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Joe O’Mahoney’s Consultant’s Guide to Increasing Your Business Valuation


Joe O’Mahoney’s Consultant’s Guide to Increasing Your Business Valuation

By , June 7, 2024
Joe O’Mahoney_quote



Does your consulting business struggle to stand out in a crowded market? Have you been told that increasing profits is the key to a successful exit? The pain of feeling like a best-kept secret instead of a sought-after business can be frustrating. But what if there is a way to boost your business valuation without just chasing profit? Implementing these strategies can lead to a higher business valuation.

Joe O’Mahoney, a lecturer at Cardiff University, is a seasoned consultant with a wealth of experience in the consulting industry. With a background in corporate consulting, including founding and selling his own consultancy, Joe brings a unique blend of academic expertise and hands-on business acumen to the table. His focus on helping small firms grow and exit, particularly in the consulting space, has positioned him as a trusted advisor within the industry. Joe’s insights and practical knowledge make him a valuable resource for business owners looking to enhance the valuation of their consulting or professional services firms.

Joe O’Mahoney’s captivating journey through the consulting industry began with his foray into corporate consulting, eventually leading him to establish and sell his own consultancy firm. Transitioning to academia, he dedicated his self to assisting small firms in their growth and exit strategies, particularly within the consulting sphere. His insights delve into the crucial aspects of founder dependency and niche specialisation, shedding light on the evolving landscape of business development in the digital age. Joe’s perspective on the impact of AI on consulting services and the intricate interplay of culture, strategy, and business valuation presents a fresh and thought-provoking outlook for both established consultants and aspiring entrepreneurs. His story serves as an inspiring narrative, offering invaluable guidance for navigating the complexities of the consulting industry and paving the way for future success.

In this episode, you will be able to learn:

  • Mastering IP development can maximise your consulting business’s value.
  • Implementing AI can revolutionise your consulting services and boost your business valuation.
  • Cultivating a strong company culture can significantly increase your consulting firm’s worth.
  • Learning exit strategies is essential for maximising your consulting business’s valuation.

Improving Valuation of Consulting Business
In the consulting industry, enhancing the valuation of your business is crucial for long-term success and potential exit strategies. By focusing on reducing owner dependency and establishing a specialised niche, consultancy owners can significantly increase their firm’s attractiveness to potential buyers. This not only allows for a smoother transition during a sale but also showcases the sustainability and potential for growth within the business. Joe O’Mahoney sheds light on the importance of owner dependency and niche focus in improving the valuation of consulting businesses. Through his experience working with small firms aiming to exit, he emphasises the need for diversifying sales strategies beyond founder-centric approaches. By developing a niche that offers unique expertise and solutions, consultancy owners can set themselves apart in a competitive market, ultimately maximising their business’s value and appeal to prospective buyers. Joe’s insights provide practical steps for consultancy owners looking to enhance their valuation and prepare for future exits.

Watch the episode here:

If you’re the owner of a consulting business or any professional services firm, then you’re going to really enjoy today’s conversation. I’m speaking with Joe O’Mahoney from Cardiff. Joe is a lecturer at Cardiff Uni and he’s the consultant’s consultant. We talk about all sorts of things that will help you improve the valuation of your consulting or professional services business, from bringing in new people, from pricing, from IP, and these are the topics that you’re interested in. How do you increase the valuation of your business?

How do you make sure that it’s going to be exit ready when you’re exit ready to exit? How do you know it’s going to be what’s sellable and one of the businesses that will be sold? Tune in. Listen to the rest of this Joe O’Mahoney really engaging conversation if you run a specific if you run a consulting business or professional services firm. But bear in mind all these topics cover to all boutique businesses. Hope you enjoy the show.

Welcome to the podcast that’s dedicated to helping business owners to prepare for exit so you can maximise the valuation of your business and then exit on your terms. This is the Exit Insights podcast presented by Succession Plus. I’m Darryl Bates- Brownsword, and today I’ve got a guest that I’ve been, well, been trying to pin down for quite a while. It’s Joe O’Mahoney, and I think of Joe as the consultants consultant.

He’s a professor or an educator at Cardiff Uni and teaches in consulting. So I thought, why not ask Joe to come and join us on the podcast and share his expertise around what consulting businesses need to do, specifically around preparing their business for exit, because I’m sure that there’s some specific areas that are peculiar to those businesses.

Welcome, Joe. Thanks for joining me today.

Thank you, Darryl. It’s really kind of you. And as I said to you in some of the pre chat, I listen to the podcast. I think it’s fantastic. I think you offer great value. So it’s a real honour and pleasure for me to be here.

Appreciate it, Joe. So why don’t we start and get into it? Well, look, I’ve given you a little bit of an intro, but what did I miss? What are the important things that listeners need to know about your experience in working with consulting businesses just to give us a little bit of a frame up there, if you don’t mind.

Sure. Okay. So I came from the consulting industry. I was in corporate consulting. I had an independent consultancy. I ran a big internal consultancy for a corporate I started my own firm back in 2001, sold it in 2007 and since coming to academia back in 2003 I think it was, I’ve been helping small firms grow and exit, especially in the consulting space.

As you can imagine that increasingly covers a little bit of tech or SaaS offering and really just trying to help founders avoid those obvious mistakes that you might only know if you’ve been through the game through or four times.

Brilliant. So what we’ve got here is some expertise is not only teaching it academically, but being there and done that, actually built a business, run a business, built a business and sold a business. So you’ve got all the expertise that we’re looking for on this show and you’re also focused on SME type of consulting businesses. So for the listeners out there, I won’t waste any more time in just talking about it. We really should get into it.

Good. Cheers.

So Joe, let’s start with the big one. What’s the most important thing that’s going to influence whether a small, let’s call it an SME consulting business?

Let’s say it could be, I don’t know, between 20 and hundred consultants in the business. What’s the biggest influencer that’s going to determine whether that business will be able to be sold or not be actually achieve a sale?

Your really, really good point, I think good, really good question. I’m kind of split between founder dependency, which is something we always bang on about, or niche because as you know, it’s hard to sell a firm where you’re a bit too diversified. Firms that are buying typically want someone to put that missing piece of the jigsaw puzzle into their proposition. If you are the wrong shape, it can be very often hard to sell.

Yep. And owner dependency, that always comes up in all businesses. So how does that show up in consulting businesses? Is it, you know, the, I guess the typical stereotype consulting business and I’m thinking of maybe even bundling up accountants and lawyers into professional services as well.


And if I look across those high level management consulting advisory type businesses, it’s always the to be some traditional legacy that the founders, the partners, the directors do all of the selling. And they say to the junior people, right, you go out there, you’ve got a network, all the work comes in through referrals. They just say go out there and do it. They don’t teach them how to do it, they just go, well, it took me 20 years to learn, so it’s going to take you 20 years. You may as well start now.

Is that what we’re talking about owner dependency there, where the partners, the owners of the business, are actually key people and all the work comes through them.

Yeah, yeah, I think that’s spot on. And to develop that point slightly more, I think very often founders feel that the next generation coming up behind them should do business development in the same way that they can. But to be honest, very often, if they were that type of person, if they were sort of the charismatic, go get them network builder who was completely not fazed by going into a room full of people and coming out with 30 relevant business cards, they’d be starting and running their own company. And I think the challenge is for business owners, for consultancy owners, professional service firm owners, to accept that very often it’s a different type of business development.

So you’ve got, you know, we talked about David Maister earlier, before this started, and David Maister wrote the book the Trusted Advisor. It’s a brilliant book. And that’s very much the traditional founder approach. You know, I’ve got a huge network, I’ve got a reputation in the industry. I’m 60 years old, so I’ve been doing this for 40 years and I’ve got a huge, huge black book.

Well, listen, if you’re a 30 year old partner or someone who wants to become partner, then you’re not going to have that necessarily. And so having a different approach, the digital marketing approach, having the thought leadership using LinkedIn effectively, are perfectly adequate ways of taking shortcuts there, contrary to what Maister said. And it was easy for him to say because he was a professor at Harvard with a worldwide reputation. You know, of course he’s going to say you don’t need to market. But actually, for most people, doing digital marketing, especially in this day and age, is a good way to shortcut that trusted advisor approach, which is tough to develop and takes time.

Yeah, yeah. Not to pick on Meister’s work, but it was pretty much pre Internet, wasn’t it?

It was, yeah. And there’s, you know, funnily enough, I picked up his managing the professional service firm a few weeks ago, and there’s, his entire section on technology is about fax machines, and that’s it. So, you know, and as I say, it was, I’ve got huge respect for him, massive influence on me.

You know, I could only ever hoped to emulate something that he did, and he did it all so well. But he lived in a very different time and he was a very different type of person. He had that reputation. People would come to him and pay him tens of thousands for a day. Unfortunately, most of us aren’t in that position.

Well, it sounds like. Yeah. While you’re saying that, what’s coming to mind for me, it’s a bit like comparing the brain surgeon with, I won’t say GP, but someone who is a bit down the rungs a bit more.


You don’t need your brain surgeon to have a good bedside manner. You just want them to be the best damn brain surgeon out there. You don’t care how they talk. You don’t want to talk them, just operate on my brain and make me healthy again. Whereas someone, if it’s, I don’t know, a stomach ulcer, you want them to make you feel better, you want them to give you reassurance. They’re still a specialist on stomachs and I have no medical experience and I don’t claim to be an expert, but I’m just trying to create a story here.

You want them to engage and connect at that human level as well. You want them to have a good bedside manager manner and.


That’s half of it, isn’t it? That’s half the equation of being good at what they do, is that they connect and they’ll get referrals.

Correct. Yeah. And also, to be fair, even if you’re a brain surgeon, if you’re a brain surgeon in a private market, you might be the best brain surgeon in the world. But unless you do a little bit of marketing, unless you put it out there, unless you do some thought leadership, no one’s going to know about it. So you don’t want. As one of my one of my clients came to me a year or so ago and they were very proud of the fact that they were the best kept secret in the. I think it was Fintech consultancy space, and I had to talk them out of this as being a good thing.

Yeah. You want them to be the worst kept secret. Well, if you’re thinking about exiting your business and improving the valuation, do you wanna be the worst kept secret out there?

Yeah, definitely. Yeah. Yeah. You want to be winning the awards, you want people to be talking about you, you want there to be a queue for your services and then all of that is value that’s been added to your valuation.

Yeah. So if we’re talking about professional service consulting businesses, if I’m looking back, they’re very traditional and in the way they run their businesses, they talk about the language and the partnership and going up and is it still true today, in your experience, that they like to do everything themselves, so they want to do all of the sales. Whereas functionally, if you have a look at an engineering or manufacturing business, you’ll have one person who’s the head of operations. You’ll have one person head of marketing, one person head of sales, one person head of operations and finance and HR, etcetera. Whereas in professional services firms, we’ve gone, well, yeah, we’ve got one partner. Well, you like people, so you can do HR and you can count. So we’ll get you to do the finance and we’ve all got to do sales equally because we’re selling ourselves. Is that still something that’s happening? And what are your thoughts on that strength or weakness?

Yeah, it’s a really good observation. I mean, it’s necessary. When you’re a small firm and you’re a people firm, it’s necessary. Everyone does everything. By the time you get to 50 people, you should be getting a fractional CFO, CMO and chief people officer, HR manager, whatever you want to call it.

However, it is difficult on the sales side of things, because people businesses are different from product businesses. In that with a product business, you can show it to someone and say, this is it, trust the brand, these are the features. Whereas with a solutions people based business, very often it’s not a one size fits all. Very often it’s a, what they call, economists call it a credence business, where the seller often knows, like a doctor, you know, to use your analogy, the credence business is a business where the seller knows more about your problem than you do. So, you know, if the surgeon’s, you know, going to be cutting open your head to do brain surgery, it’s because they’ve done it a thousand times. They don’t really want your input into how best to do it.

We’ve got Google, we’ve got. We can help them.

Well, that’s another story, isn’t it? I mean, everyone does have Google, but every service business is different.

And what works is so dependent on the interaction with the client as opposed to a product business, which is, you know, if I’m buying an iPhone, if the iPhone doesn’t work, it’s Apple’s problem, it’s my problem, but it’s Apple’s fault. Yeah, whereas in a consultancy business, 50% of the work, 50% of the value is coming from the client themselves, the way they interact you, the way they recruit you, the way they manage the project, all the rest of it. So that does mean that on the business development side of things, having that expert insight as to what works usually is quite important for a consultancy business to succeed, which is why you still have that apprenticeship model where the juniors are coming up and slowly starting to turn into the finders.

Yeah. And to some people, I think you touched on this earlier, but some people are more natural to be, I guess, back office bowfins. We just put them in the corner to punch out the information and process the data that’s been gathered and producer reports for the clients. Whereas other people you just more naturally put in front of clients, they’re just more engaging, they’re more relationship based, and they can build that rapport with clients. They kind of accelerate those side of things a bit quicker. Yeah. So we were talking about maestro earlier.

I’d go back to his brackets of finders, minders and grinders. Finders are the people that go and do the work, the minders are the people that manage the work, and the grinders are the people that grind the work out. And a great grinder doesn’t make a great minder or a great finder. So that’s down to your competence management system, your competence framework and your training. And obviously, in some consultancy firms, they have an up or out policy in terms of if you don’t turn into a finder, then you’re asked to leave.

The other interesting dynamic here that I’d mentioned briefly is the amount of automation and AI that’s coming in at the grinder phase. So if you look at a lot of the tasks that are being. I’m writing a book on this at the moment. If you look at the tasks that are being replaced by AI and automation, it’s pretty much all at the grinder. It’s the PowerPoint, it’s the Excel, it’s the data analysis.

Yeah, well, and yeah, service based professions are very much relationship based as opposed to transactional, and that’s where the difference needs to be.


I had on the podcast just a couple of weeks ago, and by the time this is released, that episode will be released with Joe Pine, who wrote a book called The Experience Economy. I first read it, it’s about 25 years old now. And he talks about, when you’re with clients, it’s. It’s an act. You’ve got to be, you’ve got to dress up and it’s like you’re on stage and it’s you’re putting on a show which is part of the experience and you want to create an experience for the client. And if you do that, then you’ve got half a chance of restructuring the way you do your pricing as well. Instead of just charging for time, you can charge for the experience or even charge for the outcome that they’re coming to you for. So any experience on your side, Joe, on how consultancy or service providers can make that, that desired change, how do we move away from selling time or even just reframing to the clients? You’re not buying my time, you’re buying my solution, my proposition.

Yeah, yeah. And I had that conversation this morning because I had a client pushing back on a fee rate. And I said, well, you know, I’ve got contact lenses in at the moment. So in other words, it’s ten pence or $0.10 worth of plastic in my eyes, but I’m paying $60 a month or 60 pounds a month for the privilege of having that. And the reason is because actually the value that’s being given is my, you know, I can now see, same with your company. I’m nudging it up, you know, two to five percentage points in terms of your valuation. Valuation is going to be around 20, 25 million. So the value of these services is around 1.5 million to a million. Now, if then you want to push back on me, charging whatever my day rate is, then that’s a different question. Let’s have a conversation around that. So that’s the first thing in terms of that value conversation. But the second thing is that value pricing and fixed pricing aren’t always suitable. So there’s very specific situations where time and materials is actually the best answer and actually can generate higher profits and higher margin for you. I’m a big fan of fixed pricing because I think that encourages the consultancy to be as efficient as possible in achieving the value outcomes for the client, thereby improving their margin.

And it also depends on the strategy of the consultancy, because some consultancies are very much commodified and they’re process based and they have products, and they very often would take a different approach to your kind of strategy, consultancies that would be closer to the brain surgeon that you were talking about. So it does very much depend on the consultancy. But what I am seeing in the markets, and this isn’t necessarily a good thing, I’m seeing a lot more SaaS offerings coming out of consultancies, but I would say around 80% of those are unsuccessful.

Interesting is that because they’re going, hey, look, I need to get out of consulting charging for time. That’s just too hard work. It’s labor intensive. I’ve got to turn it into a subscription based pricing. And just because that theory says subscription based business models are the best in terms of valuation, doesn’t mean there’s a gap in the market. Doesn’t mean there’s a market in the gap, so to speak. Yeah, it doesn’t mean you should.

Yeah, definitely. I mean, typically what I’ll hear is the CEO or the CMO will have had a bath or gone for a run and had a great idea about some software that they could be selling their clients. And sometimes they’ll say, you know, all we’re doing is automating or putting on the cloud a method that we already use. But a software business is very, very different to a consultancy. It has a different life sales life cycle, it has a different investment structure.

And very often people that have been brought up in a people services environment make the worst SaaS business owners or software business owners. They don’t really understand it. They don’t place enough attention on what the competition is and what their value proposition is. And don’t get me wrong, I’ve been involved with a handful of consultancies that have really made it work. But before you start investing, what can become hundreds of thousands of pounds of your hard earned cash into a software company in Poland, and you don’t really know what the requirements are and you get them building stuff because you love to see software at the end of the day, have a chat to someone that’s been through the loop a few times.

Yeah. So Joe, we’ve touched on pricing, we’ve touched on product, where we’ve touched on the type of business and selling time or outcomes. What about culture in professional service type businesses, where I guess they are intimate type workforces and they build strong relationships with their clients. What about the culture of the business? How much impact does that have on the success of the organisation and ultimately its salability?

Yeah, I think there’s another really good question. So I always say to my clients that consultancies exist in two markets or they fight in two markets. One is for clients and everyone talks about that. Very few people talk about employees. And especially these days, there’s a really tight market for talent. A lot of the good talent is going to SaaS businesses. It’s going to Google is going to banks, Facebook, all the competitors. So consultancy is less of an attractive market than it used to be when we were younger, when good consultancies would pay roughly the same as the banks. And you could be assured of career progression if you stayed in long enough, there’s becoming a less attractive market at the same time, consultancy’s ability to pay decent wages is being constrained because their profit margins have been hammered by tough clients procurement and all the rest of it. So culture, managing a culture and creating a culture that is sticky is one great way of attracting and keeping good people.

And, you know, you, if you don’t pay attention to that, you’re going to get the typical, you know, 25% churn. That is really expensive for consultancy to manage.

Yeah, it’s a really good point. And I’ve got a bee in my bonnet at the moment about the old culture and HR and going, why do we call it human resources? It’s just one of those terms that just distills all humans down to just a resource. And especially in a service based business, we talk about them being our most important assets, people, and we just refer to them as resources.

Yeah, definitely. And the younger, they often get hammered for it by the boomers, who would say they’re all snowflakes, but young people very often, quite rightly, are worried about work life balance, they’re worried about nervous breakdowns, they’re worried about traveling the world and ruining the environment and all of those things. If you’re not speaking to those as an organisation, then you’re not going to be attracting as many people as you could to your business.

Okay, so in your experience, so what are you seeing with recruiting of younger people at the moment?  Are they looking for a career in consulting? Are they falling into a career in consulting after a career elsewhere? Is it something that’s desirable? I know that some of the big consulting practices have got varying reputations, shall we say?

Yeah, yeah, no, it’s true. I mean, it’s an interesting conversation to have at the moment because so many of the large consultants getting rid of people at the moment, the boutiques interest in the armed boutiques have been. 2023 was tough for everyone, but they’ve been less hit by the economic environment than the larger firms. We can talk about that later. At the moment, a lot of young people will just take any job that is offered to them simply because it’s pretty tough out there. However, the Harvard MBAs, the Warwick MBAs, the London business School MBAs, the Sydney University MBAs, those type of brands, if you’re a good student and you’re looking at, well, I could go to McKinsey, start on 60,000 and be working 100 hours weeks, or I could go to Google, possibly be working a little bit less, but being paid double that and also, you know, my salary would be going up faster.

Consultancy isn’t as attractive as it was. Young people very often do it because they don’t know what to do with their lives. So they’ll go. And this is what I did. You know, I went into for three years, five years, corporate consultancy, because I didn’t really know what I want to do. And it was a good training ground. But your average graduate stays six years as a consultant before leaving the industry. And one of the reasons for that is because of these 80 hours weeks that people have to work and that’s partners quite rightly leveraging the assets that they’ve got to maximise their own bonuses.

And it’s always good on their CV, I guess. And if you’ve been trained up by one of the big ones.

Yeah, but I do think boutiques, which is my area, sort of the 20 to 100, 2150 person firm, which is my specialism, you know, they’ve got a real opportunity here to go to these people that are leaving, especially now, these big firms, and say, hey, look, we’re not all about hammering you into the ground. We expect you to stay with us for a long period. We’re going to invest in you. You’re going to do varied and interesting work as opposed to being a small cog in a big machine. If you can communicate that employee value proposition, you’re going to be attracting good people.

And tying up with universities is one great way to do that. Also, just a quick hint, there’s a huge number of lawyers which are even more being made redundant very often. They’re bright, articulate, ambitious, but the law industry has been hammered by deregulation and, you know, commodification and, you know, I’ve known a lot of good firms pick up some decent young lawyers who are just sick of, you know, that, that type of lifestyle.

Wow, there’s a hot tip. Okay, so we’ve got the boutiques and they’re, yeah, the 20 to 150 sort of size organisation. They’re working on getting the work life balance right in terms of their proposition in the marketplace Joe, would you encourage them to explore building and developing their own IP or you’re just copying everyone else’s IP and just applying everyone else’s IP out there, whether it be for strategy or solution. Should they be developing their own, I call it, instead of KFC IP, which is a secret formula that no one has, I refer to it as Subway IP, which is a process, proven process or methodology which you may have developed in house. And should they be looking to develop their own IP and have and position themselves in the marketplace to attract clients based on that IP or what are your thoughts on use of IP?

Yeah, I mean you’ve encapsulated it perfectly there. I mean, that’s what they should be doing. The challenge with consultancies is that the IP isn’t the type of IP that you get in products. It’s rare that you get consultancies with a nice suite of patents, for example. However, buyers and investors in consulting firms, I’m including private equity here, they take IP very seriously because they don’t want to be, again, moving away from founder dependents. You don’t really want to be dependent on any key individuals.

What you want is a set of systems and processes, not just for delivery, but also for your sales and marketing, etcetera. The more you can present yourself as a machine, the higher your valuation is going to be. So don’t get me wrong, I always talk about the delivery IP, which is a great way of leveraging juniors to do higher value work. But also there’s IP around your thought leadership, your sales and marketing, and the systems and processes that you have to talk to enable that.

Yeah, I’m a big fan of actually using IP and creating a standard methodology because a lot of people think as soon as you start systemising, it constrains you and restricts your thinking.

I think it actually frees you up. If you know the process of doing that way, then your creative time is you’ve got more time available once you’ve done the mundane stuff and you’re not constrained any further so you can have better free thinking. We train everyone in the process and the methodology, we’re less reliant on key people and that’s got to be a good thing when it comes to valuation.

Yeah, so I mean, I use myself as an example. I have, you know, I’ve built a values driver framework. So every consultancy I engage with at a deep level, I’ve got a 350 questionnaire where we go through every value driver, you know, marketing, thought leadership, all the way down to delivery and strategy and all the rest of it. Now present this in proposals. But it’s very rare that we actually go through the whole suite of questions and I do the entire package because it’s relatively expensive. Very often in the initial conversation they’ll say, look, you know, our delivery is fine, our sales and marketing is terrible, or our digital marketing, or we don’t know what we’re doing when it comes to people. So then that allows me to focus down and craft something specifically for them.

So I agree completely. You codify you commodify, you use that on your website, you use that for business development. But when it comes to the specific solution, you may well tailor it and you can build IP around tailoring it as well. So you might offer different options or different price points for different services.

Yeah, yeah. It’s one of the things we do. I found that people like to go, oh, well, look, we need to codify our service. And they go, well, here’s our five step process for doing whatever. And I say, well, no one cares about your five step process. They assume you have a five step process to make sure that your people do it well.

What they care about is how the benefit of that, you using that five step process helps them make their lives better. And if you can build some IP around that messaging that gives you a consistent experience and something you can train your people in, it’s going to give you a big head start.

Yep, definitely. Yeah. It’s all about, you know, benefits and outcomes. And, you know, if you’re, if you can show that your process has led to that through several clients, then, you know, they’d be crazy not to buy your solution.

Yeah, exactly. So Joe, we’ve, I’ve made sure we’ve scanned across the whole strategic topics. We’ve skimmed across the top. Is there anything that you think really we need to add to the conversation for consulting businesses around what they should be looking at, what they should really be focusing on, if they want to be one of the consultancies that are actually able to sell their business when it comes time that they want to move on.

Yeah, just one insight that I’d add. I mean, I could, obviously, I’m very boring. As I said to you in the pre chat, I could talk about this for weeks and often do with my students. One key thing is that when it comes to valuing professional service firms, typically you get a multiple of EBITDA. And one challenge, one challenge I would give consultancy owners and professional service firm owners is that when you’re coming up to a sale, very often they’re focused on the profit and we’ve got to have a fire sale of all our assets so we can beef up the EBITDA.

But firstly, buyers aren’t stupid. They can see when you’ve paused bonuses in order to boost your profit. But the second thing is that rather than pushing up your EBITDA from say 22% to 24%, it adds more value to the company to build the multiple. So I’ve got a client at the moment. I’m trying to have this conversation, they’ve got incredible EBITDA, and they’re like, we need to move it from 30% to 32%.

However, what they could do is spend that 2% on building their IP. And if they built their IP, well, that might increase their multiple by one. And if it’s a $20 million company, then they’re improving their valuation of the firm by another 5 million rather than trying to add another 2 million to the bottom line.

It’s as if you read our playbook.

Ah, there we go.

Good. Look, I’m forever having the conversation with business owners and going, look, you can increase or improve the valuation of your business without increasing your revenue and going, what? Well, look, yeah, improving your profit, that’s the easy bit. Everyone, everyone can do that. Let’s have a look at your intangible assets, especially if you’re a service business.

Let’s go through all your intangible assets and let’s change that mindset switch from being the best kept secret to the worst kept secret. Let’s bring all of your intangible assets and document them and put them on display so that you know they’re not happening by chance, that they’re part of a deliberate action. And that’ll improve things for you.

Yes, definitely. Yeah, no, it’s. I’m literally having this, I had this conversation this morning with one of the owners, and it’s a difficult conversation because when you’ve spent 15 years chasing profits and then someone comes along and says, well, actually, let’s forget about, or not forget about, but let’s de emphasise profit in favor of building your structure and machine. Then people get a bit twitchy because it’s more intangible and it’s not about the bottom line.

Yeah, let’s make that mindset shift from profit growth to valuation growth. And that way they can look at EBITDA and start to be conscious of the multiple for two or three years leading up to an intended exit. 

Sorry, I get quite passionate about some of this stuff. But then, and in the long term, then you will increase EBITDA. So, yeah, like IP because it’s pretty or because it sounds nice, it because in the longer term, it improves your profitability sustainably, rather than artificially trying to bump it up a couple of percentage points.

I couldn’t agree more, Joe. We’re on the same page there, so let’s see how good we are at pulling it all together.

Joe, we’ve touched on, I think, all of the key elements, the intangible elements of the business model. We’ve talked about culture, we’ve talked about pricing. We’ve talked about whether you’re a boutique or scale type of business. We’ve covered a lot. But is there one thing that you really want listeners to take out of our conversation? And we’ll call that the wrap up point.

Partly to emphasise what I’ve just said, the other in terms of value rather than profit and don’t get me wrong, profit’s bloody important. I guess the other thing are the opportunities for cost reductions at the moment, or even business development from AI. There’s a lot of tools out there. You can go to product hunt and just have a look through some of the AI tools they’ve got. There’s a lot of opportunities for reducing costs and increasing performance just looking at some basic AI tools that are out there. My favorite is called Meet Alfred. I have no ties to the company. I’ve got no financial relationship with them. There’s another one called Crystal Nose, which is, you know, really cool when it comes to understanding your buyer. But there’s, there’s some really interesting tools out there that my clients are telling me are adding value

And new ones being developed every day.

Yeah, yeah, yeah. Yep.

Joe O’Mahoney. I’ve done it myself. I’ve done exactly what I said I wouldn’t. Joe O’Mahoney, thanks for sharing your exit insights with us today. No worries.

Thanks for having me on, Darryl. Cheers.

About Joe O’Mahoney

Prof. Joe O’Mahoney is a leading authority on the consulting industry and a consultant to boutiques and small consulting firms. His research on the profession has won several prestigious awards and publications, and resulted in leadership of high-profile government-funded research into the profession. Joe’s textbook on Management Consulting (published by Oxford University Press) was the best-selling in Europe and his academic research has been published in the top international journals. His most recent, evidence-based book on growing consulting firms in the digital age (published by Routledge) is the ‘go to’ growth text for CEOs and Managing Partners all over the world.

Joe also practices what he preaches: he has been a corporate consultant, an internal consultant and a solo consultant. He has spent fifteen years providing advisory services to small consulting firms on growth and, in 2007 sold his own company, StayMobile Technology Ltd. In addition to his private practice, he is the founder of Repair Café Wales CIC and Consulting Mastered Ltd.

Joe has taught and coached over 2,000 executives and MBA students about management consultancy and helped hundreds of students gain places at leading consulting firms. Joe’s work has been recognised by awards from the British Academy of Management, the Centre for Consulting Excellence, the ESRC and several University prizes. Joe studied History at Oxford University and obtained his PhD and MSc at Warwick University. He lives with in Cardiff with his wife, Hannah, and two sons.

If you would like to learn more about how to start preparing your business, then you can get more information here: It All Begins with Insights.

Darryl Bates-Brownsword

Darryl Bates-Brownsword

CEO | Succession Plus UK

Darryl is a dynamic, driven Business Mentor and Coach with over 20 years of experience and passion for creating successful outcomes for founder-led businesses. He is a great connector, team builder, problem solver, and inspirer – showing the way through complexity to simplicity.

He has built 2 international multi-million turnover businesses; one now operating in 16 countries. His quick and analytical approach cuts through to the core issues quickly and identifying the context. He challenges the status quo and gets consistent, repeatable and reliable business results.

Originating in Australia, Darryl’s first career was as an Engineer in the Power Industry. Building businesses bought him to the UK in 2003 where he quickly developed a reputation for combining systems thinking with great creativity to get results in challenging situations.

A keen competitive cyclist, he also has a B Eng (Mech) Engineering and an MBA.