Running a business as if it were publicly traded, audited by specialists, and monitored by regulators prepares a firm for any eventuality. The idea of “running a small business like a big business” helps make a translation or interpreting company sustainable, even if the owners don’t intend to sell it.
Market research firm Common Sense Advisory’s latest Industry Providers Research report presents the best practices language services providers (LSPs) that will lead to better overall company performance. The report, titled “The Owner’s Guide to Maximizing LSP Value,” examines the various growth and exit strategies, as well as the full range of issues that confront “owner/operators” of small to medium LSPs as they manage their companies.
By recounting interviews with buyers, sellers, and private equity firms involved with the language services sector, outlining the best practices for the next phase of a company’s history, and delving into the implications for buyers and sellers, Common Sense Advisory presents a step-by-step guide for LSPs to maximize enterprise value, regardless of their final destination.
“To build a great company that is worthy of being acquired, you have to build a great company that you’d like to keep,” explains Michael Powers, the report’s lead analyst. “The longstanding practices of the industry are morphing under the feet of language service providers, forcing them to modify their service offerings and to compete with companies around the world for business, growth – and for even bigger firms or aggregators to buy them.”
The report cautions companies to be systematic in how they operate and to manage objectives, such as maximizing EBITDA (earnings before interest, taxes, depreciation, and amortization), a common measure of a company’s operating cash flow – something of great interest to investors and potential buyers.
For any LSP to successfully grow or exit the market, it is important to follow a strategic plan that includes many specific elements outlined in the report, including:
- Create clear points of differentiation from the competition
- Understand where the firm fits in the greater market landscape
- Develop a succession plan that ensures continuity of leadership
- Develop a flexible timeline for growth, exit, or change
- Put your financial house in order with internal auditing and other best practices
- Invest in solid data systems to run the business
“The most successfully managed LSPs model the best practices of the top companies in other fields,” adds Powers. “They become institutional -- not personality-driven -- and create structures that foster delegation and provide for succession. These top translation firms have documented processes and audited financials. They are transparent in the sense that they can easily demonstrate their value to a sophisticated audience.”
For more information about Common Sense Advisory’s research on maximizing LSP value, visit http://www.commonsenseadvisory.com or contact us via email.