Jun 12, 2023 | Growth & Scale

Can a consultant help me, and if so, how do I choose one?

Q. Dear Zenagos,
My business is profitable, but I feel like I could be doing better. I’ve been thinking about hiring a business consultant, but is it really worth it? How should I choose one?
–Max

Hiring a business consultant can definitely be worth it. Research has shown that consulting and training both can have significant impact on small business results – increasing hard measurements such as average revenue, average operating income (or “EBITDA”), and net new jobs created (Lafortune, Riutort, & Tessada, 2018; Pavlovic, Olukuru, & Coelho, 2019). Similarly, a study by Nahavandi and Chesteen (1988) concluded that overall, small business owners were highly satisfied with the consulting services they received and reported that consulting had a positive impact on their business.

Shouldn’t the consultant have experience running the same business?
Small business owners commonly hold the belief that they should only hire a business consultant if that person or firm has experience in the same exact business, not just the same general industry. However, the research clearly shows that consulting is broadly helpful, despite the fact that many firms hire general business consultants. A potential reason for this surprising fact is the conclusion that the bulk of the positive impact that small business owners receive from their consultants or trainers comes in the form of the role modeling that they receive, rather than from any specific recommendation (Lafortune, Riutort, & Tessada, 2018). This suggests that when an entrepreneur selects a consultant, what is most important is that the business owner respects the consultant and feels confident in the personal connection and communication, rather than that the consultant has experience running the same business.

What else is important besides connection and communication?
We recommend that our entrepreneurs look for some specific characteristics in a consultant or advisor:

Seek Broad Experience across a Variety of Businesses
A consultant who has operated the same business as yours can provide very specific suggestions. However, this advice may not actually be what is best for your business, since you are experiencing changing market conditions, you have unique employees, and you may have different goals and values. A consultant who has broad experience across a variety of businesses or industries has seen more situations and solutions and can forecast the likely impact of various choices on your business. We recommend to our entrepreneurs that they seek advisors with many years’ experience working with quite a few businesses.

Match Your Functional Challenge to the Consultant’s Experience
When you are interviewing consultants, think about your greatest challenges, and ask about the consultant’s experience working in those areas (or “functions”) of a business. For example, if you are most worried about hiring and retaining employees, ask for specific stories about the consultant’s experience hiring and retaining employees themselves and/or helping other organizations solve challenges with employee hiring and retention. Make sure that the consultant can tell specific, compelling stories about that experience.

Listen to Your Instincts
Humans are capable of taking in a great deal of information, much of it on an unconscious level. Your instincts exist to protect you. If you have a bad feeling about a consultant, don’t talk yourself into it. There are many business experts, and you should choose one who fits with you. Look for someone who fits your personality as a leader, your company’s priorities, and your budget. And above all, make sure the consultant is really listening to you.

Once you have chosen your consultant, discipline yourself to set aside your skepticism and give their recommendations a chance. In their research, Nahavandi and Chesteen (1988) note that small business owners “do not implement some of the recommendations that they receive from consultants” (P. 29). Keep in mind that you sought a consultant because you wanted help. If you reject the consultant’s recommendations without trying them, then you will be right back where you started. It is sensible to consider risk before you make big moves, but try a small test and see if you are willing to extend that trust.

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References

Lafortune, J., Riutort, J., & Tessada, J. (2018). Role models or individual consulting: The impact of personalizing micro-entrepreneurship training. American Economic Journal: Applied Economics, 10(4), 222-245. Retrieved on June 11, 2023, from https://repositorio.uc.cl/xmlui/bitstream/handle/11534/47676/Role%20models%20or%20Individual%20consulting%20The%20impact%20of%20personalizing%20micro-entrepreneurship%20training.pdf?sequence=1
Nahavandi, A., & Chesteen, S. (1988). The impact of consulting on small business: A further examination. Entrepreneurship Theory and Practice, 13(1), 29–40. https://doi.org/10.1177/104225878801300104
Pavlovic, S., Olukuru, J., & Coelho, J. (2019). Impact of training on small and growing businesses. IUP Journal of Entrepreneurship Development, 16(4), pp. 44-67. Retrieved on June 11, 2023, from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3472940

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