It’s quite a personal decision on which direction you take and it depends on how you view the purpose of your business in the way it rewards you.  If your firm has become a lifestyle business where you’re able to balance the needs of your personal life with those of income generation, you absolutely enjoy what you’re doing and can’t imagine doing anything else then it may make sense to carry on doing what you’re doing. However the only challenge that I'd make to you is are you putting enough away from your earnings each year to fund your retirement, so that when the day comes when you cant or don’t want to continue you’ve achieved financial security?  Consulting is really a young man or woman’s game, it’s exhausting and you’re not going to do it forever. At some stage you’ve got to get off the wheel and either hang up your boots and do nothing, or do something new.

There are also a lot of people who run a lifestyle consulting business because they’ve never considered the possibility of selling it; they think that a people business can’t have any value. Well that’s certainly what I was told in the early 1990s when a lot of my friends who went into other industries said “I don’t know why you’re messing about with this consulting business it will never have any value!” At first sight that sounds reasonable because all of the assets of the business have got legs! There are a lot of people who would view a consulting business with the sort of partnership mentality found in accountancy or law, where the name of the game is to extract as much cash from the business on an annual basis as possible and not worry about the end game. Of course if you’ve got very high earnings and you are disciplined enough to put money away each year you can do that and not worry. However there are two reasons why that may not be the most lucrative approach.

The first is that every time you extract money from a company, no matter how clever you are at getting it out you pay between 30% and 40% tax on it (in the UK) either as income tax or tax on dividends.  So the idea of extracting money each year and putting something away is fine, but it isn’t always the most tax efficient way of doing it.

The other reason is that you CAN ‘have your cake and eat’ it because there’s nothing to stop you extracting as much cash as you want each year and then if you’ve managed to be successful and build a business that’s got some equity value, you can realise that equity value at the end of a certain period of time. The ideal scenario is that you just keep enough cash in the business to be able to achieve your growth objectives. One of the great things about a consulting firm is that it doesn’t consume that much cash to grow, you’re not investing in capital equipment or buildings and things like that, you are in essence just managing the gap between when you get paid by clients and when you have to pay staff salaries. If you’re really clever that gap can be zero, so a consultancy business doesn’t consume much working capital. You may need to leave some in for additional sales and marketing, product development and things like that to fund your growth, but you shouldn’t have to leave too much in there. And then if you do the right things then you’re going to have a business that’s worth something.

It’s rather like saying to somebody…you can spend the next five years working with clients and doing great stuff and taking a good salary, or do exactly the same thing and build up a pension scheme at the end. So it’s a choice, you can build something of real value that you can sell onto somebody else or just walk away with nothing!