The love-hate relationship between a business and a consultant is nothing new, and more often than not, a consultancy engagement ends in disappointment for both parties. It all begins with the business owner identifying a problem, quickly hiring a consultant to recommend a quick fix, which the consultant does give, only to have the problem resurface in a few months – the vicious circle never ends. And yet, both the business owner and consultant work in earnest to solve the problem. Then, where does the entire thing go wrong? Is it the business owner who needs to change their ways, or does the problem lie with the consultant? It’s not as simple as that. Let’s begin at the beginning to understand this better.
Types of Business Consulting Engagements
Depending on the problem, a business owner usually chooses from one of the three main types of consulting engagements:
Project Engagement
This is when the consultant is hired to address a specific problem, such as helping with a business acquisition, creating a growth-oriented budget, or preparing financial reports or statements for an upcoming investment round. The consultant usually offers ideas or recommendations on how to proceed, which the business is expected to implement.
Advisory Retainer
This is when a business owner hires a consultant on an ongoing basis and provides a “retainer” or a recurring fee for their services. Such engagements have a broader scope, including brainstorming, ideation, recommendations, employee training, workflow streamlining, and providing an overall framework for business process improvement.
Fractional Executive Engagement:
A fractional executive is more about action than ideation. The consultant is responsible for delivering outcomes rather than making recommendations. Hence, when a business needs to improve operational efficiency within a stipulated timeframe and achieve measurable outcomes, a fractional executive is usually hired.
While the fractional executive arrangement is known to deliver better results than the other two, it is also more expensive to implement, especially for a small business. If it’s growth planning, advanced operational efficiency, or increased investor interest you want, a fractional executive suits you best.
The project-based engagement is more affordable but comes with a different problem: most businesses put off acting on the consultant’s recommended tips, leaving the problem unfixed. The advisory retainer model, though good for an overall step-up in your business, is not really designed to address deep-rooted strategic issues.
How to Fix the Gap in Business Consulting Engagements
While there is no fixed formula for making every business consulting engagement succeed, there are a few things small business owners can do to make sure their business makes the most of the consultant’s experience and knowledge.
Define Specific Problem Statement
Draft a clear, specific problem statement. For instance, instead of giving a vague goal such as “enhance revenue”, say you want to adopt online and cross-border payment options to encourage faster payments from customers. The more explicit and clear-cut the problem statement, the easier it will be for the consultant to understand what is required of them, and the higher the chances of your problem getting resolved faster.
Aligning The Problem’s Scope with the Right Consulting Model
The onus for the failure of consulting engagements lies neither with the owner nor the consultant, but rather with the misalignment among analysis, ideas, and implementation. Firstly, hiring the wrong kind of consulting engagement model for the wrong problem is sure to disappoint. Hence, checking a potential consultant’s past work and looking for references related to your specific problem, not just your industry, is a good strategy. Eg? A consultant with 20 years of experience in retail operations may be good at handling inventory problems but ineffective in marketing.
Lack of Resources
Having said that, how you implement or execute any recommendations or ideas given by the consultant is your prerogative and responsibility. Hiring a consultant without sufficient financial resources to implement their suggested changes would be a waste of time and money. So, make sure you are well-prepared in terms of finances, manpower, skills, and time for the transition necessary to implement the consultant’s recommendations before even hiring the consultant. For instance, a consultant may recommend transitioning bookkeeping to accounting software, but the company may lack a technology specialist to manage the transition. In such scenarios, they could extend the consultant’s engagement from a project to a retainer, asking them to help through the execution.
Define Exclusions
If in the problem statement you define what needs to be done, you also need to create a list of things that need not be done, i.e., a list of things that are not included in the consultation contract. The main reason for this exclusion list is to prevent the consultation from dragging on and the focus from shifting from the main problem to other issues, thereby expanding both the consultancy deadline and the budget.
Measurable Deliverables
The potential success of your consultant engagement lies in measuring its success. Assigning measurable deliverables with defined timelines can help you check the progress of your problem resolution. For instance, if your problem statement is to increase revenue by 20% in 6 months, you can track your progress by comparing weekly sales figures to completed payments against raised invoices. A marked increase or improvement in these figures could signal that the consultation is showing the desired results and is headed in the right direction.
Evaluate Return on Investment and its Sustainability
While the consultation deliverables are quantified as specific outcomes, the cost of consulting should justify the expense. Suppose your outcome from the consulting engagement is to improve profit by $50,000. When the consultant is actively involved, the business meets the target. Measure if it can sustain this profit in the next quarter or six months. If you pay $20,000 to a consultant for a one-time profit growth of $50,000, only for things to return to the previous profit, the consulting efforts are not worth it.
Exit Clause
Finally, make sure your consulting agreement includes an exit clause, which works for both parties if the consultation does not progress as desired. Also, having an exit clause increases the consultant’s accountability, encouraging them to deliver consistent results throughout the engagement rather than only at the beginning to impress.
A consultancy that goes right will deliver results, justify the money spent, and take your business to the next level. However, continued reliance on consultants to iron out wrinkles in your business setup could prove counterproductive. So, look for consultants who not only help resolve issues but also encourage you to tackle problems independently, without their constant handholding. After all, your small business is your baby, and it’s your responsibility to set it up for a promising future.
Contact Ford Keast LLP in London to Help You with Business Operations
Talk to a business consultant and discuss your business challenges. Try to carve out a fruitful engagement by documenting expectations, mapping resources, and defining sustainable, measurable outcomes. To learn more about how Ford Keast LLP can provide you with the best business consulting services, contact us online or call us at 519-679-9330.
