Small Business Management Consultant – What is a business consultant? Why hire a business consultant? What does a business consultant do? Types of Business Consultants What about consulting firms? How to Choose a Business Consultant Drafting a Business Consultant Agreement or Contract How do you measure the success of a business consultant? Frequently asked questions about the business advisor
Running a small or medium-sized business is challenging because of the large number of tasks that are required to be successful. From accounting to HR to technical support, it’s almost impossible for business owners to do it all by themselves. But with the ease of hiring consultants, you don’t have to figure it all out yourself. We’ll explore what a business consultant does and how they can help your business thrive.
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A business consultant is a professional with a wide range of skills to assist business owners in their endeavours. Consultants are knowledgeable through their previous education and experience.
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In addition, business consultants provide management advice that helps organizations improve their performance and efficiency. These experts analyze businesses and create solutions that help businesses meet their goals.
Business owners should consider hiring business consultants when they need help or insight into their chosen path or a catalyst for change in their companies.
There are several reasons why business owners should consider hiring consultants. Consultants offer a wide range of services, including the following:
If your company serves customers in the European Union, consider finding a GDPR consultant to help you meet GDPR requirements for transparency and control of consumer data.
What Does A Business Consultant Do?
The first step for any business consultant is the discovery phase, where the goal is to learn about your business. A good business consultant will take the time to learn as much as possible about the business from the owner and employees. The advisor will do the following:
During the discovery phase, a business consultant will uncover details about your company’s mission and current operations.
Once the business consultant has a deep understanding of your company, they enter the assessment phase to determine where change is needed. This phase involves identifying your company’s strengths and weaknesses, as well as current and foreseeable problems.
Once your company and the consultant agree on a plan, the consultant must enter the third phase: the restructuring phase, or implementation of the plan. At this stage, the consultant builds on your assets and eliminates liabilities. They also monitor the progress of the plan and adjust it as needed.
What Is The Cost To Hire A Management Consultant?
A business consultant can help you conduct a competitive analysis to learn relevant information about market saturation, new opportunities and industry best practices.
Business strategy and management consultants can bring industry expertise to your business to help you grow, capture new opportunities and increase revenue.
Business consultants who specialize in operations can help you improve your day-to-day processes. These business consultants will take stock of your current business model and find the best way to achieve the same high quality results at a fraction of the cost and time. These consultants also help through quality control and understanding how to adjust and optimize your production for better results.
A financial advisor can show you the wider scope of your business’s financial health. They primarily help with investment decisions and help you find the best way to manage the assets and liabilities of your business. Financial advisors may also have other specialties, including financial planning and advising your business on taxes, day-to-day expenses and the best retirement plans.
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Top HR companies and independent HR contractors can help you with your HR functions. These consultants can take over your day-to-day HR tasks, such as recruiting and retaining employees, processing payroll, performing administrative tasks, and managing employee performance.
Marketing consultants help businesses identify their brand strengths and use them to create brand awareness and exposure. Whether your business needs a new logo or a social media strategy, a marketing consultant can be beneficial in expanding your business’ reach.
While you can hire a freelancer, you can also use the services of a specialist firm for your consulting needs. Big firms like McKinsey & Co. and BCG may not necessarily meet the needs and budget of a small business, but a local firm could work well.
Start by doing a Google search for your pain point and location—for example, “brand strategy firm Seattle”—and explore your results. A search will likely turn up companies you’ve never heard of before, but a closer look at their projects and customer reviews can help determine if they’d be a good fit. Plus, hiring a local firm means you have a better chance of finding someone you know or have met on their client list.
What Is Management Consulting, And What Do Consultants Do?
Whether you should choose a consulting firm or an individual depends on your business needs and preferred work style.
Choosing a business advisor that suits your business needs can be a daunting experience. Whether you’re looking for someone to help with your high-level strategy needs or a solution-oriented specialist to improve your SEO or product sourcing processes, it’s essential to know where to start and step by step.
Finding the right business consultant can be the most challenging part for an owner or management. A consultant must have a passion for their work, a drive for excellence and a sense of organization and detail. It is essential to find a consultant who has expertise in your industry or experience with the types of problems your business faces.
If your potential consultant’s references are excellent and they are proven to be serious and efficient, meet with them to make sure they are the right person for the job. Be clear about their pain points and expectations and see if their style and personality fits you. If the consultant ticks all your boxes, it may be time to move on.
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Once you’ve found a great consultant, done your due diligence and vetting, gotten satisfactory and verifiable references, clearly outlined your pain points and expectations, and made sure you fit their style and personality, it’s time to seal the deal.
Consulting agreements or contracts are usually for three to six months with the option of extension. Agreements typically include details such as the names of responsible parties, consultation parameters, fee structures, payment schedules, prescribed deliverables, and defined deadlines.
A defined and confirmed deadline ensures that your consultant has enough time to deliver the promised results while ensuring timely progress.
Draft the contract in stages and provide logical stops in the workflow. That way, if the partnership ends badly, you can always part ways with your consultant on friendly terms.
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Unlike employee performance appraisals, there is no widely accepted objective methodology for measuring consulting performance, but it is reasonable to set goals and measure results. This process is similar to Peter Drucker’s management by objectives and SMART principles for managing employees.
According to the Bureau of Labor Statistics, the average annual salary for a consultant in 2020 was $87,660 or $42.14 per hour. However, advisory fees are usually higher to cover business costs.
Consultants do not always charge by the hour. According to Consulting Success’s consultant fee study, these are some popular fee arrangements and the percentage of consultants who prefer them:
According to the study, 40.5% of consultants earn up to $5,000 per project, although some earn more than $100,000 per project. The size, scope and length of the project will determine the cost.
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Business consultants are a significant expense, but their feedback and planning can help you grow your business and increase profits by eliminating problems and identifying opportunities to ensure future success.
You measure ROI by examining specific key metrics to define consultant performance. Most companies look at their net profits for the quarter before they hire a business consultant and then estimate their net profits for a quarter or two after implementing the consultant’s recommendations. Before calculating the ROI, you need to subtract the consulting costs.
Considering ROI is an essential part of hiring a business consultant. If you’re paying a business consultant more than $5,000, you want to see an established ROI behind the project. Established business consultants should be able to show their past ROI data to potential clients.
According to the Predictive Index, 27% of businesses surveyed chose not to hire a consultant because the consultant failed to demonstrate a return on investment. This is the most common reason companies don’t use consulting services, and it’s up to the consultant to use big data to demonstrate past ROI. [Learn more about big data solutions for small businesses.]
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Hiring a consultant can be a significant expense. Since fees vary, it is essential to create a realistic and reasonable budget. Consider setting consultant costs as a fixed percentage of your total sales. For example, if your monthly sales are $10,000, it may not be appropriate to pay a monthly consulting fee of $5,000, which is 50% of your profits. A 5% fee per $100,000 of income seems more reasonable.
By setting clear phases for your consulting project, you can reduce costs and risks by evaluating progress at each phase. For example, if you use a consultant’s marketing expertise to launch various products, evaluate their efforts afterward