During the process of growing a business, entrepreneurs, business owners and managers are often faced with the question of whether to bring in an outside business consultant.  This can be an especially challenging decision for entrepreneurs, who are by definition independent and self-reliant.  However, it’s important to recognize that even the most talented businesspeople can benefit from the support and guidance of an experienced consultant (or consulting firm).

From our perspective, here are some of the key benefits to bringing on an outside business consultant.  

Functional Expertise

Perhaps the most common benefit a consultant brings is his or her experience.  More specifically, the consultant’s experience should directly fill gaps in the entrepreneur’s or management team’s own skillsets.  

For example, a businessperson may be gifted at recruiting employees and partners, and motivating them to achieve the company’s strategic goals.  But that same person may struggle to assemble a detailed financial model, conduct strategic market research, or convey the company’s growth plans in a succinct, marketable written document.  

A skilled consultant or consulting firm often fills these functional gaps, in order to help the company complete a particular task or achieve a milestone.  


Prior Domain Experience

Especially when venturing into new markets or devising a new product or service offering, a client may seek a consultant’s experience in a particular domain.  Experienced consultants and consulting firms can apply past consulting experience to new client engagements.  Aside from simply getting the project done, this familiarity with various markets and business models is a value-add that an entrepreneur or manager would not likely otherwise receive, without conducting months or years of competitive and industry research.


Objectivity

Engaging with a consulting firm provides more than smart, timely advice on crucial business decisions.  Specifically because they are not engaged in the day-to-day operations of their clients' businesses, consultants are able to analyze a business decision from a position of greater objectivity.  By working with an experienced, credible consultant, you receive 3rd party, objective analysis of your situation.  This perspective is critical for gaining organizational consensus around one course of action out of a sea of competing choices, and it helps assure you that you’re following the best business opportunity.


Time (Opportunity Cost)

Aside from the expertise and objectivity that a consultant brings, perhaps the greatest value is the simple fact that another person (or firm) is handling a part of the burden.  Engaging with an outside firm to assist with tactical or strategic responsibilities allows the internal management team to remain focused on the critical day-to-day actions and responsibilities that drive ongoing revenue and sustain the operations of a company.  Each person and company may set a different value on their own time.  However, often times it is economically beneficial to hire a qualified firm to efficiently manage a project, rather than allocating resources internally or hiring additional full-time staff to fulfill the need.


Other Benefits

Aside from the direct value of a consultant’s domain and functional expertise, engaging with a consultant or consulting firm can provide other benefits.  Because of their existing relationships, established consulting firms can introduce and connect clients with a wide array of potential customers, strategic partners, supplies, investors, and board members, etc.

What Do You Think?

What are other reasons why you have hired an outside consultant? What advice would you give regarding the pitfalls and benefits of hiring a consultant?

 

Are you looking to enter new markets or better serve your existing markets? If so, here's a technique that will allow you to gain insightful market research and learn best practices REALLY QUICKLY.

And for no cost, thanks to Google.

The other day, my son told me he wanted to take up lacrosse, so let's use lacrosse as our example. So, let's say I want to get into the lacrosse business, selling equipment through stores and/or online.

To start my market research I went to Google's new keyword search volume tool here: https://adwords.google.com/select/KeywordToolExternal

I typed in "lacrosse" and Google then shows me all the related keywords and how many times people searched on them last month. It immediately showed me the following:

Keywords_________ Approx Monthly Search Volume
lacrosse.......................... 2,740,000
lacrosse equipment........ 110,000
women's lacrosse........... 74,000
girls lacrosse.................. 60,500
high school lacrosse...... 49,500
lacrosse sticks................ 49,500
lacrosse wisconsin......... 49,500
lacrosse camp................ 40,500

From this, I see that lacrosse is a pretty popular sport; in fact, when I download Google's list of the top 150 lacrosse-related searches, I see that the sport gets 4.9 million searches per month.

To put this in perspective, and to see if the market is growing or expanding, I go to Google Trends at http://www.google.com/trends and type in "lacrosse."

Not only does Google Trends show the number of searches that people have done on lacrosse monthly beginning in 2003, but when I type in additional sports like football and basketball, I can see the relative size of lacrosse. Also, from the Google Trends graph, I quickly saw that lacrosse is a seasonal sport with peaks and valleys in search volume.

My next area of research is to determine the level of competition for selling lacrosse equipment. For this, I simply type in terms like "lacrosse," "lacrosse equipment," and "high school lacrosse." I find that general terms like "lacrosse" and "high school lacrosse" have very little competition (based on the few Sponsored Links I see on the top and to the left of the search results), thus providing a significant opportunity if I can figure out products and/or services to fulfill the needs of those who search these terms.

For the term "lacrosse equipment," which is a term that shows more buying intent (i.e., someone who searches this term has more intent to purchase a product than someone who simply searches "lacrosse"), I see several more competitors. Finally, when I search the term "lacrosse sticks," I see even more ads, since someone who types in this phrase has even more buying intent.

The next tool I use is Google's Traffic Estimator, located at https://adwords.google.com/select/TrafficEstimatorSandbox, which shows both the estimated clicks per day I would receive if I advertised on the term, but more importantly, the average estimated price that I would pay each time someone clicked on my ad.

Why is this important? Well, it gives me an estimate of how much my competitors are spending each time someone clicks on their ads.

For "lacrosse sticks," Google estimates that the top 3 advertisers pay between $0.99 and $1.26 per click.

The final stage of my research is to return to Google.com, do a search on "lacrosse sticks," and conduct competitive research. I click on the ads of the companies advertising on the keyword, and figure out how they are generating more than $1.26 per click.

I assess things like:

1. How their web pages are organized

2. Whether they are trying to generate profits from merely a one-time sale or whether they have long-term revenue generation systems (e.g., a paid membership club)

3. Whether they have a newsletter or other mechanisms to collect the email addresses of their prospects so they can market to them on an ongoing basis, etc.

This process provides me with significant competitive intelligence on current practices in the industry.

So, maybe this takes a little more than 10 minutes to thoroughly assess a new or existing market, but this technique and the tools listed above will quickly give you great information and insight really quickly.

 

"It takes many good deeds to build a good reputation, and only one bad one to lose it."  -- Benjamin Franklin.

Fannie Mae.  Freddie Mac.  Bear Stearns.  Countrywide.  IndyMac.  Lehman.  Merrill.  Once strong and even great corporate and financing nameplates now sullied by significant business reverses.

On the flip side: Apple.  Google.  Berkshire Hathaway.  Goldman Sachs.  Firms with gilt-edged reputations and prestige, admired the world over.

And the people that constitute both firms?  Ask any former Enron employee: whether deserved or not, their personal reputations have been sullied by the scandals and collapses suffered by their previous employers. In contrast, employees currently or formerly associated with corporate America's golden children benefit significantly -- even those that have had only a marginal impact on the businesses (like those who joined Google when its shares were at $700).

Whether we like it or not, our reputations, our incomes, our future prospects, all are massively impacted by the organizations with which we are associated.   In small companies especially, ALL employees have a meaningful impact on the company's reputation.  When any of us do great work and the firm is recognized and prospers, all of us benefit: in the short term, as the firm's reputation grows and in the medium and long term,  we enjoy a financial boon as the benefit of a good reputation yields financial results, given that reputation is a core driver of brand equity.

Arguably in the modern, flat world, the most valuable asset for all of us – firms and individuals – are our reputations.   And when any one individual in an organization, a community, a nation – shines, we all glow.  And when anyone of us falters, we all pay the price.   The price can be sometimes small, sometimes insigifnicant, but it is always paid and if it happens often enough, then eventually the law of numbers catch up and all lose.  Big time.  

My suggestion for all (including myself of course) – given our shrinking global village – let's be ever-vigilant to assure that we are consistently touched by "the better angels of our nature" when we get out of bed in the morning.  Each and every day.

Amidst the extraordinary, mournful crisis in the financial markets these last few weeks, a few truths have become painfully evident:

• Leverage is a far more dangerous mechanism than any probable scenario models had predicted.
• The very ephemeral concept of public and market trust is the core asset of financial and insurance institutions. Even the slightest weakening of this trust can almost instantly cause a cascading effect – driving down asset and equity values, which in turn further erode trust and confidence.   This negative feedback loop can quickly cause panic mindsets even among the most sober and experienced Wall Street hands.
• Financial markets and instruments – fundamentally transformed by the information technology revolution of the last 25 years – have and continue to morph at a far faster rate that both self-regulatory and government oversight bodies are equipped to handle.

From Growthink’s entrepreneurial economy perspective, a few more truths are less readily evident, but fundamentally more profound.  Quite simply, Wall Street finance has lost connection these past few years with its core purpose and intent – namely to provide intelligent advice and capital to operating companies. While significant efficiencies (and correspondingly wealth-building) can be achieved from trading platform and instrument innovation, the value of this “innovation” is vastly over-rewarded in the marketplace.   

The very fact that the most highly compensated roles in our economy over the past few years have been hedge fund managers, derivatives traders, and sub-prime mortgage hypsters points to the heart of the problem.  While these folks serve a role, for sure, the combination of their almost comically (if it were not so anger-inducing) inflated compensation structures, combined with the systemic risk to which they exposed both their fellow workers and the economy as whole, is a failure of priorities for which we are all paying the price.  

Where do we go from here?  My hope is that finance and general marketplace incentive structures revert to more wholesome, “vanilla” dynamics.  Traders are rewarded less, and company-builders rewarded more.   Capital is more difficult to come by for hedge funds, and easier to come by for entrepreneurs.   Harder for derivatives traders, and easier for scientists and engineers.   Harder for debt, and easier for equity.   

The fundamental good that can and should come out of this market cataclysm is a cleansing and a re-ordering of priorities.   Provide a milieu and an incentive structure for operating companies to access capital and grow.  And contrastingly – devalue activities that simply move capital as opposed to creating it.