Business Exit Strategies for Solo & Boutique ConsultanciesOct 16, 2023
- How can independent consultants and boutiques create an effective exit plan?
- Can you sell a business built around your personal brand?
- How to valuate your consulting firm
- How to determine the value of your consulting business
- How can you increase the value of your solo or boutique consultancy?
- Business exit strategies for independent consultants
- Business exit strategies for consulting boutiques
- Get the help you need to create a scalable consulting business that you can sell
Who is this guide for
You’re ready to slow down or to pivot out of your independent consulting business. But, you’re hesitant because you think your only option is to walk away without monetizing anything you’ve built.
It’s common for most businesses that are dependent on the owner, like an independent consulting business or small consultancy, to shut down without any further payout to the owner.
That doesn’t have to be the case for you though.
It’s possible to monetize the exit from your independent consulting or boutique consulting business.
I’ll walk you through your business exit strategies options in this article.
How can independent consultants and boutiques create an effective exit plan?
Independent consultants often assume that their business model doesn’t allow for an exit. As a result, they set up their consulting business in a way that overlooks the potential to have an exit event when they’re ready to retire or to pivot into a different type of business.
You might be questioning this idea of an exit for a solo consultant.
Your business is based on your knowledge, your expertise, and your ability to deliver for your clients. So you’re probably wondering what assets you have to sell when you’re ready to exit from your solo consulting business?
The answer is that you have intellectual property you can sell to other consultants or to consulting companies when you’re ready to exit your independent consulting business.
To be successful in setting yourself up to monetize your exit from your independent consulting business, you’ll want to plan ahead and establish an intentional business exit plan.
Can you sell a business built around your personal brand?
While it’s not impossible to sell an independent consulting business that’s built around your personal brand, it’s not common. Because you wear all the hats in your business from owner to salesperson to delivery consultant, there aren’t the traditional repeatable, transferable assets that other companies or individuals would want to buy.
With that said, independent consultants do have something that can be attractive to buyers and could provide you with an exit event. What is this attractive asset? It’s your intellectual property. Specifically, when you’ve created methodologies, frameworks, courses, trainings, assessments, and other unique ways of helping your clients achieve their specific business goals. These are attractive assets to a variety of buyers ranging from other independent consultants to boutique consulting firms to larger consulting businesses.
For example, I frequently talk to independent consultants who are looking for proven methodologies and frameworks they can use to create a bigger impact for their clients. And, they’re even more interested in purchasing a methodology or framework if there’s a proven marketing and sales process that would enable them to predictably land clients.
Additionally, if you’ve built a boutique consultancy where you’ve got employees and/or subcontractors and provide specialized services, your firm could be attractive to other consultancies, either for your unique methodologies or for your relationships and customer list.
Let’s look at Accenture’s acquisition strategy as an example. They have been acquiring 1-5 consulting firms per month for the last several years. They acquire some of these firms for their customer revenue and they acquire others for the intellectual property.
How to valuate your consulting firm
So now that you know it’s possible to sell some or all of your solo or boutique consultancy, your next question is likely “What is my consulting business worth?”
How to determine the value of your consulting business
There are many factors to take into consideration when you’re valuating a consulting firm. With that said, for consultancies with recurring, predictable revenue that isn’t tied to a personal brand, you could expect 1X-5X of your net profit. This is a wide range based on a variety of factors including the buyer’s desire for your intellectual property, how they see your IP fitting into their existing business, their assessment of how transferable your IP is to their business, and their willingness to pay.
Buyers also take intangibles into account including year-over-year growth, your market position, the strength and predictability of your customer funnel, your repeatable systems and processes, your liabilities and debts, and the degree to which the business is dependent on the owner (you in this case).
For consultancies that are built on your personal brand, have a dependence on the owner, and rely on you and your reputation, this is where you’ll want to explore selling assets such as your customized methodologies, digital assets, courses, specialized training curriculum, and other tools you’ve built over the course of owning your business. In these cases, you can build a valuation based on year-over-year revenue that’s attributed to the specific asset. Or, you can build a valuation based on predicted revenue models for the potential buyer’s business.
How can you increase the value of your solo or boutique consultancy?
There are several ways to increase the value of your solo or boutique consultancy.
First, you want to reduce or eliminate the dependency on the owner (that’s you). Think about what services you offer that can be transferrable to other consultants or consultancies. Answer the question – “What would I need to put in place to make the methods, frameworks, and processes I use with my clients to be usable by other consultants or consultancies?”
Next, you want to focus on demonstrating your business’ year-over-year repeatable top-line (revenue) growth and bottom-line (net profit) growth.
Finally, you want to build up the value of the assets you have to sell. For example, if you’ve built a specific methodology to help your clients achieve a set of outcomes, you could translate that into a course that’s used to enable other consultants to deliver that same methodology. You can capture testimonials and build out a repeatable sales process to demonstrate to potential buyers that it’s a plug-and-play process.
Business exit strategies for independent consultants
The business exit options for the independent consultant can range based on the type of business you’ve built, the types of clients you work with, and your goals.
As a solo consultant, you have options for exit strategies from your business.
First, you’ll want to be very clear about your business goals, financial goals, and personal goals. Do you want to officially retire at some point in your life? Or, do you want to continue working, at least partially, up until you’re no longer able? Do you want to build a business into an asset you can sell, as a way to add to your retirement fund, or do you want to sell your business (or some portion of your business) simply because you want to take on the challenge?
Then, you’ll want to design your business strategy and model to align with those goals. For example, if you want to sell your business at some point, you’ll want to focus on building up assets that are attractive to potential buyers, such as frameworks, digital products, courses, and/or repeatable methodologies.
Other consultants, micro consultancies, and boutique consultancies are constantly looking for tools they can leverage to add more value to their clients, as a way to enable more revenue in their own businesses. If you can develop tools that other consultants can implement to amplify their expertise, they’ll see value in that and be willing to invest in buying a license or outright access.
This will provide you as a business owner with a financial payout for the expertise and intellectual property you’ve built up over the years. And, it will provide the other consultant or consultancy with a shortcut to additional revenue in their business.
There are several models to consider as you’re thinking about slowing down in your independent consulting business. You can choose to sell access to your tools in a license model to build out recurring revenue for yourself. Or, you can sell your toolkit outright.
Some other options to consider are to pass the business to a family member (assuming they followed in your footsteps and have similar expertise to yours). You might also explore selling your email lists and automated customer funnel.
Business exit strategies for consulting boutiques
What are the exits for a boutique consulting company?
When you’ve built a boutique consultancy, you open up more options when it comes to exit strategies.
First, you want to make sure you’re clear about your goals. Do you want to build a consultancy that’s worth $5M to you when you sell it? Or, do you want to merge with another consultancy and take on a leadership role in the new, larger company? Would you like to acquire another company and build your business into a larger company?
Would you like to sell outright and free yourself up for new endeavors? Or, would you like to maintain some recurring income from your consultancy so you have diversified revenue streams?
Then, after you know what your goals are, you can devise your consulting exit plan.
You’ll choose the right time for you to exit, merge, or acquire.
Then, you’ll build out your exit plan. This might involve hiring a business broker or leveraging your network to set up a deal with a strategic buyer. You might bring on a business partner with the goal of selling it to them, all at once or over time.
Next, you’ll navigate your business to meet your specific goals. For example, you’ll want to be able to demonstrate year-over-year revenue growth. You’ll want to be able to show your potential client demand, such as your pipeline. And, you’ll want to be able to prove that your processes, including customer acquisition and client delivery, are repeatable and transferrable and don’t rely on you to execute them.
By taking on these approaches, you’ll set yourself up to have options and flexibility when you’re ready to slow down or exit your consulting business.
Finally, when you’re ready to exit your consulting business, you’ll be able to exit on a high note and not feel the regret of “what could have been.”
Get the help you need to create a scalable consulting business that you can sell
Are you growing an independent consulting business or a boutique consultancy?
Are you ready to be more proactive as a business owner to set yourself up for one or several exit strategies in your business?
In the meantime, I recommend the following resource for you:
The Independent Consultant’s Scaling Assessment. Click here to start the assessment. You’ll answer ~15 questions and then you’ll receive a personalized report that breaks down and prioritizes your opportunities to shift your business so you make more money and set yourself up for the long term.