Compiled by Shweta Kadtan
Without a strategy, most people won’t embark on a long journey. Without finding some guidance and taking the required instructions beforehand, it is rare to start anything potentially expensive and time-consuming. Still while starting a new venture or expanding an existing business, many business owners and entrepreneurs forget to speak to a financial consultant or are unwilling to do so.
Consultants are outside entities that 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.
But finding the right advisor can be tricky. One common mistake: going with the first expert you meet. Here are a few mistakes to avoid when choosing a consultant:
- “One-size-fits-all” Approach
There are times when a consultant uses a “one-size-fits-all” approach. Consultants should have a customized strategy and domain expertise tailored to a specific industry that benefits your business. 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.
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 has worked with said consultant.
- Suggesting a strategy which can’t be implemented
Sometimes consultants present impressive presentations that provide a show but no real actionable items or helpful information. Chose a consultant who will help you stay on course by providing you the right mentorship and hand holding to help you achieve those numbers presented. Any consultant who shows you numbers with no actionable solutions is simply wasting your time.
- Taking all your business decisions
Having a consultant giving advice and helping in decision making can lure you into giving away your power and allowing them to take all your business decisions. 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.
- Opting for only success fee
More often than not, the size of a financial firm is directly proportional to their fees. Work with a consultant who will own your business just like yours. Big firms exist to enrich their shareholders, and usually do so at the expense of the their clients. Big fee doesn’t guarantee a better outcome. Only giving success fee makes them work at back seat and as per convenience. So, the consultants will be able to give you their good time only when there’s a fixed fee too.
- Working with a friend or family member
While working with a family member or friend doesn’t always spell doom, there are times when it’s a bad idea. For example, you might be more concerned with the friendship than you are with your finances. Perhaps you’ll take your friend’s advice and trust them when you shouldn’t – even when they don’t have your best interests at heart. Working with a friend or family member is a personal decision.
There’s no right or wrong answer here. If you do decide to work with someone close to you, you should:
- Set expectations upfront to ensure you’re getting the professional advice you need.
- Put guardrails in place to prevent the friendship from getting in the way of your finances.
- Ask them what precautions they take to ensure the friendship doesn’t impact the business relationship
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. Ensure to seek clarity before approaching the consultant and give them the full picture of expectations.
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.
We all know the old adage: Give a man a fish and you feed him for a day; teach him to fish and you feed him all his life. A good consultant ultimately wants clients to be able to make their own good decisions.
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.