By Marieta Bencheva, Consulthon
Being in business always comes with risks. One in every five small businesses fail in their first year…and unfortunately it doesn’t get easier as time goes on. Thirty per cent of small business fail in their second year, 50% fail after five years, and 70% fail in their tenth year in business.
What’s going on? Are most small businesses doomed to fail?
One of the biggest issues in small businesses is access to a range of expertise and talent. SMEs often keep a ‘startup mentality’ ─ this means they hire people with a range of skills and get them to plug holes as they appear. Depending on the people you hire, this approach can work well. Everyone pulls in the same direction and naturally flows into areas they are needed, with little regard for a strict job description.
But what happens when your business faces a serious problem? This is where many SMEs get stuck. While they have the breadth of skills needed to keep everything running, they don’t have the depth of skills needed to overcome major hurdles. And they can’t afford to hire a specialist full-time.
As such, many SMEs turn to professional services and consultants which has led to a thriving consultancy market. At the moment, there are over 700,000 consulting firms around the world generating $250 billion in annual revenue by providing services across virtually all aspects of business ─ from strategy to finance to technology. In the UK, SMEs spend a total of £60 billion a year on professional services.
Unfortunately, much of the spend is wasted.
While the advantage of consulting firms is that they’ve likely seen the issue before, the level of experience or the complexity of advice given is often disproportionate to the needs of an SME and the cost too high.
A small business owner may only need the answers to a few questions, yet are forced to pay a minimum fee/contract length for advice that they may not have the expertise to implement. For example, SMEs in London paid management consultants an average of £12,600 for 10 days work, according to research. That is half the average UK annual salary…
Additionally, consultancy firms often dispatch their junior team members, using senior resources to manage and control their teams. As such, SMEs pay top-dollar fees and receive junior expertise
For these reasons, nearly half of SMEs avoid using external consultants because of over-inflated costs, with 36% citing scepticism about their level of expertise as a barrier.
So, what can small business owners do to ensure they get the right level of advice, for the right price, at the right time, in order to keep their business from failing?
- Speak to employees
One of the quickest, cheapest and most effective sources of advice might just be your own staff. Over the course of their careers, people will often have held a variety of roles in a number of variously-sized businesses in different markets. Just because you hired them as a sales director doesn’t mean they won’t know how to fix an IT issue or can’t provide high-level strategy, for example.
Start by bringing your entire team together for a brainstorming session. This way, staff with fragmented skills and experience can support one another in coming up with a solution that is both practical and effective.
PROS: Staff already know your business from the inside-out, so there’s no need to bring them up-to-speed. Besides, asking your staff costs nothing, so it’s always a good place to start.
CONS: Existing staff will be personally invested in projects and work completed to develop their department. As such, they may be too close to the company to recognise the problems or too attached to existing processes to even think of challenging them. If you’ll excuse the cliché, they can’t see the wood for the trees!
- Ask your network
Everyone has a network whether you’ve deliberately nurtured it or not. Fellow students from school or university, family, friends, as well as business contacts you’ve made over the years. Any of them could have a solution to the challenge you’re facing.
Begin by going through your LinkedIn connections and sending some messages. LinkedIn’s professional focus makes it an ideal platform for reaching out about business challenges.
PROS: You know your contacts, you know their background and can view their skills and experience. People are much more willing to help out someone they know than someone they don’t, making it potentially much cheaper than a consulting firm. They may also know someone within their own network that can help.
CONS: Relying on people you know to do you a favour gives you little leverage to make demands. They may not have a lot of time to help, making them slow to reply and little time to focus on the solution. This means they’re like to be pretty unreliable for quick solutions to immediate problems, and could create more uncertainty than they solve.
- Expert networks
If you’ve tried your personal networks to no avail, you could always try an expert network. These are companies that connect businesses with relevant experts from around the world. You send your challenge to the expert network company, they find a suitable expert in their books, and then connect you. Think of it as tapping into someone else’s LinkedIn and getting a guaranteed response.
PROS: As there is a strong financial incentive to help, expert networks are very reliable in terms of putting you in contact with someone. You’ll receive a fairly rapid response and can quickly jump on a call to discuss the challenge. Calls may total several hours, but it’s still a lot cheaper than hiring a consultant for two full weeks.
CONS: These calls don’t come cheap. Businesses can sometimes pay expert networks up to $1,300 per hour for advice and they have no idea how long it will take to find a solution. There is also no way to personally vet the expert you are connected with ─ you simply have to trust the network company to connect you to the right person ─ making it a bit of a blind call.
Expert networks have also come under increased scrutiny, particularly in the US, after several cases of insider trading were discovered and prosecuted by the SEC in 2012. In total, more than 36 individuals and firms were charged with a variety of financial and corporate crimes, causing a swath of regulation aimed at clamping down on unscrupulous practices.
- Employ a consultant
In reaction to the declining popularity of expert networks and in response to the need for quick, cost-effective consultancy, a number of disruptive services have now become available. For example, Consulthon, allows businesses to post their challenge to a network of experienced consultants for free. The consultants then pitch a brief overview of their solution, which the business owner can then discuss or try out without committing to anything. If the business then wants a deep-dive into the solution, they can book a call with the consultant
PROS: Reviewing responses before committing to a consultant means you can find someone who speaks your language. You can assess which of the consultants has the relevant level of experience and offers a solution that you understand, so there is no risk of overcomplicating the solution. You can even test the solutions in principle before the call, giving you live data to feed back to the consultant.
Additionally, since the network is for expert consultants from a variety of fields, you have a one-stop-shop for all your challenges or a multi-faceted challenge requiring more than one consultant.
CONS: Calls can be expensive (e.g. £250/hr) but you do only pay for the amount of work you need, avoiding the cost associated with minimum contracts. Consultants may also have full-time jobs and therefore be unable to visit your premises or commence work immediately, restricting them to calls only.
With any consultancy option, whether in house, a member of your network or an external consultant, it’s still on you to assess the solution and accept the risk. If it doesn’t work then you’ve wasted time and money with no recourse.
It’s also on your team to implement the solution. A consultant may be able to help on-site but they’ll only be responsible for their area of expertise. As you’ll know, it takes a team to make any business successful. A consultant can only help navigate specific hurdles to help you achieve success.
However, with the right advice at the right time, you will find a solution to any challenge, allowing your business to grow without huge debts or overheads.
ABOUT THE AUTHOR
Marieta Bencheva is co-founder of Consulthon, a UK Management Consulting Expert Network. Businesses can raise a Business Challenge and the network’s experts will brainstorm solutions. After selecting the answer they like the most, the business can book a paid one-hour advisory call and deep-dive session with that consultant. All the consultants are vetted by Consulthon and the platform offers businesses access to a wide range of skills, in a variety of sectors and countries.
Twitter: https://twitter.com/CONSULTHON @consulthon