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Consultants

November 25, 2009

You are about to begin an expansion of your business that will involve an investment of about one hundred thousand dollars. Would you consider retaining the services of someone familiar with financial structures to review your plans? Probably not.

You are about to buy a major piece of capital equipment that you hope to use for many years. Would you consider retaining the services of someone with extensive experience in purchasing equipment of this type to advise you on your selection? Probably not.

As the consulting profession has grown over the last several years, it has developed into a massive resource reservoir for all businesses. Unfortunately, this pool of talent is viewed as a big company resource and is too often overlooked by closely-held and growing businesses.

Consultants come in all shapes and sizes. There are private practitioner, small group practices and major international consulting corporations. In each case the consultant provides their services, expertise, experience and judgment to a client company to help with a special problem or situation.

Smaller companies, those with from two to two hundred employees, generally do not have the luxury of having excess management resources to direct to special projects. Unless the project involved will become a major element of the business, the company won’t find it economically sound to retain in a full time position the management expertise that is capable of developing state of the art solutions.

Just the opposite is true of the large company. They invariably have management resources that can be diverted to a special project without a substantial disruption in the daily operations of the business. Further, the larger company can afford to maintain full time the type of specialists that can bring to bear state of the art solutions to special situations.

Consultant’s services are retained for both good and bad reasons. Inappropriate retentions include using a consultant to support an executives point of view, to help to do a managers job, to assist in searching for a solution to vaguely defined problems and to serve as a scapegoat for unpopular decisions.

Consultants are appropriately and profitably retained when there is a clearly defined problem or situation in which the consultant’s specific skills and experience can have a positive impact. Those instances include situations where a company needs a specialized skill, when there is an emergency or a peak work load situation, when the objectivity and perspective of an outside expert is needed to evaluate a major judgment, dealing with a critical issue that may jeopardize the future of the business, arranging long term financing, acquisitions and negotiations.

Clearly many of the best uses of consultants are appropriate for the closely held and growing business. Why don’t smaller businesses take better advantage of this readily available and productive resource?

Initially the thought of calling in outside help just probably doesn’t occur to the manager who has always been self sufficient. Once the business owner has decided to consider the use of consultants, there are some typical concerns. Have I chosen a competent consultant? Are the fees excessive? Is the consultant too busy with other clients and his next job to give my project the attention that it needs? Is the calling of help a sign that I can’t get the job done? Is there a risk in disclosing too much proprietary information?

There is no one answer that will counter each of these very real concerns. My advise is to step back from the problem and try to take an objective view. If you have a situation where outside expertise can help and you know that expert is out there, you would be foolish not to take advantage the opportunity.

Don’t look at the cost of outside help as coming out of your bottom line. View the cost of a project as a percent of your gross revenues and not as a percent of your net profit.

Further look on outside help as the purchase of an asset and not as an expense. The work of a consultant that helps you buy the right piece of equipment, establishes a salary incentive program or assists in restructuring your finances will pay dividends for longer than one year.

When you decide to explore the use of a consultant, begin your search for the right one through your network of contacts. Begin with your current professional advisors, mention your interests to friends with similar businesses and contact your trade or industry associations for references.

Before beginning your discussions with a consultant, make sure that you have clearly identified the problem and your reasons for retaining the consultants services. Prior to authorizing the consultant to begin work, you should receive a formal proposal that includes the fee structure, a maximum cost of the project, what specific work will be performed and a statement of what conditions will exist when the work is completed.

Because it’s your business, don’t be afraid to call on outside assistance for special projects.

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