9 Steps to selling a consultancy business

s it time to sell your consultancy business? Selling your consultancy business is an important decision, and if done correctly, it can set you up well for your future endeavours. Unfortunately, the opposite is true as well; if you sell it at the wrong time and strike up the wrong deal, it can also derail your future plans. 

So, it's vital that you get the guidance needed to sell your consultancy business correctly so that you get the best deal out of the sale. At Lloyds Brokers, we are all about helping you make the best of every sale. So here are ten steps that'll help you sell your consultancy business the right way. 

What determines the value of your consulting firm

The overall value of your consultancy business has a massive impact on how well it'll sell. The lower middle market consulting business can often trade across a decent range of clients. Turning over at least $15m EBITDA. Larger consulting businesses will generally have much larger trades and more of them, too, making them more valuable. Here are some factors that'll help you place a value on your consulting business:

• When selling your business, buyers or investors are going to want to check your turnover. They'll pick apart your revenue streams and profitability. The healthier your profit margin, the higher your business's value will be
• They'll also want to check your client base. Do you have several clients? Are they long-term, or do you have retainers that are ending soon? Having loyal clients will indicate that your business has built a good reputation and is trustworthy
• Are you charging enough? Reputable businesses know the value of their services and charge accordingly
• They'll check your current team. Having an experienced team is a good asset
• Does your firm specialise? Showing that your business has unique skills will make it more attractive to buyers
• How well does the business function? Is it efficient, or are there always issues arising from mistakes being made
• Finally, is the market conducive to buying a business at the moment? Industry trends and economic conditions can play a big role in the evaluation of your business

Steps to selling a consultancy business

So now we know how to ensure your business is attractive and valuable, let's discuss how to sell your consulting business. Here are nine steps to selling your consultancy business the right way:

Step 1: Plan your sale effectively

Plan with the end goal in mind. You need to create a comprehensive sales plan that aligns with your sales goals and helps you achieve them. This means considering when the best time to sell is and what type of sale you want to do. For instance, one of your managers could buy you out, etc. 

You'd also need to figure out how to position yourself in a good position for negotiations. Negotiating from a strong point will get you a better deal. To do this, evaluate how you can maximise the value of your business before entering negotiations. Reducing risk is another important aspect of planning. Try to create strategies to help reduce risk on your end if possible. 

Step 2: Do business as per usual

Preparing to sell your business can take a lot of resources away from the everyday runnings of daily business. This will affect your sales plan negatively, so we'd suggest putting a plan in place to ensure business carries on as per usual. This may mean you need to hire an advisor or delegate more responsibility to others in your business to help manage either daily business functions or sales. 

Step 3: Attract Buyers and Create a Buyers list

Now, it's time to build a buyer list. Using an advisor or broker, build a list of potential buyers. At least 40 or more should do it. Categorise the list based on their chemistry with your business. Do they catch the vision, etc? From here, you can work out who the best potential buyers would be. 

Step 4: Get the necessary documentation

Sorting out the necessary documentation is an important part of the sales process. These are a few documents you'd need to sort out to get ready for the sale:

• Blind Profile: A 2-page overview with key financial and operational details, excluding your firm's name, tailored for potential buyers.
• Information Memorandum (IM): A comprehensive 30-page report on strategy, finances, services, clients, staff, and sale rationale.
• Management Presentation: A customisable presentation for discussions with prospective bidders.
• Financial Analysis: Included in the IM, focusing on financial history, forecasts, and growth drivers for investors.
• Vendor Due Diligence: Recommended to prepare and present critical information for financial investors.

Step 5: Prepare your lawyers and financial advisors

Get your lawyers and financial advisors in early to help ensure you get everything right in regard to legal requirements and that you effectively plan around tax so that you get the most out of the sale. 

Step 6: Start chatting to buyers

Now you can start chatting to buyers. Send out your Blind Profile and follow up with the client via phone call. Guage their interest and see who you think has the best buyer potential for your consulting business. 

Step 7: Let the meetings begin

Before you start your meetings, allow buyers to submit their indicative offers. These show you how serious the buyers are and it adds a level of competition to the bid. Shortlist offers you think to meet your standards and set up a meeting with them. In these meetings, you want to "sell" your business to them and impress them. But you also want to weigh up how well they'd suit your business. 

Step 8: Do your due diligence

Invite your potential buyers for a second meeting, encouraging them to present their second offers or bids. At the same time, ensure that you have all the necessary paperwork done. This will ensure the process goes smoothly.

Step 9: Draft a contract and Encourage Pre-emption

Get your lawyer to draft a contract for the sale so it's ready when you make a decision. In addition to this, pre-emption for early exclusivity should be encouraged. This pretty much allows potential buyers to make an early bid that exceeds expectations, which, to a degree, guarantees them your business unless they're outbid by someone else. This will also create healthy competition, ensuring that you get the best competitive price for your consulting firm.

Final Thoughts

Selling a business that you've put years of hard work into can be difficult. In the end, we want to see that our business has increased in value from years of hard work. For this reason, getting the most out of your sale is important, and these steps above should help you sell your consulting business without hassle and for what it's worth.