Equiteq gives 100 tips for consultancies to survive and grow in a recession

It doesn’t seem long since we were talking about exit strategies and how to grow the equity in a consulting firm. Now that the downturn is upon us, does that mean that consultants should adopt a completely different strategy to survive a recession?

Paul Collins, founder of Equiteq, which provides M&A services to consulting firms and potential buyers, doesn’t think so. His firm has just produced a booklet, 100 tips for consulting firms to survive and grow in a recession, which looks at how the principles that underpin equity growth can be used to meet the challenges of a recession.

Collins’ model of the “8 levers of equity growth” is based on his own experiences growing a consulting firm in the early years of the century, and contains 80 key performance indicators which underpin equity growth. This has now developed into a web-service which helps firms prioritise their activities.

“Having built all that and finding now what looks like a recession, the question is how to view those KPIs,” he says. “We went through them and for each one we asked what would the practical tip or tips that would help a firm get through a recessionary time.”

While many consultants have never planned to sell their businesses, Collins believes it’s worth focusing on equity value, because it’s a direct reflection of the certainty that a buyer would have of revenues and profits being sustained or growing.

“If you do all the things that enable you to grow the equity you will build profits and help your cashflow,” he says.

Collins primary advice to firms going into 2009 is focus.

“You need to focus on existing clients, focus on business development and those projects where you have a ‘right to win’,” he says. “Look at existing and past clients and give them no-brainer propositions—tell them we’ll help you survive the recession and also help share some of the risk.”

This will often entail offering some form of contingent fees.

“In my experience when you go in with a contingent proposition you very often come out with a normal contract anyway,” says Collins. “But the willingness to share benefits endears you to clients.”

What firms shouldn’t do is attempt to maintain work levels by broadening their offerings and chasing new clients in new sectors.

“The last thing you want to do in a recessionary environment is start taking risks—clients won’t want to take risks either,” says Collins. “It’s nice to be focused on an area which does well on a recession but it’s more likely that you will need to take a larger market share in a reducing market.”

This means keeping up spending on areas like marketing.

“When people see a recession coming they cut marketing in order to protect their profits,” he says. “We advise our firms to increase spending on marketing. Marketing is an investment and you should get a return on it even in a recession. It’s much easier now to measure your return on marketing, so there’s no excuse.”

In fact Collins advises firms to measure everything: gross and net margin, utilisation by sector—every week.

“You need to know which sectors are going to give you trouble,” he says. “Measure everything and make that information available to the leadership team. Part of that may involve getting someone senior in with a finance skill, even if it’s on a part-time basis.”

Redundancies may seem inevitable, but firms should not be too quick to forget the lessons of the war for talent.

“It’s a knee-jerk reaction<