Selling a Consultancy

peter (apparently) - 12:54pm Mar 29, 2007 PST
via email

Good morning,

The time has come, as they say, for folks to move quietly off into
the night. And so it is for me. I have reached the point in my career
when I can and want to retire in the next year or so. However, I

still own and operate an active single person consultancy. I propose to sell it.

No, I am not soliciting buyers but rather am asking our collective group how to value

something like this. How much should I be selling it for? What can I
offer a buyer? Basically, as I see it, what I am selling is my client
list, contracts, contacts, files, and goodwill. The hardware and
office is nothing. How do I value this?

As an related question, can anyone offer suggestions for

purchase/buyout options that work. I have heard of things such as
$XXX per year paid for X years with the original owner offering XXX
hours of assistance to the new owner during that time for transition,

etc. Who has gone through this process? What works for all parties concerned - seller, buyer, and client(s)?

These questions are not as trivial as they may seem. Research with
various small business texts, internet searching, conversations with
colleagues and professionals (lawyers, accountants, and School of
Business profs) give widely varying opinions. General response starts
out "...it depends on many factors..." and branches out from there.

So I am appealing for ideas that WORK in this instance.

Suggestions, ideas, case histories, thoughts all welcome.

<x-sigsep>

--

</x-sigsep>

Peter Johnston, P Eng
PSC Consulting Ltd.
Email mailto:peter

psc-consulting.ca
Sec. Email mailto:psc

compusmart.ab.ca
Telephone/Fax 780/459-9280

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hankatlma (apparently) - Mar 29, 2007 7:17 pm (#1 Total: 2)

via email

Posts: 42

Re: Selling a Consultancy

     For Peter, re selling consultant practice.

        After ten years in Chicago, with some scattered national clients,
returned to Oregon and found same situation prevailing, 'way back in
'82.

        SO at 89, still doing some small intermittent continuance and finally
decimated large piles of useless paper and files, for more-active
"retirement", working at retirement...
        Only job still hanging is national poll to run early in summer for
same editor on whom I have inflicted copy, in five separate magazines,
for over 30 years...he must be "slow-learner", but also best friend.

        Good luck, Peter !
        Best I can suggest is work it as long as you can...then relax and go
with flow...just moved from apt. occupied since return here, to son's
home across state;
        where continuing to write but not consult...promised all four sons
"this is last move !" -- to whih No. 2 son looked me right in the eye
and responded: "One more, Dad... !!"
        All four are "in the media" and we have family story:
        "We warned them...but they did it anyhow !".

        Take it easy and enjoy, while you can...

yrfriendhank

ctreleaven (apparently) - Mar 29, 2007 7:17 pm (#2 Total: 2)

via email

Posts: 10

Re: Selling a Consultancy

>it depends on many factors..."

Wise words, those.

>
>So I am appealing for ideas that WORK in this instance.

In theory, one need only develop a discounted, after-tax, cash flow model of the expected earnings of the business over the period that arises from the customer 'goodwill' that the former owner developed. Oh, except that there are quite a few plausible scenarios and unknown economic variables. Really should do a Monte Carlo simulation and DCF those results. That'll work. In theory.

Since theory isn't very practical, rules of thumb have developed over time that provide a short-hand way of valuing a business. Average sales times 'X' and that sort of thing. These really only provide a starting point for negotiations with the buyer. The deal that results, if one does, ought to reflect the buyer's needs and wants, your needs and wants, and a number that both of you can live with.

If I were you, I'd ask around for accountants and lawyers that have experience in the purchase and sale of a small business. Not least so that the tax implications are thought of before you get a nasty surprise.

Lots of background stuff is available on the web. I happened to pick Grant Thornton's web site (no affiliation):

http://www.grantthornton.ca/mgt_papers/mip_template.asp?MIPID=36

Craig

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