Part of the advantage of being a small or mid-size business (SMB) is agility. Encumbered with lower overhead, SMBs can act quickly to take advantage of new opportunities. However, the SMB executive often lacks crucial knowledge and experience that could optimize the company's odds for success. An outside business consultant, or advisor, is a powerful resource for SMBs. An advisor can, for instance, assist with complex business problems, provide strategies for entering a new market, or determine the tactical remedies where lack of company resources hinders productivity or increases costs.
Nevertheless, advisory services are expensive, and companies should not retain outside advisors without understanding how to capture the desired return on such an investment. Here are some valuable tips for getting the most benefit from working with a business advisor.
(1) All Advice is not Equal
There is a difference between strategic and tactical advice. If an SMB seeks advice on how to streamline business processes, how to determine what drives costs, how to increase profitability, and other company-performance matters, a specialist in tactical matters is preferable. In these scenarios, try to find a consultant whose background includes significant real-world executive experience (especially in the same industry as the SMB and with the same business processes being discussed), rather than primarily consulting experience. Competitors' benchmarks, as well as cause-and-effect analysis and cost-benefit analysis will be prongs in a consultant's methodology for a tactical project. Another important consideration is whether the consultant can assist the SMB with follow-on work, such as implementing the solution and assisting in managing change.
If an SMB seeks advice on how to gain competitive advantages by entering a new market, increasing sales from existing clients, or acquiring another business, a consultant who excels in big-picture thinking is the best choice for such strategic advice. Scenario planning, forecasting and risk analysis will be prominent activities in this type of advice.
A trend in today's competitive business world, where executives increasingly need to build their own competencies in running a business, is to retain a coach. The role of this type of consultant is not to provide solutions but, rather, to listen, observe and enhance the client's resources and skills.
(2) Due Diligence; How to Select an Advisor
Always check a consultant's references. Obviously, the consultant will only provide a list of satisfied clients, but the SMB needs to consider whether the consultant has advised clients in the same type of business and same industry as the SMB, as well as companies in the same point in the life cycle. For example, if the SMB is a start-up or is an established company looking to enter a new market, the consultant should have references from past clients who were at those points in their business cycle.
Next, understand the potential conflicts of interest in what the consultant may advise. Will the advice be objective, or is the consultant connected to another company whose services will then be referred as the “best” provider of goods or services that solve the SMB's business challenge?
Communication—not only what is said, but how it is said—is a key decision factor in choosing a consultant. Ask questions; are the advisor's answers explained well, no matter how complex the information is? Is there a high degree of comfort on a personal level? The SMB will need to work with the consultant—without tension and with trust—for a period of time, often revealing confidential information.
(3) Cost and Contract
Discussing cost is not just asking the bottom-line price for services. If the advisor bills by the hour, both parties need to agree on exactly where and when the work will take place. It is also a good practice to ensure the relationship does not become open-ended; the contract should detail precisely what the consultant is paid to do. It should also include details on how to handle issues that arise during the consulting project. The consultant may uncover a problem not anticipated in the process; on the other hand, the consultant may be up for a bonus by selling add-on services.
As a risk-management practice, the contractual arrangement should include a confidentiality agreement or non-disclosure agreement that prevents the consultant from revealing the SMB's business to anyone else.
(4) Ensure Buy-in
While an SMB may receive valuable insights from an outside advisor, there will be no return on that investment unless the company's managers buy in, or agree, to the advised changes in procedures. Buy-in is best obtained up front, before the consultant begins the work, so the managers (and other staff) will be cooperative in providing necessary information to the consultant.
By Kathleen Goolsby
