I'm excited to announce that we have just released a study entitled Top Dollar: How to Achieve a Premium Valuation for Your Professional Services Firm. The idea arose from our observation that when firms are sold, most of them receive an “average” valuation. In other words, they are priced at a multiple of their earnings very comparable to most other firms in their industry. Yet, there are some firms who receive a premium valuation—that is, their worth is several times more than their peers. The obvious question we set out to answer is… why?
We interviewed two groups of firms. The first was acquirers of professional services firms. These are large companies such as IBM, SAIC or CACI or private equity firms.
The second group was valuation experts who value firms for a living. These are industry specific consultants such as Stevens Gould Pincus, who specialize in public relations and public affairs firms or units of investment banks, such as The McLean Group, Silicon Valley Bank, or Stout Risius Ross.
We questioned the experts about their experience with these premium valuations and had them rate the importance of over 40 variables that impact valuing a company, from earnings to employee turnover. We also asked for their advice to a CEO who wanted to build a firm that could command these premiums. What's important to concentrate on and what's a waste of time? They had a lot to say!
We also distinguished between government contracting companies and firms that market primarily to commercial enterprises—and we captured some important differences. To address these differences, we've also released a special version of the report just for the government contracting community.
Here are a few headlines from the reports to whet your appetite:
- Financials are not the most important factor. It's about your relationship with your customer.
- Growth without strategy can actually hurt your valuation.
- Rainmakers are over-rated.
- Middle management is a key asset.
- Most of what CEOs typically do to prepare for a sale is a waste of time.
Both versions of the report are free and no registration is required. Enjoy!
