Are consultants good for you?
After consulting for many years and working with a great deal of small business owners and not-for-profit organizations from startups to mature companies, I have come to the conclusion that most companies and not-for-profit organizations hire consulting-coaching firms without specific expectations of results or outcomes. I try to understand the mentality of the decision makers of these firms. The typical consulting firm charges anywhere from one thousand dollars a day to one thousand five hundred dollars a day. I ask the clients I work with what is their expectation from spending this amount of money and how this expenditure will improve their bottom line. Generally the answer is well, I am not sure. What is the return on their investment (ROI) of a “motivational speaker” or the “strategist”, the general responses are that “I heard they do a great job”. I am not sure what that means except I don’t think the owners have thought through the process.
It is interesting that I am writing about these issues and I am also a business consultant. I think it is important that companies identify their expectations and outcomes that will result from the expenditure. Most clients don’t think about the outcome and what will the ROI be. My issue is that one needs to both quantify and qualify the benefits of spending the money. An organization should ask the following questions before committing the funds to the consultant:
- What is the purpose of retaining the consultant?
- To motivate employees?
- To increase sales and marketing?
- To increase profits?
- To increase cash flow?
- To develop a strategic plan?
- To streamline processes for efficiency?
- What will be the deliverables that the company will take away?
- How will the deliverables be applicable to the company?
- How will the company be able to use and implement those tools that are obtained?
- How will the information benefit the company?
- How will the expenditure help the company grow or survive?
- How will the company use the results of the benefits it perceives?
- Quantify the return on investment (ROI).
It is important that companies, who are typically struggling for cash to either make this week’s payroll or to pay their vendors, evaluate how and why they are spending their money. I do understand that education and information are one of the most powerful tools companies can have to allow them to be competitive and establish, maintain and grow within the market place. What I disagree with is spending money just because the company thinks it is a good idea or because the consultant does a great job.
Most small businesses and not-for-profits go into these situations thinking that whatever is delivered will solve all their problems, whatever that may mean. After a couple of days the energy and excitement are gone, and business is back to usual. There is a lack of follow through, implementation, deliverables, tools or change in behavior of the players.
Yes, consultants can be a valuable asset to an organization. This value is generated by solving problems. Every company that retains a consultant should expect to solve a problem.. And, sometimes an extra eye can do that, especially if it is from an independent source. I simply am delivering the message that spending money to spend money is a waste of resources and unless there are defined goals and expected outcomes that can be implemented, companies might better spend their money more wisely.
Neil Shnider direct contact information
Neil Shnider, MBA, CPA, is a special projects consultant for the Small Business Development Center at Florida Gulf Coast University. Go to www.theshnidergroup.com for more small business information and tools.