Andy Raynor - Beyond the Brief
Andy Raynor's blog
Why would I invest in you?
It’s not a daft question, is it? You’re a lawyer or accountant, you run a business. You’re successful. Why aren’t people beating a path to your door to throw money at you?
Well, perhaps they are. I spoke at a Forum for Private Equity firms targetting Legal Services last week and the attraction is certainly there. Twenty-five investors looking for the right home for their money.
And, so far, failing to find it.
The answer was very, very obvious. Here is an industry that has thought that outside capital in Alternative Business Structures would create an avalanche of deals. Here is a sector that has thought increasing technology and outsourcing were the only things that can recreate value in a wasteland of exhausted legal firms.
Which is not what the investors are looking for. At all.
You could now delete all I’ve said so far and pretend this is just a column about corporate finance for any business. Because the investors are looking for value not in the product you produce, but in how you do it.
Here are the three most important things to define the value of your professional services business:
1. Great leadership and management – and I mean great active leadership and management, engaged, personal, supportive, motivational, soft or hard when it needs to be. Leadership and management makes businesses perform, again and again, where others fail.
2. Easily repeatable products and services – best not try to make a growth business out of clever dickies? Almost always true. One of the most profitable accountancy businesses in the UK today, per £1 of revenue, has no corporate finance, no recovery department, no financial services, doesn’t do anything except accounts, audits and white-sliced tax planning and acts only for local private companies. And it does it lots, and very well.
3. Market captivity – or the answer to the question “why do people buy from me?”. Your products and services can be bought in fifty other places within a half-hour drive. So how you target, sell, resell, extend, retain.....this all has to be created by you and the personality of your business, not your technical ability. Ooo-er.
Accountants, lawyers, software developers, coal merchants – it doesn’t matter. These are the things that really create value. Time to get off our professional pedestals if we want a piece of it.
Tell me what you think at andy@andypraynor.com
And see what's been said before by looking in the archive:
© Andy Raynor 2013