VARportal™

Jane Johnson, CPA, CMA,  is currently providing business advisory services to resellers and other small companies as a partner with B2B CFO®, and is a Business Service Provider member on VARportal. Join Jane as she examines company value in today's challenging economy.


BUILD COMPANY VALUE IN 2010

by Jane Johnson, CPA, CMA

2010 may turn out to be a “rebuilding” year even if the recession extends into 2011.  Recessions force us to focus our attention internally to be sure our companies can “weather the storm”.  It is also the perfect time to prune deadwood from the business and examine the way we do things…EVERYTHING!  Use this opportunity to set aside time on a REGULAR basis to work ON, not IN your business.  Most of us spend all of our time and energy all year helping our clients build their businesses while often neglecting our own.

Having been through the sale of our reseller organization, trust me when I tell you that you never know when you may have the opportunity to entertain an offer from a potential buyer.  Are you ready to have your company examined under a microscope?  Is your house in order?  Do you know what makes your company more valuable than others in the same industry??

According to a recent survey of acquirers and valuation experts called “Top Dollar – How to Achieve a Premium Valuation for your Professional Services Firm”, there are seven primary factors that drive PREMIUM instead of AVERAGE valuations of professional service firms.  Most of the factors won’t surprise you, although their ranking may!  Here they are in order of importance:

1. Strength of existing client relationships
2. Technology
3. Quality of management team
4. Marketing strategy
5. Financials
6. Employees
7. Profile/Image

In this and upcoming articles, I am going to discuss these factors and how you can use them as guidelines to boost your company value in 2010.  I would challenge you to include these factors in your 2010 strategic plan and make plans not only to improve your business practices but also to measure the results in each of these areas.

Strength of existing client relationships

I was pleasantly surprised to see this in the #1 spot, significantly ahead of financial results.  In my leadership role with  professional service firms, I always believed client relationships were critical to our business and we focused significantly - time and resources - in this area. 

We conducted an annual client survey, even before we had web-based applications to assist us in the process.  There is absolutely no reason NOT to do an annual survey – unless, of course, you are afraid of the results.  I would recommend that you develop the questions internally but ask for external, independent feedback to be sure you are focusing on all of the important areas of your relationship.  I am confident that the results of the first survey will be enlightening for you!  Be sure to tally the results, along with your interpretation of the results (not excuses), AND make them known to your staff.  Do this every year and you will be able to truly gauge the impact of your initiatives in many areas of your firm.  Do this every year and you will have hard-and-fast data to backup your claims to potential buyers as well!

If you haven’t done so already, bite the bullet in 2010 and begin offering support contracts to your clients.  It is an excellent way to build those client relationships and build recurring revenue at the same time!  Don’t allow your vendors to take this revenue stream away from you, unless you are absolutely certain it doesn’t make financial sense.  Depending upon the nature of your business, there are many ways to package and charge for your support services, but the numbers have to make sense.  Work with your internal service delivery and financial experts to analyze the client base and come up with plans and pricing that will be appealing in this economic climate.  If you can, use this opportunity to break away from the billable hour constraint and use value billing.

How long you retain clients is an excellent measure of the strength of your client relationships.  There are many ways to build client loyalty, and I believe that regular communication is one of the best.  Electronic newsletters provide an efficient and inexpensive way to be in touch with your clients on a regular basis.  In addition, quarterly visits from an account or project manager should be built into the service delivery plan for all key clients, preferably as billable.  Deliver them pro bono if you can’t charge for them…these visits will typically drive additional revenue that will far outweigh your cost for the visit.  Also consider holding quarterly customer briefings to keep your clients informed about new developments with their technology as well as your firm.

Technology

This factor refers to the existence of proprietary processes, patents or other intellectual property.  This may be difficult to achieve for most reseller organizations, given the nature of the business, but you CAN develop methodologies for key business processes that will improve your business markedly.  In addition, having repeatable processes will demonstrate your focus on quality to others, including clients and potential buyers!

Key areas that should have methodologies (preferably branded) include: 
* Sales process
* Client induction
* Project management & implementation
* Client support
* Hiring
* Employee orientation
* Staff development & training
* Performance review

Quality of the Management Team

This factor refers primarily to the strength and depth of the management team, but the team also has to be willing to stay on after the sale of a professional service firm, at least for a short time, to ensure a successful transition.  Having a good management team can ensure business success and the absence of one can inhibit firm growth...dramatically! 

Be most careful when selecting or promoting managers.  Use a hiring assessment tool (also known as a personality profile) to help you evaluate the candidate’s leadership potential and personality traits.  In addition, look for candidates whose skills round out or complement those of the existing management team.  It is also essential that you evaluate the business philosophy and values of each candidate to ensure team synergy.

Jane Johnson, CPA, CMA

Jane Johnson founded CoActive Consulting Group Inc. and was its CEO from 1990 to 2004.  CoActive was a Certified Partner for Microsoft Dynamics GP (formerly Great Plains) and a consistent member of the President’s Club during the period of Jane’s leadership. 

After successfully growing the practice and servicing over 350 clients, Jane and her partners sold CoActive in 2004 and joined forces with another Microsoft partner that provided infrastructure, IT risk & compliance and software development.   Jane was a partner with the newly combined organization and spent four years as VP of Business Development and Technology Consulting. 

Jane is currently providing business advisory services to resellers and other small companies as a partner with B2B CFO®.  She is also a volunteer instructor with the Massachusetts Small Business Development Center.