, teach, convert, and serve clients, while building a personal brand that stands for trust and expertise.

That’s a formula that will work for consultants.

Here are the questions Jantsch and I discussed:

  1. You introduce a concept in the book called inbound selling. Can you explain the idea and how it fits into your overall view of selling in today’s environment?
  2. Many sellers and firms focus on defining their target markets based on who will buy from them. You make an interesting point about broadening a seller’s target market to include customers/clients that a seller deserves (and really wants) to work for. How do you use that idea in the sales and business development process?
  3. You make a strong case for the importance of content in a sales strategy, especially the need for sellers to bring useful content to their clients. Do you have any tips for how people can make time for content development while serving the on-going needs of their clients?
  4. You mention that the old sales saying, “Always be closing” needs to be discarded and replaced with “Always be connecting.” How can sellers use that advice?
  5. If you could give sellers one piece of advice about selling in today’s world, what would be?
  6. How can people learn more about your work and the book?
ducttape coverIf you want to learn more about Jantsch’s book, go to the Duct Tape Selling website or his blog, Duct Tape Marketing. He created a resource page on his site that shows you all of the tools he references throughout the book. This highly practical collection of tools is organized by book chapter. Be sure to check it out.

Becoming an Insight Seller

Insight sellingIn the world of business books, those on sales and selling are as popular as any you’ll find.

Amazon.com, for example, has more than 3,000 books just on Kindle in their “sales and selling” category.

You’d think the market for sales books would be saturated by now. But there’s always room for a well-researched, well-written book like the latest by Mike Schultz and John Doerr, Insight Selling: Surprising Research on What Sales Winners Do Differently.

Schultz and Doerr decided to figure out what the winners of actual sales opportunities did differently than the sellers who came in second. Once they knew what worked, they wrote a book about it.

The research they did for the book was comprehensive. They studied more than 700 B2B purchases, which represented $3.1 billion dollars in sales, and conducted over 150 conversations with buyers regarding their buying experiences.

Once they sorted through all of the data, Schultz and Doerr found that sellers who win sell in a radically different way than the second-place finishers. Specifically, winners effectively harness the power of ideas and their insight to land sales.

Schultz and Doerr found that sellers who win sell in a radically different way than the second-place finishers.

Additionally, their research revealed that a buyer gives business to a seller who:

  • Educates the buyer with new ideas or perspectives
  • Collaborates with the buyer
  • Persuades the buyer that the sales offer would achieve results
  • Listens
  • Understand the buyer’s needs
  • Helps the buyer avoid potential pitfalls
  • Crafts a compelling solution
  • Connects with the buyer on a personal level

Most consultants will nod their heads in agreement with these findings. But Schultz and Doerr go on to outline a practical application for their findings.

They discuss ideas that work with clients, and they offer readers an approach (and a mindset) for becoming an insight seller. The path to insight selling is shown in the infographic below.

The Road to Insight Selling

Click Here to Enlarge

This book is appealing for two main reasons. First, it’s based on real data. This isn’t a theoretical exercise. It’s a discussion of what works and what doesn’t in sales. Second, it offers a practical approach to implementation. You’ll be able to put the ideas in this book to use quickly.

This is one sales book that’s a keeper. Read it. Use it. And keep nearby for reference because you’ll use it over and over.

insight selling
Mike Schultz and John Doerr

If you want to know more about the authors, their work, and their company, head over to the web site for the Rain Group.