Is It Time for Business Management Consulting?

If you've got a business, sooner or later you're going to hear from a business management consultant. There's an old saying that those who can, do and those who can't, teach. Here's another one: A consultant is an unemployed worker. Those are pretty harsh words, without a doubt, and not fair to the many consultants who really do a good job for your business. But there are five questions you've got to ask yourself before you hire a business management consulting firm.

Question #1: What do the numbers say about how your business is really doing?

Take a look at your financial statements and the stats of your business. Is your business growing at a steady pace? Is profit increasing or decreasing?

This is an important first step before you start any new project. At my businesses, I've had mixed results from hiring a consultant.

One of the first consultants I hired focused on marketing. I knew nothing about marketing and just blindly did whatever she recommended. She didn't encourage tracking results and in fact, said it was a waste of time. Against every instinct I had, I did what she said. You can imagine the results. I let go of looking at the business and tracking what worked and what didn't work, instead focusing on growing the business at all costs.

I knew better, especially since I'm a CPA. But I was getting more customers and clients and so figured it would all work out. I did get more customers, but I didn't pay attention to how much it was costing me to get those new customers. Plus, as I took my eye off fulfillment costs and instead trusted an employee to make sure things stayed the same, the costs skyrocketed. The manager hired friends and inflated payroll and benefits. I was so busy working with the business consultant that I didn't see what was going on, until I noticed the dwindling bank account.

Thankfully, I went back to pulling stats and saw how much this business management consultant was really costing me.

So, before you start, make sure you know your numbers. That's so you can compare the real results to the advice you're going to get.

Question #2: Where do you need help?

There are many different types of consultants. Make sure you're hiring the right person. For example, you may need help fulfilling on promises and keeping costs down. You might need time management help. You might need marketing help. Or you might need legal or tax advice. Ask the right person the right question. That all starts with knowing what you need first.

Question #3: What are the consultant's credentials?

I'm amazed by how many shysters there are on the Internet these days. These are people who claim to have made millions or own millions in assets. But there is no talk about how much they kept of that millions they made. (And by the way, did they actually make that much? How can you confirm it?) Or for the people claiming to own multi-millions of assets, how much is the net worth really?

The best type of credentials are those you can check. If they have taken a company public, ask for the name of the company and check it out. If they have a CPA certificate, CFP designation or have passed the bar, you've got more assurance that they at least didn't just hang out a shingle and self-declare they are an expert._

Question #4: Does your consultant have an ethical obligation to hold your information confidential?

I was shocked to read on one business consultant's website that he had a disclaimer that all client information he received was his to do with as he wanted. He could publish it, sell it, go into competition. And his written response ON HIS WEBSITE was that if you didn't like the terms don't send him your stuff. He had no intention of keeping your information confidential.

I can't imagine anyone wanting to hire him under those terms. But he's charismatic and there's a sucker born every minute I guess. Don't you be one of them!

CPAs and attorneys have an ethical requirement to keep your information confidential plus there is even law that helps us do that. Other professions have similar ethical requirements. Make sure your consultant belongs to some kind of group that will ensure your company information's safe-keeping.

Question #5: How does the cost of hiring the consultant and implementing his advice compare to what you intend to receive? Is there any early-out clause if he fails to deliver as expected?

Business is about numbers. If you spend an amount and make 5 times that amount back, does it really matter how much you spend? In fact, you'd probably want to spend as much as possible. In real life, though, there is risk and uncertainty. Market conditions might change. Your consultant can't guarantee his results. The higher the risk, the higher the possible upside needs to be.

Unfortunately, it's easy to get caught up in the hype of hiring a particular business management consultant and not realize that all you're doing is paying for advice in most cases. You still need to hire others and pay other fees to implement his advice. Make sure the possible return is high enough to justify the expenses.

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Is It Time for Business Management Consulting?

Reviewed by smith
Published : 2012-03-23T10:27:00-07:00
Rating : 4.5