With the “Gig” economy booming, hiring outside consultants has become quite fashionable these days. Even smaller companies and startups are hiring them. However, are they worth the price? Let’s look at some of the pros and cons of hiring a business consultant, especially for a smaller venture.
Business consultants offer many benefits to companies. Here are some of them:
Sometimes you need outside expertise that just can’t be found among your in-house employee pool. Perhaps you need a computer system or network upgrade and your staff just isn’t up to the job or they just don’t have the time. Rather than hiring a permanent IT guy it might be more cost effective and result in a better job if you hire a short-term consultant who will come in, do the job and not be an ongoing expense.
One common reason to hire a business consultant is because they can offer a thorough evaluation of the overall business strategy. A consultant will be able to spot right away whether your strategy is actually working for the industry you are in. Consultants can recommend changes to the strategy, or point out problems that could be hurting sales. In addition to identifying general problems, business consultants can be experts in a niche field and so they can provide expertise to solve a specific problem or identify problems you didn’t even know you had.
Get an Unbiased Opinion
True enough, some of the tasks business consultants perform can be conducted internally. However, that doesn’t mean companies should. Internal reviews are useful, but often have a major flaw: bias. If the company is rather small, bias tends to be prominent. Business consultants companies hired externally don’t come with biases influenced by internal office politics. So, they can provide a highly valuable unbiased point of view when it comes to strategy and performance analysis. Certain intricate subjects, like staff performance, can be evaluated better with an outside consultant than an in-house agent.
Along the same lines an outside consultant can provide “fresh eyes” they see things that you may know but have seen for so long that you have become “blind” to it. The consultant will be able to evaluate it objectively and determine how important it is to correct it.
Some business consultants, like Global Resources, provide generalized services like how to maintain positive cash flow, control costs & accelerate growth. Others specialize in certain facets like advice on tax strategy. Even the tiniest startup needs a solid tax plan. Hiring a tax lawyer for the task can be incredibly expensive, as a small business it might be more cost effective to hire an accountant or other tax professional to prepare your taxes and maximize your deductions.
Obtain a Business Valuation
Business consultants can also provide comprehensive business valuations. Doing this is rather complex, so businesses really do need an expert on the matter. A business valuation is extremely important for managing finances of the business, planning taxes, estate planning, and for setting up retirement options among other tasks. It’s not wise for smaller businesses to function on speculative valuations. If you’re not ready to sell your business you might be wondering why you would need a business valuation.
- To obtain financing to expand
- To determine whether expansion is even wise
- To keep stake holding employees motivated
- To make goal tracking easier
- For estate planning
While business consultants can offer incredible benefits to companies, there are a few downsides too.
Some business consultants charge an arm and a leg to type up a two or three page routine business analysis. Hiring consultants can easily get out of hand, financially speaking. Therefore, it’s very important to choose from a reputable agency that your company can actually afford.
Losing Control over Strategy
Some business consultants can be overly opinionated and insist on doing things their way, even if it is sometimes to the detriment of the business. Therefore, when a consultant provides you with a list of recommendations, it’s vital to understand the logic and evidence behind those conclusions. This will help to avoid implementing the wrong “solutions.”
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