Thoughts on ways to improve the management of professional services firms

Tuesday, July 04, 2006

Self-employed professionals vs business builders

Discussions last week with one of my colleagues raised again the difference between the self-employed professional and those trying to build professional services businesses. Why is this important?

Well, in the case of my colleague, one core issue was the nature of the different exit strategies.

The self-employed professional is not trying to build an asset for later sale. Rather, his/her focus has to be on maximising the value of cash flow since investment from this provides the base for later exit.

The business builder is in a different position. He/she wants to get a return not just from immediate cash flow but also from business sale. So the focus has to be in part on investment from cash flow to build longer term business sale value.

Sounds simple, but the difference leads to quite profound behavioural differences.

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