IP is the primary asset of a consulting firm looking to sell. It is also the key to sustainable, scalable leveraged, profits. This PowerPoint provides the structure of a workshop which I run with clients to maximise the value of their IP.
Proprietary methods and tools not only include the services and products that are delivered to clients, but also the operations and business development processes, methods and technologies that firms commodify over time.
When it comes to buyers’ own preferences, revenue generating IP is in first place, but not by as much as many might expect. For obvious reasons, buyers look for recurring revenue IP rather than revenue dependent upon constant sales efforts. Over 60% of buyers say that recurring revenue is ‘extremely important’ for them, although this is much more important for private equity buyers (67%) than strategic buyers (45%), and much more important in the US (75%) than in Europe (42%). In other words, if you do not have any recurring revenue, perhaps focus your attention on European strategic buyers!
Your type of firm (e.g. Brains, Grey Hair or Procedure) will influence the focus of your IP. Brains firms will tend towards strong marketing IP, especially in the form of thought leadership. As the problems they solve tend to be relatively unique and the solutions they develop are relatively creative, there are often low levels of service IP. This said, there are strong opportunities for these types of firm in operational IP and it is something that many neglect until it is too late.
At the other end of the spectrum, procedure or IT-led firms will (or should!) often have strong levels of IP throughout the firm: well-defined products, operational processes and sales IP. Of course, space for creativity and innovation is still important and still the basis for long-term competitive advantage, but this tends to be generated at the more senior levels as juniors are often maxed out with utilisation. I would urge these firms to think about slightly lowering utilisation levels in exchange for greater involvement of juniors in IP development. Types of IP should also reflect the firm’s UVP, whether that is making clients quicker, cheaper, higher quality, or bigger, it should help define your IP priorities.