| | By Mick James
It doesn’t seem long
since we were talking
about exit strategies
and how to grow the
equity in a consulting
firm. Now that the
downturn is upon us,
does that mean that
consultants should adopt
a completely different
strategy to survive a
recession?
Paul Collins, founder
of Equiteq, which
provides M&A services to
consulting firms and
potential buyers,
doesn’t think so. His
firm has just produced a
booklet,
100 tips for
consulting firms to
survive and grow in a
recession, which
looks at how the
principles that underpin
equity growth can be
used to meet the
challenges of a
recession.
Collins’ model of the
“eight levers of equity
growth” is based on his
own experiences growing
a consulting firm in the
early years of the
century, and contains 80
key performance
indicators which
underpin equity growth.
This has now developed
into a web-service which
helps firms prioritise
their activities.
“Having built all
that and finding now
what looks like a | |
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| | recession, the question
is how to view those
KPIs,” he says. “We went
through them and for
each one we asked what
would be the practical
tip or tips that would
help a firm get through
a recessionary time.”
While many
consultants have never
planned to sell their
businesses, Collins
believes it’s worth
focusing on equity
value, because it’s a
direct reflection of the
certainty that a buyer
would have of revenues
and profits being
sustained or growing.
“If you do all the
things that enable you
to grow the equity you
will build profits and
help your cashflow,” he
says.
Collins’ primary
advice to firms going
into 2009 is focus. “You
need to focus on
existing clients, focus
on business development
and those projects where
you have a ‘right to
win’,” he says. “Look at
existing and past
clients and give them
no-brainer propositions
– tell them we’ll help
you survive the
recession and also help
share some of the risk.”
This will often
entail offering some
form of contingent fees.
“In my experience when | |
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| | order to protect their
profits,” he says. “We
advise our firms to
increase spending on
marketing. Marketing is
an investment and you
should get a return on
it even in a recession.
It’s much easier now to
measure your return on
marketing, so there’s no
excuse.”
In fact, Collins
advises firms to measure
everything: gross and
net margin, utilisation
by sector – every week.
“You need to know
which sectors are going
to give you trouble,” he
says. “Measure
everything and make that
information available to
the leadership team.
Part of that may involve
getting someone senior
in with a finance skill,
even if it’s on a
part-time basis.”
Redundancies may seem
inevitable, but firms
should not be too quick
to forget the lessons of
the war for talent.
“It’s a knee-jerk
reaction to let people
go – it cost consulting
firms a fortune last
time round,” says
Collins. “Also, once you
start people thinking
‘Am I next?’ they start
leaving of their own
accord.”
One way of avoiding
this is to look at | |
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| | making as many direct
costs as possible
variable. This can start
at the top by making
more of senior partners’
remuneration
performance-related.
Firms could also
consider trading equity
for salary while times
are tough.
Most consultancy
firms will also have
considerable scope to
tighten up internal
processes, and this can
be a useful way of
keeping staff busy
rather than leaving them
“on the bench”. Keeping
people upbeat – and
informed – is vital.
“You need to lead
from the front but also
to share the load,” says
Collins. “The last thing
you want is to
overstress yourself and
end up getting heart
attacks and ulcers.”
Collins believes that
if firms continue to
focus on the areas that
built value in the good
times, they can survive
the bad times, and for
those firms that have
done this so far, the
prospects seem good.
He says: “85% of our
clients report that they
are doing OK. They say
things like ‘Yes, we’re
worried, but at the
moment we’re having a
record year’.” | |
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