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Chief Financial Officer of H2 IT Solutions, Inc. supporting the Department of Defense with Software & Engineering solutions.
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Despite the industry, growth is the end goal for most businesses. With so many aspects of the business to manage and risks looming over their head, it’s understandable that at some point a business’s owner will feel the need to reach out to a consultant. Consultants are outside entities who review a company’s operations and gain an understanding of how the company works internally. As they gain knowledge of your company’s processes and procedures, they can offer more efficient strategies to further improve them and ultimately create profitable solutions.
Consultants can provide customized industry benchmark comparisons that may not be easily accessible for a small-business owner. These resources can be valuable nuggets of information that lead a company into the next phase of its progression and even resolve blockades that have limited growth thus far.
Sadly, there are many consultants who hurt the companies they are paid to save. Here are a few mistakes to avoid when choosing a consultant:
1. Choosing One With Minimal Understanding Of Your Specific Niche/Industry
Although consultants should have a customized strategy tailored to a specific industry that benefits your business, there are times where a consultant uses a “one-size-fits-all” approach. Many consultants review what has worked for a multitude of companies and simply present the same metrics and strategies time and time again. This lack of research and customization could do more harm than good for a company that’s trying to find its footing in a very specific industry.
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When listening to a consultant, be sure to question their sources and strategies. The overall goal is always to ensure that as a business owner you are receiving information that benefits your company. Get a list of previous clients in your industry that have worked with said consultant.
Doing your homework now will save you money and time in the long run. Consultants can be very costly, and having the wrong one can become a heavy expense on cash flow. As consultants charge by the hour and not by results, I have seen small businesses spend about $30,000 or more on consultants that have yet to provide a return on their investment.
2. Not Requesting Real, Strategic Solutions
I have seen this more times than I care to count. Sometimes consultants present impressive presentations that provide a show but no real actionable items or helpful information. Owners and employees often remain silent out of fear of being the only one in the room who doesn’t understand (I used to be one of them). The information provided can be valuable, but feel free to inquire on actual strategic solutions based on industry demographics. Any consultant who shows you numbers with no actionable solutions is simply wasting your time.
3. Going With Someone Who ‘Can Do It All’
I’m leery of the phrase “we can do it all.” I truly don’t believe anyone can do it all, and in business, I don’t believe they should. As a business owner, you need other perspectives and outside feedback included in the decision-making process. Employees, co-workers and strategic partners are human capital that gets overlooked time and time again. People still choose the consultants who claim to know it all.
Find a consultant with a focused expertise. Don’t be afraid to incorporate easily accessible resources, connections, employees and forums when needed for the totality of your decision-making process. Any consultant who is offended by that is not the consultant for you.
4. Hoping The Consultant Can Run Your Business And Minimize Risk
When confidence is low, having a consultant whose confidence is high can often lead to entrusting them with your business decisions as a whole. It may seem as though you are relieving yourself of all the risk, but in actuality, you’re adding to it. Giving full rein of your business to another person based on the assumption of their expertise is dangerous. A consultant’s primary focus is to educate you in ways you may not have been able to see for yourself, not to make you reliant on them. They cannot be the “yes” or “no” to your every decision. The decisions and risks ultimately remain with you.
5. Hiring A Consultant With No Understanding Of Finance
In the end, changes and decisions are eventually implemented with the support of a consultant. Those changes could be life savers for your company or they could be expenses that hurt your bottom line and put you in an even worse situation than before. If the consultant doesn’t show a curiosity for your budget and pushes solutions that place your company in debt, then you need to be able to challenge any decisions beforehand with a budget and a clear understanding of how much these implementations cost.
Know What You Need Beforehand
The truth of the matter is that oftentimes small-business owners reach out to consultants for help but have no understanding what they need help with. They assume the consultant will be the lifeline they have been searching for, and that way of thinking will only ensure a company’s downfall.
Overall, a better solution is to identify a specific area you’re struggling with in your business and hire an experienced consultant who can provide insight in that area and ultimately solve the problems you are asking for help on. A consultant who understands your company’s niche, culture and goals can prove to be a valuable asset. Like investments, don’t place all your eggs in one basket. Reach out, and use the resources available to you to make the best decision for your company. Consultants can provide their expertise, but it’s best to have all the information needed to make the last call and move forward with a measurable goal for success. Ultimately, the decision is yours.
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