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Practice Development: Honing Your Value Propostion

Friday, July 27, 2012   (0 Comments)
Posted by: Jack Jennings
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Our industry is rapidly changing and our deliverables and areas of expertise are constantly changing. Many consultants are either working in an industry that did even exist a decade ago, or are certainly utilizing new techniques and methods. The sophistication of deliverables seems to double every few years. If one could compare the consulting business today versus the formative years of a century ago, the comparison would be astounding.

However, sometimes such a comparison can offer new ways to both communicate with clients and to increase our value proposition. Like old friends, seasoned approaches can deliver value because of their familiarity and simplicity.

One such approach is to revisit a highly useful tool from the early part of the last century - the DuPont Model. The DuPont Model still has a lot of value after all these years and is useful in helping to focus our deliverables. It is both timeless and timely. It can help consultants to both understand how their services have an impact on results and in communicating those results with clients.

The DuPont Model is a system of financial analysis that is a visualization of the basic building blocks of a business, like a genome of a business’s DNA. Donaldson Brown, an engineer, developed the system while working in the finance department of DuPont in the early 1900s. After DuPont invested heavily in a fledging General Motors, he was asked to work with GM to straighten out their financial condition. In essence, he was one of the early consultants working on a turnaround. Following this successful application, the DuPont Model was a mainstay in MBA programs for decades.

More recently the model has been expanded and enhanced to include more detail and sometimes adapted to include ROE in addition to ROI as a measure, but the value of this simplistic tool is unchanged.


Basic DuPont Model

(This is the most basic DuPont Model, it is much more effective to greatly expand and enhance the presentation to include more detail)

As consultants, we are all working on one of four goals:

a) improving revenues,

b) improving operating margins,

c) improving asset utilization, or

d) improving a firms potential.

If successful, all of these efforts result in one primary objective: Increased Shareholder Value.

I don’t suggest that we all suddenly become financial analysts, but it is a suggestion that this visualization tool can be productive in honing our offerings. A simple method is to just start at either side and work through the chart asking basic questions:

Why are we doing this?

How does it affect shareholder value?

How can we improve results?

One can easily expand each block to its logical conclusion and list the potential deliverables to improve shareholder value and your value proposition. This helps hone our offerings and is useful in client communications.

While not perfect and some may say that it is not complete, it can and does add to a consultant’s value proposition.

Jack Jennings is the Principal of Jennings and Associates based in Dallas and is a member of the Dallas/Fort Worth Chapter. His practice areas are in corporate finance and in conducting complex feasibility studies. He may be reached at jack@jennings.net.


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