My company is growing quickly and it has been suggested to me that I use consultants. Why?
I have consulted for emerging companies for over 29 years. I have also run emerging companies, so I have a view from both sides of the fence.
The easy answer to you question is that a consultant has specialized knowledge that can help your business. This is knowledge that you or a member of your existing team do not have. It may take the form of setting up a computer system, contacting key customers, or cutting the fat out of a budget.
You may think that you should perform the work yourself. In many cases this is the right answer. However if you can afford a consultant and the consultant will save you money and/or time – hire the consultant. Ask yourself just how long it will take you to get up to speed and then perform the task. Then determine if a consultant can step right in and do the same or better job in less time.
Remember that in some work there is no substitute for experience. You may have previously launched a company, but the consultant may have launched twenty companies. You may have read about John Malone in the newspaper, but the consultant may have worked with him for 5 years. You may have the greatest innovation since sliced bread, but the consultant may have already made a particular venture capitalist millions of dollars.
Are there other times when I should use a consultant?
I think of consultants as expert temporary help. There are lots of situations where a consultant can help. One is in new company startups where a consultant fills in while a permanent team is being built. Another is planning of a new company, product/service or other venture where a good, objective opinion can focus on the goal. I have used consultants to help close down companies after key people have fled to other jobs. I like to have a wide variety of consultants available with different talents and experience.
Whenever I use a consultant, their fees always end up higher than I expected. Is there anyway to keep them under control?
In any services contract, you are either buying time or deliverables. If you hire a consultant by the day, then you are buying time. If you hire a consultant to write you a business plan, then you are buying a deliverable.
Most consulting contracts get out of hand when you want something done that is not well defined. If you ask a consultant to ‘improve your market share’ in an industry that is new, you have failed to be specific. This will usually result in fees without end.
Don’t expect a consultant to agree to a fixed bid for services on a loosely defined deliverable. You will be told that there is not enough information to fix a price. One way to handle that is to step into the consulting agreement in stages. First stage, for a fixed time period, allow the consultant to familiarize himself or herself with what information is available and then, in the second stage, ask the consultant to bid to produce deliverables at a fixed price.
Where can I find a good consultant?
I have found that the best consultants are people that usually do work on a commission or equity fee basis. These people have refined their business practices to a point where there is no fat and they have not developed infrastructures that result in higher overhead costs with inflated fees. The fact that these people usually charge based upon success is a good indicator of their level of confidence in their own work and the likelihood of a positive outcome.
If I need a consultant to help me with a project, I contact my network of contacts, I attend meetings of professional organization, and I do literature searches of publications where a feature article may be written by an expert. Then I contact the individual to see if they are available for hire, on what terms, and determine if they can help me.
If I can get someone to work on a commission or contingency fee, why would I pay them a daily fee or retainer?
When you hire someone to get a job done, you seldom get the benefit of learning how to do the job yourself. However, with a consultant, you should take advantage of the opportunity to learn what the consultant knows. You can observe the work while it’s performed and ask questions. You can participate in meetings and presentations. You can set aside times to discuss the pros and cons of a particular strategy. In this way, you are being privately tutored while at the same time moving your business forward. This is a significant benefit that you will not obtain from working strictly with sale reps, brokers and other relationships in which payment is solely dependent upon success.
