When it comes to selling a consulting business, the price tag can vary greatly depending on the size and scope of the company. But one thing is certain: the higher the price, the higher the multiple. Pete Martin, an expert in sales, operations and executive management with over 25 years of experience, joins us on Build to Sell Radio to discuss how much consulting companies typically sell for and what factors influence the sale price. Martin explains that large companies often use software such as SAP, which stands for enterprise resource planning. It's a single software that manages all facets of a company, from sales and distribution to purchasing and materials management.
Martin notes that while SAP is the third largest software company in the world, few people have heard of it unless they work for a large company. When it comes to selling a consulting business, Martin says that for a small professional services consulting firm, he would expect six or seven times the EBITDA; nine times seems too high. He explains that they achieved instant scalability by not having to expand to consultants from all over the world, but instead relying on their own consultants to do the billable work and also sell.On average, Martin says that a profit period of one to two years is common in the consulting services industry (his experience was even longer, three years). He emphasizes that in the COVID era, it's crucial to hire a broker who understands the art of selling a consulting business. He notes that what he describes is different from basic professional services, where you sell professional time in some way. The bottom line is that if you're interested in selling a consulting company, the industry is expected to recover and interested buyers can be found.
You just have to know how to position yourself to attract them and teach consultants how to sell without falling into the trap and without selling to the customer. When it comes to maximizing your sale price for a consulting business, there are several key factors that can influence the final number. First and foremost is understanding your company's value proposition. What makes your business unique? What services do you offer that other companies don't? Knowing this information will help you determine what kind of multiple you can expect when selling your business. Another important factor is understanding your customer base. Who are your current customers? What kind of relationships do you have with them? Knowing this information will help you determine how much potential buyers are willing to pay for your business. Finally, it's important to understand your competition.
Who are your competitors? What kind of services do they offer? Knowing this information will help you determine how much potential buyers are willing to pay for your business relative to other similar businesses. By understanding these key factors and positioning yourself accordingly, you can maximize your sale price when selling a consulting business. With the right strategy and preparation, you can ensure that you get top dollar for your business.