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Should Startups Use Consultants?

Earlier this week, the New York Times’ “You’re the Boss” column asked whether small and fast-growing businesses should hire consultants.

The author, Clifford Oxford, opined that consultants should mostly be kept away:

“This is the human factor of growth, and quite frankly, most consultants contaminate the whole place. Keep them out of this part of the business. Think about snakes in a wood pile. In fact, go back and find that 10-foot pole and grow without them.”

As a consultant who provides marketing services to startups, I think Oxford is wrong because it doesn’t reflect the value that consultants can offer at the right time for the right price.

One of the crucial considerations for startups, especially early-stage ones, is they need to be strategic and selective about how they spend money. There are parts of the business that demand a full-time employee because they’re core to the company’s operations. At the same time, there is a lot of stuff that needs to get done but doesn’t necessarily need a full-time, part-time or contract employee.

Instead, a startup can look to a consultant to fill an important gap on a project basis to achieve a key deliverable or milestone. In hiring a consultant (or hired gun), the startup can tap into someone’s experience, expertise and network to get exactly what it needs when it’s needed. It does not have to be a long-term or expensive relationship but it can provide both parties with what they need.

So when should a consultant be hired by a startup?

For many startups, the interest in a consultant begins when they have a problem to solve or a task that has to get done. At this point, they can try to have someone internally do it or look to hire someone if the position needs to be filled right away. Another option is finding someone (aka a consultant) who can come in for a set period of time (let’s say one to six months) to provide strategy and tactical assistance.

The key is determining what kind of help is needed, and then finding someone who has the experience and track record to fill that need. And you have to find someone who shares your values, passion and vision. That’s the first big step.

Next, a startup has to find a consultant who thinks strategically and performs tactically. A startup does not, under any circumstances, need a consultant who puts together fancy strategic recommendations, and then leaves the startup to execute. To me, that’s a half-ass job that provides little value, and gives consultants a bad name.

Third, a consultant needs to drink the Kool-Aid. While they don’t work for the startup, they need to feel like they’re part of the team, even if it’s for a short period of time. As well, the startup has to feel and know the consultant has a vested interest in their success, not just getting paid for consulting services.

So what about fees?

The image of consultants is they’re blood-sucking, money-hungry wolves. That may be true for some but it’s a sweeping generalization. A good consultant who wants to work with your startup should recognize the budget limitations and accept the reality that working for reasonable fees is part of the opportunity cost.

If a consultant wants to make large hourly rates, they should work for a big corporation. If they want to work with startups, they need to take a different approach – one that takes into account a startup’s potential and the buzz around their business and sector.

Truth be told, it can be hard for a startup to hire a consultant who meets the above criteria. The reality, however, is there are a lot of good consultants who can meet the needs of startups and, in the process, deliver a win-win proposition.

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  • Chris Carder

    Another great topic for a great Saturday morning Mark! The part I’ll pick up on here the concept that startup consultants should have skin in the game and really be part of the team. At Kinetic we’ve really had great success employing pay/equity combination models where we eliminate portions of fees in exchange for upside. We also have models where we’ve invested cash in the company as part of the engagement. And we have reward models that ensure that the biggest victory for us comes when we deliver signed sealed and delivered customers for the startup. Just a few things startups should be asking their startup consultants — if you believe in me and you believe in you abilities as a consultant, are you willing to put some measure of your money and time on the line and prove it? — chris

    • http://www.markevans.ca/ Mark Evans

      In the two years I have been focused on providing marketing consulting to startups, I have not been offering many option opportunities. It hasn’t been for a lack of interest.

      That said, my prices are “startup friendly” so perhaps clients don’t feel it’s easier to pay cash rather than going through the paperwork of option granting.

      Even without the options, I always feel like I’m part of the team in some way given how engaged you need to get to the job.

      Thanks for the comment!

      • Naomi

        Hey Mark great article! I am a beginning entrepreneur for a start up gym, thing is I only have the business plan done. I located a consulting firm that I really like, however they are quite costly 7k and I only have 20k to put towards my business. I want to open my gym in Jan 2014 ideally do you think that this is a reasonable cost? The cheaper consultants I found I didn’t connect with and I know there is free consulting, but like the article mentioned, I need someone on my team that will help execute my plan into action. Please advise :) Thanks in advance

        • http://www.markevans.ca/ Mark Evans

          It’s hard to tell if you’re getting good value without knowing more about what they will offer. It really comes down to finding a consultant that will not only tell you what to do but help you do it as well.

    • SK

      Thank you for the valuable comments Chris. As an entrepreneur who’s going to jump in full time after quitting my job, I find the amount of disposable income I have towards consulting is not as vast and I want to understand what is the best win-win arrangement I can work out with a great team of consultants who I’d like as part of my ‘extended family’ if you will…Going to research on what you just mentioned, but wanted to say Thanks!!!

  • Joel L. Goldman

    Normally there is a myth that start ups should hire only if there arises an issue. It’s true to some extend also. But I think it’s good to hire the services from the start itself. Not full time services, part time services.
    I’m a business consultant in KPMG. We offer such services to many start ups. So far almost all are successful.