You started your company with just three employees and now want to grow that number to 50. Or perhaps you’re looking to integrate a new accounting system, put together a pitch deck or create a customer relationship management system to make your organization more efficient.
Whether you’re in the first weeks or first months of running a new business, you’re bound to come across knowledge gaps within your core team. From financial strategy to HR management, outside consultants can help fill this gap with their experience in working with small and fast-growing companies. Nevertheless, hiring startup consultants isn’t for everyone, and it requires a close assessment of company resources as well as your ability to bring in skills that will prove invaluable to your company.
Benefits of Hiring a Consultant
One of the primary reasons businesses hire consultants is to fulfill a skill set or area of expertise the company lacks internally. Oftentimes, new business owners lack experience developing and launching products, hiring employees or managing large amounts of complex data. Startup consultants come into the organization with a fresh perspective and, ideally, substantial industry experience, which can help companies effectively manage their organizational risks.
The following are some of the commonly cited benefits of hiring consultants to guide you through the startup process:
- Consultants provide strategic insight to organizations. The consultant you hire should have an in-depth knowledge of your industry’s latest trends and best practices. This is particularly helpful as consultants work with you to shape your business direction and positioning in the marketplace.
- Consultants have real-world experience. Although not always the case, startup consultants have ideally launched and cultivated their own companies. Their resumes should demonstrate solid experience in leading companies through the full project lifecycle across different teams, functions and technologies. Hiring a consultant with knowledge that comes from personal trials and errors can be invaluable for a startup looking to expand its business and customer base.
- Consultants bring skills and a broad network. Because of their experience launching businesses, startup consultants should have acquired skills and connections that are both useful and unique to your industry. A good startup consultant should have a pool of people and abilities that will help you strategize, build partnerships and grow with fewer mistakes. Need a reliable accountant? Your startup consultant knows a couple great ones they trust. Want to start using Google AdWords? Your consultant used it to market his or her own business and can help you draft an advertising strategy based on his or her learnings. These should be your experiences when working with a good startup consultant.
- Consulting firms can cast an even wider net. When it comes to aspects of your business that require a network beyond a single individual, such as PR, you may consider hiring a firm rather than an independent consultant. While their fees may be higher, they will have an even broader database of connections, a wider range of specialties and years of experience as an established firm.
As a startup, you need to be strategic about how you allocate and spend your funds. Some areas of your business will demand a full-time consultant, particularly if you’re just starting out and the consultant can help manage the core functions of your company. If your business is bootstrapped, and you need a consultant to play a very pivotal role in growing your company, you can consider compensating them with equity.
However, other areas may not require a part-time or freelance consultant, specifically in departments with projects that can be completed within a short time period. For instance, you may consider hiring a startup consultant when:
- Your company has a specific problem that needs to be addressed
- You are looking to accomplish one large milestone, such as getting funding
- The issue or project has a set scope and timeframe
- You need a professional with industry skills, connections and/or knowledge who can provide strategic and tactical experience for a defined period of time
Considerations when Hiring Startup Consultants
One of the main arguments against bringing in a startup consultant is the cost. For example, information technology consultants on average charge upwards of $300 per hour, according to a Forbes.com article. Consultants may be expensive, but what about consulting firms? Bloomberg Businessweek revealed that retainers for PR firms average between $3,500 and $5,000 per month.
Critics argue that retainers – one-time contracts where clients pay a monthly or one-time fee in advance of work being delivered– are often ill-spent on small consulting firms that are at or beyond work capacity. As a result, the startup client is serviced by overworked consultants unable to dedicate the time or attention necessary to their projects.
If you find that consultant fees are outside your budget, look within your own network to find experienced entrepreneurs and advisors who’ve successfully launched and managed startups. Setting up a few meetings, coffee dates or phone calls with a business mentor may be more worthwhile than paying a consultant who fails to deliver the same quality you expect from employees.
Where to Find Resources
First, determine where you need added resources. Do you need a consultant to help you with financial strategy or to handle equity and debt negotiations? Maybe you need a “virtual CFO” who has previous experience as a chief financial executive and can connect you with senior professionals in the industry. Using consultants for accounting and HR support are other common areas where bringing in an external resource may be beneficial to your company.
To avoid wasting valuable time and money, research the consultant’s reputation (a good place to start is their LinkedIn profile), ensure they have a substantial and impressive portfolio, good recommendations and that they fit with your company culture. Cliff Oxford, founder of the Oxford Center for Entrepreneurs, suggests in a New York Times article that startups should try setting up an agreement where consultants are paid a small fee upfront with the promise of a bonus if they deliver real results. This is one way to reduce a consultant’s hourly rate and get them to truly commit to achieving your project goals.
Additional factors you should consider as you start searching for a consultant include:
- Using your existing network. Which consultants have your colleagues and similar companies used in the past? Speak with other startups, and get their opinion on consultants’ work and reputation.
- Searching online review sites like Angie’s List, or conducting a general search on Bing, Google or other major search engines for leads. Refer to the Yellow Pages under attorneys, consultants or similar services for possible candidates.