Listen to this podcast Ep. 156: How To Make Your Consultancy Business Saleable With Prof Joe O’Mahoney.

Interviews, strategy and advice for building your online business with your host Trudy Rankin.

Trudy Rankin: Welcome to the Online Business Launchpad podcast. I'm your host, Trudy Rankin, and if you have an existing business or you're dreaming about building a business that you could sell someday, today's episode is one that you're going to really want to listen to.

Professor Joe O'Mahoney is a professor of consulting, and he's both a growth and an exit advisor to boutique consulting firms. And that probably covers a wide range of firms, but when you talk about boutique consulting firms, they're typically fairly small, usually with masses of people inside the firms, but they're still very effective with what they do. Now, Joe's got over 20 years of experience in advising on growth, exit valuation, and all the other things that go around with it.

Basically, selling a business and getting it to the place where it can be sold and he sold his own consulting firm, and the thing that I find interesting is that he's researched, consulted, and written about critique, growth, and exit. So in other words, he has the experience that it takes to actually know what it takes to sell a business.

And he's also done a lot of research, published three books on the consulting industry, and written lots and lots of articles about that particular topic. And also, the other thing that sort of stood out for me is that he uses evidence to back up what he says, not just what worked for him personally, because I hear lots of stories about people who said, “oh”, I did this; you can do it too.

And then the reality is that we can't do it because we're not those people. We don't have their experience or their skillsets. But he's basically studied over 200 boutique consulting firms, and he's identified what worked for each of those firms individually. And he's really clear that what works for one firm might not work for another firm.

So, that's really interesting to me, and I just think it's a really good way of approaching that whole focus on giving advice to people about being able to do a particular thing. So I just wanted to say welcome, Joe, and thank you for being on the podcast.

Professor Joe O'Mahoney: Thank you, Trudy; that was a fantastic introduction. By the way, I want that bit of the recording so I can play it back to my mother. Thank you. It's very kind of you, and it's very nice to be here. Thank you.

Trudy Rankin: It's an interesting topic and one that I personally have an interest in, not because I want to sell my business but because I have an interest in it. Making sure that what I row and build is something that's going to eventually turn into something that's going to be valuable enough that if I did decide in the future that I wanted to sell it, I could do that. At the moment, I'm actually interested in looking at buying businesses and going into what makes a business attractive, useful, and interesting, and one that you could jump into without necessarily giving yourself a job.

So, I'm personally interested in the topic. I think there are interesting sides to it, whether you're in the growth phase or you're in the exit phase and you're at the stage where you're starting to think about wanting to exit. I think it's important to keep those two things in mind because they seem to be a bit of a continuum.

So, before we jump into that side of the discussion, can you maybe just share it with our listeners? Just a little bit of your background, who you are, where you've come from, and a little bit more detail about how you actually got started in this whole space.

Prof O’Mahoney's Education Journey And Early Consulting Adventures

Professor Joe O'Mahoney: Sure, as with many people in this space, I studied ancient history at Oxford, and I wanted to be Indiana Jones. But then I realised there was only one of those positions, and there were a hundred thousand people applying for it. And I was by far not the brightest.

So, I did my master's and PHD in businessy stuff and then went straight into consulting. I always liked the academic side of things. I didn't want to be one of those professors who lectured without ever having experienced the inverted commas of the real world. So, I spent a few years consulting.

I'd already done a bit as an independent consultant, doing my PHD. Then I went into corporate consulting focused on everything really. I was one of those generalists where they rewrite your CV just before you go and see the client. Then I was an internal consultant when 3, the mobile phone company, was being created from scratch.

So, I was responsible for designing the company, I guess, on the products and services side. And then after that, to be honest, I was exhausted. So, I thought, “This is the time to go back to academia”. So, I took a massive pay cut and decided to follow my passion of teaching. You know, I love teaching.

I have done huge amounts of it. And to be honest, in those days- this is nearly 20 years ago- it was a bit like early retirement. And so, as with, I guess, many entrepreneurs, I got itchy feet and started my own business that I grew and then sold while climbing up the greasy pole of academia.

And then what happened? It was interesting. A lot of my friends who I left in consulting went up the ranks. In the big firms, they hit up against partners, didn't make it, and started their own firms. And then, because the university had me teaching and researching academia through consulting, they came to me for advice.

And it was really a massive gap, I realised. So, anyone who's researching consultancy in academia wants to be with the sexy firm. They want to be researching McKinsey, Accenture, and Deloitte. No one had really done decent -evidence based research on boutiques. There were a few papers over 20 years, but nothing very useful.

So, I thought, “This is important because boutiques and small companies account for 95% of all consulting firms. So, that's really where I started to get into the evidence-based side of it. And there were a lot of surprises. After a few years, my friends started recommending me to their friends, and then I thought it was time to start charging for this stuff.

And if you can improve the trajectory of a firm by a couple of percent, by the time that firm hits exit, that can be five or 10 million. So, I thought it was Inappropriate of me not to charge for it. And then, I guess, that's the first thing in terms of my expertise.

But the other thing that really pushed me towards this, and I'm sure you'll get this all the time as a business owner, is that there's a lot of really bad advice out there. And it's typically guys in their twenties in cheap suits promising they can scale your business to seven figures in three months.

And some of the advice, in effect, has been stolen from the SaaS industry or the software industry and applied to consulting firms, whereas it's all about the funnel. And, don't get me wrong, digital marketing is important, but it's not all about the funnel. And so that's really what's prompted me to get into this.

And then, over the years, as I've learned more and studied more, I've tried to publish a bit of it to keep the university happy.

Trudy Rankin: I'm smiling because I've got experience in the university sort of space, not from an academic point of view but from having done a master's degree. And observing a lot about what it was like to be in that space. And it's just that it's really interesting, and it's either publish or die as an academic.

Professor Joe O'Mahoney: It is, and I wouldn't mind if you were encouraged to publish stuff that was highly readable and highly relevant, but one of the nice things about being a professor. I hope my boss doesn't actually listen to this episode, but one of the nice things about of being a professor is that you can choose a little bit more about what you publish.

And so I've turned my back a bit on the highly theoretical stuff that enabled me to get up to the professor. And I'm trying to write stuff that's a little bit more accessible. I do a lot on LinkedIn, and I do a lot of blog stuff. And I try not to mention any theories at all.

Trudy Rankin: And I like that because, I think, you finish a degree at the university, and what I discovered is that you walk off into the corporate world and start to try and apply some of those theories.

And you very quickly realise that a hardly anybody uses them because they're theories. And then as soon as you apply the theories, they fall apart in the real world battles that go on. And so I'm always fascinated by evidence-based, by an evidence-based approach to applying theories, because that's where you get the real value.

Because theories can be useful but it's, you've got to use them with a little bit of caution and wisdom. I'm just curious just from that perspective in terms of the approach that you've taken with the evidence-based side of things.

How have you found people reacting to that? In terms of going, “Oh, I've heard this theory, but Joe is saying this.”

A Dynamic Landscape Of An Ever Changing Economy

Professor Joe O'Mahoney: That's a question I've never been asked, and it's a really good question because, let's face it, most leaders of management consulting firms aren't shy, and you don't get to that position by doubting your own competence.

So, if you pardon the expression, I do piss a lot of people off. And I don't care because the university pays my salary. I probably get 50% of my money from the university and 50% from consulting. But I'm not particularly bothered about keeping my clients happy. And if you look at most of my posts on LinkedIn, there are a couple of quite successful consultants who will come back and say, “Ah, this is rubbish.”

I did it this way, and this is what worked for me. And my response is always.” You can't generalise from a case of one. Organisations are complex, and societies are complex.” The economy is always changing. What happened 20 years ago? It might have been best practice, but it might not have been, and you might have been lucky.

Luck plays a huge part in all of this. But as you said in the introduction, you can't generalise from that. And it does irritate me a lot that, very well-paid board advisors who grew and sold their firms 20 years ago are in effect giving advice on how to do that 20 years ago.

And I'm not saying it can never work, because it can. But the world has changed. It's much more complex; it's much more digital. There are many more opportunities when it comes to the digital world.

Trudy Rankin: Yes, absolutely. And that was one of the things that I thought was interesting from what you said when you were talking about your background.

And that is, you were in that change space originally and there's so much has changed over the last 20 years. Both, the theory and the practicalities, pardon me. And it's, I think it can be a little bit hard for business owners, especially small business owners and solopreneurs, microbusiness owners, whether they're consultants or whatever they are, it can be really difficult to keep up with a pace of change.

So, I want to come back to the research that you've done. And just talk a little bit about that actual research, the process that you used to talk to people and then the books that resulted out of that.

Discover Prof O’Mahoney's Journey in Research and Publication  

Professor Joe O'Mahoney: Sure, okay, I based my first book, which was all about consulting, it was aimed at undergraduates, this is what consulting is, this is how it works, these are the careers, and this is the life cycle that you go through. And that was based on my own experience, but I also got lots of people who would work, lots of friends in effect, who'd worked at the big firms to chip in with their own ideas.

So, I've produced a fairly standard online course, but it's also a book in terms of how to do consulting well. And it's all the hints and tips that you pick up over a lifetime. Everything from really pushing the client to understand their problem all the way through to delivering but then looking for more work afterwards.

And the different ways of doing that, I guess the book that's most pertinent to this discussion was the one I published a couple of years ago, which is called Growth Building a Consultancy in the Digital Age. That was published with Routledge, and it was based on 70 interviews with founders who grew and sold their firms.

And I've also obviously got my own experience of growing and selling a firm. Helping others grow and sell their firm. So, I combined all of this. And there were loads of interesting insights around Firstly growing. I'm not a fan. I'm pleased you use the word growing.

I'm not a fan of the word scaling when it comes to consultancies because scaling, as it comes from the image industry, where you take a tiny image and just make it bigger. So you're doing the same thing, but at scale. And that doesn't really happen in the consulting industry. Once you get to Deloitte size, then, okay, so you are turning the handle, and you're usually using the leverage model.

But for consultancies, it's much more about growth. And growth is harder because, with growth, you are still very much in the phase of experimentation, and it's a lot more messy. There's a lot more luck involved. And so, I'm really trying to understand what worked for CEOs when starting their own firm.

Growing it and selling it. And for some of them, all of their lessons were about starting. I wish I had a client in hand when I'd left my big consultancy. I wish that I had taken on a partner sooner. I wish that I'd shared equity sooner. But some of them were quite happy with that part.

But when it came time to exit, they wished they hadn't sold to the highest bidder. Or they wished that they hadn't focused so much on margin and focused a little bit more on the infrastructure, or they wished that they'd pursued that SaaS project that they had in the back of their heads but never developed.

So, it was really a reflection on all the different aspects of growing and selling a firm in the 21st century as opposed to 20 years ago.

Trudy Rankin: That's interesting to me because just your differentiation between scaling and growth immediately brought to mind my past experience as a project manager, where if you had a project where the outcome was known and the pathway to get to the outcome was known, all you did was just repeat, repeat.

And you would eventually, if you had all the right things, get what it was that you wanted. Whereas if you had a project where the outcome was known but maybe not really because you were in a new industry or there was new technology that had come out and people were going, Hey, we know there's something valuable here, but we're not quite sure what it is, and we want to try and figure out what it is, you can't repeat and repeat.

You have to be open and flexible about trying new things. And I just found it interesting that you were applying that sort of concept. To grow a firm to the point where it can be sold because of the advice that gets given a lot. For agencies particularly- not necessarily for consultancies, but for agencies- you have to be able to have a repeatable business model in order to drive down costs. If you could talk about that just a little bit.

Why Clients Preferred to Work with Boutique Agencies 

Professor Joe O'Mahoney: That's a really intelligent question. So, you are completely right when it comes to that product or that service. So, ideally, don't get me wrong. There are companies that haven't commodified, that haven't systematised, and that have also sold.

So, Water Street Partners is a very good example of this merger and acquisition consultancy. The unknowns, as you say, have a focus on bright people, investing in people, and being innovative and creative with their solutions. They sold very successfully to, I think, McKinsey; I can't remember.

But for the most part, yes, the advice is to standardise, commodify, and systematise, and that is true, give or take. There are two things I would add to that. Firstly, strategically, you don't want to lose the innovation that boutiques or agencies have. One of the reasons why clients come to boutiques rather than go to the big four- McKinsey, BAE, and Boston- is because they're not getting that innovation from McKinsey, BAE Boston anymore.

And so they come to boutiques because the people are more friendly; they don't have that baggage or bureaucracy, and climb up the ladder and systematise things. The other thing is to say that from the CEO's perspective, you may well have one, two, or three products that you get to a commodified or systematise state, and that's fantastic, but.

There are several things that mean that you can't rely on that entirely. The first is that the market is always changing, and if you don't change your products and services with the markets, you're going to get left behind. And that's especially true in the consulting industry, where, you know, what was TQM became lean.

What was lean became agile. What was agile became something else. And the second thing is that with smaller firms that are growing you really can't make that jump too quickly. So if you go directly to modified services, you may well be modifying the wrong thing. So, there's this really important growth phase where you are really working out what type of company you are and what services provide high growth and high margins, and you also enjoy doing them.
And if you don't spend sufficient time doing that, then you are probably going to scale the wrong stuff.

Trudy Rankin: That's pretty interesting because, of course, the question then becomes, typically, In general, or maybe as a generalisation, how long does that phase tend to last?

Professor Joe O'Mahoney: That's another really good question. So, I would say it typically lasts about five years, but it should last a bit longer. So, I think a lot of consultancies focus on so, let's imagine I leave Deloitte. I'm a great change manager for the automotive industry. I leave, I start doing change management for the automotive industry because it's what I know.

It's where my clients are. Great. Okay. So I'm making, 50% gross. I'm making 15% nett. Because I've got those connections, I'm doing pretty well. Now, once you start to grow. I'm generalising here, but two things typically happen. One is that you need to feed the beast and the founder can't do that.

So, you need to go beyond your own connections. But number two, those people who started off by, giving you projects because they knew you, and liked you, and wanted to give you a bit of luck when you were starting off, start to fall away. So, you've got this two to three year period where you know you are in the money, and you're thinking, “This is great.”

All I need to do is commodify what I'm doing and sell it, and I'm done with my five- year plan. But a lot of founders forget that drops off and that they need to keep they need people who can sell. And very often the margins will drop off as well as a part of that because they need to be more competitive because they're competing with bigger players.

At that stage, I often get called in, and my initial question is, “Are” you selling the right stuff? And they say “Of course” we've got a reputation in this. I'm one of the best experts in the world, but perhaps instead of doing change management in the automotive industry.

You could be doing change management in the banking industry and double your margins, or you could call it agile in the banking industry and triple your margins. Or, there's a specific thing that you are doing that's high margin and high growth, and you're not plowing money and people into it because you've got your security blanket of what you always used to do.
So, that's a very long winded way of saying that if you think you are going to scale what you have always done, You might be right, but in my experience the odds are you're probably going to be wrong and that you are going to miss some really important opportunities.

Trudy Rankin: I think that's actually really interesting because I'm reflecting on my own sort of journey as I left the corporate world, started up my own business, and worked my way through.

And one of the biggest surprises to me was, that, you do actually change and pivot as you learn and grow your way through. This world of consulting and all the different aspects that go with it. So, if I'm interested in what you were saying about, you asked the question, “Are” you selling the right stuff?

How do people figure out what they should be selling? If what they're selling isn't necessarily the right stuff?

How Do You Know If You're Selling The Right Product

Professor Joe O'Mahoney: So, this comes back to tradition. But good market research. So, talking to your clients and doing some market research, what are the growth areas? What's the highest-margin work?

Looking at the competitors, but I'm sure you've had the same experience. It really amazes me how some, I've got four clients that I'm on the board of. And the first thing I say when I join is. “Where's the client advisor”? They'll have three people like me who have grown and sold companies or are experts in growth, but they won't have any clients there.

And what you need to do is to talk to your clients all the time. And I don't just mean sending them a questionnaire saying. “How good was this project”? Inviting them into the office, having them on the board, having get-togethers and lunches where you discuss the trends, the emergent trends, and what problems they really need solving, and then you start to explore those as potential services rather than what you've done, perhaps successfully, over the last five years.

I'm not saying that there aren't really important, valuable, and profitable things that you've done in the past that will continue to sell in the future. But I am saying that unless you have that period of experimentation, you may well find that you are on the top of the s-curve of market growth and you are selling tqm and BPR when everyone's moving on to something else.

Trudy Rankin: I find it fascinating that you partially answered the question I was going to ask, which is, as soon as you bring on a client advisor and you start, talking with them and looking at emerging trends and things, the thing that immediately jumped to mind was AI.” Where does that fit in this world”?

And how do you help a client? Or how, as an organisation or a business, how do you help your clients see the future when even you don't know what's coming around the corner within AI?

Prof O’Mahoney's Pro Tips On Mastering The Art And Science Of The Selling Process

Professor Joe O'Mahoney: I think one of the good things that academia has done is to show how much of this type of stuff is hype.

Now, don't get me wrong, I believe that AI is probably the most disruptive technology that's going to hit consultancy in perhaps the world. Since the internet was invented, but everyone knows at the moment we're at the peak of a hype curve. And if you look at any management innovation or technological innovation, they're on this hype curve.

And we're very much aware of that, is one thing. But clients-and funnily enough, you mentioned AI. My clients don't have enough time. To sit there and explore what AI can do for them, either internally as a company or for their clients, unless they're already specialists in machine learning or data analytics.

And that's part of the role of a good advisor. So, I do a monthly AI newsletter that goes out, and I really just tell them what's happening, what's working, what's hype, and what isn't. And that type of insight is really useful now. Don't get me wrong; just because it's there doesn't mean you should put money into it.

Having your services. One of the early criticisms I had 20 years ago when I started advising consultancies is I used to come up with a long list of stuff they needed to do. And that's very easy for me to do if I'm the advisor. What I do now is a very prioritised list by value and effort, as all consultants should do.

And it may be that AI has huge amounts of potential. But in terms of effort, it's huge to do well, and it's the same with SAS. SAS is a massive opportunity for consultancies, and a lot of them are exploring the potential of building software instead of people services. And they're eyeing the margins, and they're thinking, “Oh, software company would be nice.”

I could get rid of all these tricky consultants. But it's much more complicated than that. And some firms have done it successfully, but more firms have done it unsuccessfully.

Trudy Rankin: With my background as Chief Information Officer, I can tell you that software is one of the most painful and complicated things you can ever get into.

Especially when you start getting into things like cybersecurity. And all of the stuff that you have to be careful about and, the data management and things like that.

And one of the things that you just briefly skipped over, was the whole data analytics side of things. How do you help your clients deal with the morass of so many different things that you should , do when it comes to data analytics and using them to actually help with your business growth?

Professor Joe O'Mahoney: You are asking me a lot of good questions that I haven't been asked before, and I'm pleased about that because it's one of the, and this won't surprise you from your information background, but most consultancies have a vast amount of data and they don't know or care.

And so my first question is.” What do you know”? And also, how quickly can you know it? So, if a buyer comes to you and says, “Oh”, what's your employee churn for the last three years? Averaged out? Most boutiques will say, I've got no idea, but I can get it in a couple of months, or whatever.

But the selling process is very time-intensive, so you don't want to be digging around through databases to find this stuff. So the first thing is getting your data organised, and sorted, and reportable, and all the rest of it clean-not clean, but certainly not really dirty data. And are cheap systems.

There's a cheap professional service automation system that will allow you to do that. But the second thing is, What value do you have in your data that you don't know about? And that's much more important in terms of consultancies having really interesting, useful data either to them or to their clients that perhaps even they could monetize.

One of my old clients, for example, started off as a digital maturity consultancy. So, in effect, they go into an automotive firm and say, look, you should bring in data analytics or AI or robotics or whatever, and this would be the impact. Now they have generated so much data that, in effect, they have flipped, and they are now a benchmarking company.

So, they are now a software company rather than a consultancy firm. And obviously, the margins are much higher. They had to get investment to do that, but, it really does show you the power and value of data that some consultancies just don't know they have.

Trudy Rankin: It's interesting because I've seen that happen, and I have a friend who used to own a company who would do that.

They would go and talk to businesses and say, “Lets” have a look at your data. “Let's” see if we can find things that are going to show patterns, trends, or anything that's going to help make better decisions. And yet, despite all the tools that are there, a lot of the business owners that I talk to don't seem to, value that.

And I'm wondering whether, based on your experience with your clients, is that partly because people are scared of numbers or it just feels like it's an overwhelming thing to do and they just don't know where to start?

Professor Joe O'Mahoney: I think it's more the latter than the former. I think, especially if you are a traditional consultant, you're used to the leverage model. We sell people; we make money because we sell person X for Y, and we charge 'em out for Z. That's really simple. And it works, but, that's the basis of some very successful consultancies.

But my view is that it's all about client value. If you can add more value by providing the client with data insights in industry averages reporting or whatever, then as a good consultant, you should be doing that. And you don't necessarily need to hire data scientists, especially these days.

Things like Tableau and all the rest of it make data analytics quite straightforward. And again, it's on the priority list. You, as a CEO, you're responsible for making decisions about investment and this type of investment. It's not like building a software service, but it is still time and money.

So, I think there is that hesitancy about it. And it doesn't apply to all consultancies. Some consultancies only have data on a few of their employees and the money they bring in. But it is a pot, and if you're not thinking strategically about it, you'll perhaps turning your back on significant margin gains.

Trudy Rankin: And it's not just consultancy firms as well. My husband's in the healthcare industry, and this massive, use of data in non-invasive ways to be able to provide a better experience for people is just fascinating. And the ability to use the data to drive provider behaviour change.

Professor Joe O'Mahoney: One of my closest friends is the head of data for the NHS, which is the biggest data pool in the world. Imagine all that healthcare for every single person, and the opportunities are remarkable.

But as I'm sure your husband has insight into the bureaucracy, and the decision- making in the public sector isn't one that lends itself to this type of innovative thinking.

Trudy Rankin: Not only that, but coming full circle back to your days in terms of change, that is, getting people to change the way they think about something or the way they change things?

You can't just shove a spreadsheet under their nose and say, Hey, look at the numbers. You need to do things. You have to do it in a way that helps people, first of all, buy into what you're trying to tell them or see it for themselves. And then connect the dots about what that means in terms of how they should change their behaviours or whether or not it's the systems that are around them that are creating whatever it is that needs to be changed. How do you work with your clients in terms of that aspect of it?

How To Prepare For An Effective Communication

Professor Joe O'Mahoney: To be honest with you, it's probably the trickiest part of my job because, as I said before, CEOs of consultancies aren't shy about their own opinions. And I find it odd because I don't really market myself other than by putting stuff on LinkedIn.

And so people generally come to me, and then I won't try to sell them anything in a conversation. I'll just try to add value, and then they'll say, “Oh”, it'd be great if we could work together. So we'll work something out, and I'll do a deep dive. I'll look at their contract, their finances, their marketing, their markets, and all the rest of it.

I'll come up with some fairly solid recommendations that very often the leadership team is very much in favour of, but I'd say 20 to 30% of the time the lead will just be, “No”, I'm the expert here, which is fine. That's the position you are in as a consultant. But with that, you've got that sort of 25 to 30%.

You've got another 25 or 30% who are almost too keen. So, almost everything I say in effect, I become the CEO. So, everything I say they say, “Oh” great, we'll do that. Don't get me wrong, I think I'm right, but I like a little pushback sometimes. And then you've got the 50% in the middle, or whatever percentage it is, 40% in the middle.

Who are the people that you need to do the change management stuff. Again, might be the consultant in me. In the old days, I used to think the logic of the data would make the decision happen. So, I would provide the market analysis, and the recommendations, and the business case and expect people to go, “Oh, fantastic!”

We'll go and do that, Joe. And of course it's never that simple. Doing all the solid stuff around the Japanese have got a wonderful work. Which is tending the roots of a plant. So, if you want to move up a plant from position X to position y, you take some of the soil from position Y and put it round to plant and then slowly get it used to the new environment, and then you move it after a period.

So, it's having that sort of nemo washy attitude to preparing the ground communication. Stakeholder management and all the traditional stuff that consultants should do, but very often don't.

Trudy Rankin: I think that's really wise advice, and it's just interesting that there's so much that's new, but there's still a whole lot that's hasn't changed.

There is still best practise. Joe, it's been fascinating speaking with you, and I'm just keeping an eye on the time, and it just zips by so quickly. And just before we wrap up, I'm just wondering if you could just share a couple of pieces of advice for maybe somebody who's in that growth phase. And they're not so deeply entrenched in their business that they're thinking, “Oh”, I couldn't possibly change. What could somebody who's in the growth phase do that's quite logical and sensible that would prepare them for either increased growth or if they could sell their business?

Professor Joe O'Mahoney: The thing that's top of mind and is a surprise to some of my clients is that you get to a certain point where your margin isn't that important. Don't get me wrong, it's still very important, but when consulting firms are valued, typically, and this won't be a surprise to anyone who's, looked into this.

You've got your margin, and then you've got a multiple on your margin. So let's say your margin is 20%, which is the minimum you want for a sale, and your multiple is seven, which is average for a boutique consulting firm that's selling. Now you could really hammer things and push that margin up to 23, 24% if you really hammer the workers, if you really do the pipeline stuff, if you focus on high margin content, and perhaps that's stuff that you might want to do in the final year, but it's more profitable to spend a little bit of time thinking about what can we do to increase the multiple and the multiple.

Is a function of everything else other than margin. So it's having the right leadership team; it's having systems and processes in place. It's having that professional service automation software in place. So that data is just there at your fingertips. It's having founders that have moved away from the sales position.

It's potentially having a founder who's now got a CEO in place. So, all of those types of things can push your multiple. And also, being in the right niche, Obviously, if you are in data analytics or cybersecurity, or AI consultancy, you are going to get a multiple of 10, 11, or 12. So, it's making sure you're doing the right stuff in the right way.

So, perhaps in the two years coming up to the sale, you might focus more on what could we do to improve our multiple, rather than squeezing out an extra percentage point or two in terms of margin.

Trudy Rankin: I think that's really interesting. I hadn't heard it described that way before. I have one last question for you.

And it's maybe a little bit of a twist on what we've been talking about. I've seen a number of businesses and business owners just over the last little while get to the place where they're going, and I've had enough. I'm done; I'm retiring, and instead of trying to sell their business, they walk away.

What advice would you give to somebody who says, I want to walk away? Would you say fine, or would you say, “Hang On”, wait, have you thought about selling?

Prof O’Mahoney's Expert Advice For Those Ready to Sell a Business

Professor Joe O'Mahoney: That's a really good question. So, there are two things. One, I'd say 30% of the conversations I have with new people are with founders who come to me and say, I'm ready to retire.

I'd like to sell next year. I'm making a 20% margin. And growth has been good. And I look at the company, and it's unsellable. And to get it into a sellable position, you need to do all that, -the systems, the leadership, and the roles, and all of that standard stuff -because it's all about them.

And as soon as they disappear, there's no company. So, it's a common problem. And that company's unsellable. So then they've got a choice: either to go away and spend two to three years making a company as opposed to making a successful and famous founder who's connected, or they walk away from it.

So, that's the first thing. The second thing is, in terms, if you can't spend two to three years turning it into an asset, then you think about succession management. And so, you find someone who can take the business on, ideally buy you out over time, and, you retain a small percentage of the share so, that if they sell it down the line, now that is the less optimal approach, simply because the data shows it less successful.

So, when a founder goes, even if you've got someone who's coming on board to take it on, sales tend to dip. Margin tends to dip, and company failure rates tend to go up for fairly obvious reasons. So, really, the ideal answer is to anticipate your leaving in two or three years and turn your company into an asset.

Think well: when I walk away, what's this company worth? And very often, the answer is zero. So you want to make sure that answer changes.

Trudy Rankin: That's really good advice. Joe, thank you so much for being on.

Professor Joe O'Mahoney: Thank you, Trudy.

Trudy Rankin: It's been really great talking with you. If people were interested in finding out more about you, your books, or the services that you offer, where would they go?

Professor Joe O'Mahoney: I have a website, which is My wife always takes the micky out of me for that. Or you can connect with me on LinkedIn. I've put most of my ideas and research up on LinkedIn. And you'll find me; I think it's Professor Joe O'Mahoney.

Trudy Rankin: Excellent. We'll put those links in the show notes so, that people can go check them out. Thank you so much.

Professor Joe O'Mahoney: It's been a real pleasure, Trudy. Thank you.