Hiring a Consultant? Factor In The Intangibles

What should a small business owner bring to the table when hiring a consultant?

After five years operating my own small business planning service, I've come to realize it's my job to bring something to the table. I'm the one selling the service. Hiring a consultant isn't only about analyzing the costs of the services provided. Hiring a consultant is really about finding new ways to increase sales and profits. In order to make a wise business decision, you must consider the intangibles — those things that are outside of the services rendered.

Not certain what intangibles to consider when hiring a consultant?

Start by thinking like a consumer. You may be a business owner, but this changes when you spend your money — you become a customer. We are all very reluctant to let go of our money for something that, on the surface, is intangible. You can't touch it, feel it, or even see the service before deciding whether or not to buy it. The challenge is greater if the service is one for which success will be determined by your ability, not the consultant's, to facilitate the project.

I recall many times in the past, when teaching in business plan workshops and consulting clients, they would relate stories about soliciting advertising space in newspapers, magazines, on cable TV and radio stations. The sales rep spoke so glowingly of how far and how wide the paper or magazine was circulated, or how many people watched or listened to the station. Then I would ask my client if the rep mentioned anything about the types of people listening to or reading that media. So often, I noticed bewildered looks on their faces. This is especially true of first-time business owners.

In these examples the media sales rep succeeded in overwhelming my clients and students with numbers. Suddenly, they were giving up their rights as consumers — the ones paying for the services. With a symbolic swift kick, I instructed them to "turn the table" on the sales rep. It was the obligation of the sales rep to demonstrate why that particular media was going to create the right image, increase awareness and drive customers to the store, ultimately increasing sales and profits. Oh, and don't forget the sales rep would have to demonstrate the validity of the research data supporting that advertising strategy.

This same example can apply to your decision whether or not to hire a business consultant. Assuming you have the need for a particular consulting service, certain actions should be taken prior to making your decision. The service can be marketing, acquisitions, business plans, marketing plans, advertising packages, or those provided by application services providers, such as online bookkeeping, Web site visitor analysis, online catalog creation, or secure transaction processing, an even hiring a Web master.

You need to define your needs, consider the best candidates, the costs and projected returns on your investment, credentials, testimonials, track records and all the intangibles that are challenging to translate on paper.

Getting Started
Begin by doing your homework. You have an issue or problem that needs to be addressed and resolved. You have perceived needs as to what is required to achieve the intended goal. Hopefully, you have done some research about how your competitors or companies in other industries address this matter. You may even get some good input from vendors and employees.

After concluding the research and determining the possible solutions, begin searching for two or more consultants who offer the services necessary to achieve what you seek. You want options when deciding whom to hire. And don't hesitate to let each of them know there are other consultants being considered.

Why?

You want the best "bang for the buck."

Provide each candidate with the information you believe is needed to prepare the presentations. Keep in mind two very important matters of concern when distributing the information:

• At this point, do not distribute information confidential to the company unless absolutely necessary. If so, be certain all parties sign a non-disclosure agreement.
• Do not provide more information to one particular candidate over another. Consultants tend to ask a lot of questions prior to making a presentation. It is possible that one consultant will ask for information not requested by others. If you believe the data is salient, then be certain all of the other candidates have access to the same information.

Setting the Table
Decide beforehand if one or more members of your company should attend the presentations. A key member of your staff may have skills, experience or knowledge on which you rely in the operation of your business. Winners surround themselves with winners — you hired them because their skill-set will help you build a successful, prosperous business — bring them to the table.

When deciding on which consultant will be hired, be certain the services provided will be comprehensive, covering all the bases. For example, will your new e-commerce package require staff to manually retrieve online orders? Or will the package provide online, up-to-the-minute notification when an order has been processed? Does the e-commerce package come complete with detailed shipping instructions?

Cost is always a matter of concern. I have always pushed the notion you should never spend money unless the consultant can honestly demonstrate how your investment in his or her service will result in sales and profits exceeding the fees and related costs. Believe me, I really know how difficult this type of calculation can be.

As a business planner my first job is to prove or disprove the feasibility of the venture or expansion activity. A potential client will be reluctant to pay me a fee for a business plan if the resulting projections are less than anticipated. That is the risk of integrity and honesty — two of those intangible characteristics you need to interpret and evaluate. The point here is to invest the amount of money that is not too much or too little to produce the anticipated results.

Background or Gut Check?
Another evaluation factor is the background of the consultant. What experience, success stories, testimonials and client profiles can be provided? You may believe the consultant is capable, but lacks prior success or frequency of success, both of which should raise concerns. If you still have faith in this consultant the lack of prior experience provides you with leverage to negotiate lower fees, and the consultant should be prepared to accept that possibility.

Getting back to those intangibles, all business owners must rely on their ability to "read the crowd." It is part of the risk we all take as entrepreneurs. Decide what personality traits are important to you. Do you believe this person? Do you believe the consultant is and will be honest with you? Do you believe the consultant will admit making mistakes if they occur? Do you believe the consultant will still be there after delivering the service?

As a small business advisor, I have been feeding information to clients dating back to 1999. The consultancy fees were paid, the services were delivered, but I still communicate and share information with these clients. I recognize they could one day be return clients. You want your consultant to think of your business in the same manner.

In Conclusion
First, do your homework. Then give all candidates the same information so you level the playing field, ensuring that your individual evaluations will be consistent. Don't pay too much or too little — find the middle ground between price and service to land on the greatest value. Most importantly, act like a proactive consumer. You must believe the consultant can deliver as promised, and trust he or she will be there to support you after delivering the service.

Steve Windhaus is principal of Windhaus Associates, a business plan consulting firm serving small, existing and startup ventures throughout the United States and overseas. His clients range from technology-based firms in software development, e-commerce and telecommunications to retailers of ATV's and watercraft and a variety of service firms. Steve is a published author who also conducts training in business plan development and participates as a judge in business plan competitions. Steve can relate to small biz environments relying on computer technology. His skills and use of many related technologies are all self-taught. If you have a question your would like to see Steve address in a future article, send it to us today.