Management Consulting and Strategy Consulting-AVGI

Management Consulting and Strategy Consulting: Pinpointing the Value Drivers to Boost Your Company’s Value

Management Consulting and Strategy Consulting: Pinpointing the Value Drivers to Boost Your Company’s Value

Every aspect of how a company is managed and run impacts its overall value. Identifying and correcting flaws in company management early on can create millions of dollars in company value in a future sale. Similarly, identifying key threats, trends, and competitors and responding effectively can translate into millions in revenue and company value. Strategy and management consulting plays a pivotal role in ensuring that companies are well-positioned to maximize their value, both in the present and in the long term. Abrams Valuation Group, Inc. explores the critical role of strategy and management consulting in influencing company value.

Defining Management Consulting

What is Management Consulting?

Management consulting is a broad term that encompasses a range of topics, including strategy, operations, and implementation. The main goal of management consulting is to make different parts of the organization function more efficiently and effectively, thereby increasing productivity and revenue.

Management consulting firms work with clients to identify and solve problems and to improve overall performance and operations. This can encompass assessing problematic company management structures, business operation inefficiencies, and other critical issues in managing and running the business.

Management Consulting Definition AVGI

Why Use a Business Appraiser for Management Consulting?

A business appraiser assesses a business from a value perspective. Rather than asking, “What isn’t working and how could it work better?” an appraiser asks, “What is undermining the company’s value, and what can the company change to fix that?”

This key difference in approach means that the business appraiser is well-positioned to make highly impactful observations and suggestions that can substantially influence the company’s value.

Impactful Management Consulting: The Value of a Valuation Perspective

For example, an appraiser will assess the company’s management structure to help determine company value. Is the chain of command stable, well-organized, with diversified responsibilities and clear role descriptions? Or is the company overly dependent on one or a few key individuals without whom the company would not be able to function as well? In the case of over-dependence on key individuals, the appraiser applies a company-specific risk premium, which lowers the company’s valuation.

The logic is simple: no human is immortal, and the future is unpredictable. If the company suddenly lost that key individual tomorrow to retirement, illness, disability, or death, the company’s operations and revenue would be seriously impaired. Even if the key individual is a top performer, the over-reliance on one or a few people in the company creates a potential liability that undermines the company’s value.

When a business appraiser assesses a company in a management consulting capacity, they can identify this weakness in the management structure as a critical point that lowers the company’s value. Based on their assessment, they can then suggest the best way to fix the issue, either by hiring another manager, transferring specific responsibilities to another employee, or establishing another unit to handle a set of tasks. By diversifying the responsibilities, the company relies less on those key individuals to keep the business operational. This decreases the company’s risk and directly improves the company’s value.

Defining Strategy Consulting

Strategic Consulting Definition AVGI

The Role of Strategy Consultants

Strategy consulting is a subset of management consulting that provides industry-specific insights and actionable strategies to address individual business challenges. Strategy consulting focuses more specifically on developing healthy long-term strategies for the company.

Strategy consultants often work with senior executives to identify opportunities for growth and improvement and then develop and execute long-term plans to improve the corporate strategy and the company’s overall success. These strategies can encompass product or service diversification, impactful research and development initiatives, and future-proofing the company’s competitive edge in the market.

Strategy consultants often use specific risk assessment tools, such as Porter’s Five Forces and SWOT analysis, to analyze data and identify opportunities for growth and improvement.

Management Consulting 5 Forces Analysis -AVGI

Why Use a Business Appraiser for Strategy Consulting?

As with management consulting, a business appraiser approaches strategy consulting from a value perspective. Rather than asking, “What is the competition doing, and how can the company compete with them?” the appraiser asks, “How does the threat of rising competition impact the company’s value, and what can they change to mitigate that risk?”

This subtle difference in approach makes a huge difference in the effectiveness of the strategy consulting suggestions for the company. Coming from a value-based perspective, the appraiser can offer strategic direction that impacts the company’s value.

Engaging an external strategy consultant with a strong background in valuation allows your company to get objective feedback on key issues that are influencing your company’s current value. Often, business owners are heavily involved in the business’s daily operations and find it difficult to see the bigger picture of potential threats and opportunities. The strategy consultant brings objectivity to the table and can make critical, high-impact observations and suggestions from a valuation perspective.

Effective Strategy Consulting with a Valuation Perspective

For example, a business appraiser will delve deep into market research to identify and weigh the competition, not only existing competition but also rising competitors. Furthermore, the appraiser is able to identify the value drivers for both the company and the competition, and can thereby pinpoint what specifically makes the competition a larger or smaller threat to the company’s value. As a strategy consultant, the appraiser can make specific recommendations to the company about how to best diversify their revenue streams with a new product line, where to invest in opening a new location. These key insights and suggestions directly impact the company’s value and drive real results.

Management Consulting Appraiser Quote AVGI

Case Study: Valuation Strategy Consulting

During a valuation assignment for gift tax purposes for a large and well-established company, AVGI’s appraisers identified a rising market competitor that posed a significant risk to the client’s future company revenue. That risk allowed the appraiser to significantly discount the company’s valuation because the future company earnings would be at risk from this potential competitor. AVGI’s predictions proved correct, and the rising competitor became a crucial player in the client’s industry, diverting a lot of the client’s business and conquering a fair share of the market. Had AVGI’s client taken AVGI appraiser’s insights in a strategy consulting capacity, they may have been able to pivot their business model to mitigate the risk of the rising competitor.

Strategy vs Management Consulting: Key Differences

Focus and Approach

The main difference between management consulting and strategy consulting is the focus. Management consulting has a broader focus and a problem-solving approach, assessing many different areas of the business with the goal of improving inefficiencies in all areas of business operations.

In contrast, strategy consulting focuses more specifically on developing long-term strategies to grow the business and fortify it against potential threats. Strategy consulting firms use a forward-looking approach to identify growth opportunities and rising competition.

Strategic Consulting Appraiser Quote AVGI

Beyond Management Consultants: Business Appraisers as Trusted Advisors in Informed Decision-Making

Business appraisers serve as trusted advisors, leveraging their expertise to assist clients in making well-informed strategic decisions. By conducting comprehensive assessments of a company’s value and financial health, appraisers provide valuable insights that enable clients to evaluate investment opportunities, navigate mergers and acquisitions, and devise effective business strategies. Their in-depth understanding of market dynamics, industry trends, and risk factors equips clients with the knowledge needed to make sound decisions that align with their long-term objectives. Through collaborative consultations and data-driven recommendations, business appraisers play a pivotal role in guiding clients towards successful and sustainable business outcomes.

In Conclusion: Impactful Strategy and Management Consulting

Both management consultants and strategy consultants help companies improve and take advantage of larger opportunities, although there are important differences in the types of consulting. Management consulting focuses on improving the efficiency of various organizational functions, while strategy consulting focuses on determining the company’s long-term strategies. With their value-first mindset, business appraisers are highly trained and well-positioned to make insightful and impactful consulting suggestions for companies that directly drive positive growth and value. Business appraisers are highly effective management consultants as well as strategy consultants, as they maintain their focus on what will drive the most value for the company.

Engaging a business appraiser as a management consultant can be particularly helpful for business owners as they prepare their businesses for sale or exit. An appraiser can help the owner maximize the company’s value so they can achieve a higher valuation and walk away from an M&A transaction or ESOP sale with more cash in their pocket.

Ready to boost your company’s value? Abrams Valuation Group, Inc. has over 30 years of experience in identifying key value drivers in companies spanning many diverse industries, business models, and countries. Our expert business appraisers delve deep into company and market data to uncover specific value drivers and make impactful management and strategy consulting suggestions. Contact us for a free consultation with zero commitment and watch your company’s value begin to skyrocket.

Business valuations by AVGI experts

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