Starting a company is a risky business. In the early stages, there is a significant chance of failure. One in five small businesses do not last beyond their first year. Thirty per cent of small business fail in their second year, 50% fail after five years, and 70% fail in their tenth year in operation.
Why is this? Is this number of businesses shutting up shop inevitable? When a serious problem arises is when many small businesses 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 a result, small businesses often turn to professional services and consultants which has led to a thriving consultancy market. For example, the UK, SMEs spend a total of £60 billion a year on professional services.
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.
In addition, consultancy firms often dispatch junior team members, using senior resources to manage and control them. As such, SMEs pay top-dollar fees and receive junior expertise
Hence, 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? Here, Marieta Bencheva from Consulthon explains when small businesses need specialist advice and who they should turn to.
Ask your staff
One of the quickest, economic and effective sources of advice might be your own staff. Over their careers, people will often have held different roles in variously sized businesses in different sectors. Just because you hired them as a sales director doesn’t mean they won’t know how to fix an IT issue, 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 know your business from the inside-out, so there’s no need to bring them up-to-speed. With no additional cost, it’s 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 challenge them.
Ask your connections
Everyone has a network: School or university classmates, friends and family, as well as business contacts you’ve connected with over the years. Any of them may have a solution to your challenge.
Go through your LinkedIn connections and send a few messages. The professional focus of LinkedIn makes it ideal for reaching out about business challenges.
Pros: You know these people and can view their skills and experience. People are much more willing to help out someone they know, making it potentially much cheaper than a consulting firm. They may also know someone within their own network who can help.
Cons: Relying on people you know to do you 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. As such, they are pretty unreliable for quick solutions to immediate problems, causing more uncertainty than they solve.
Try an expert network
If you’ve exhausted your personal networks, you could 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 connecting you. 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 simply have to trust the network company to connect you to the right person.
Engage a consultant
With the declining popularity of expert networks and recognising the need for quick, cost-effective consultancy, a number of disruptive services have now become available. For example, these disrupters might allow businesses to post their challenge to a network of experienced consultants for free to get a brief solution overview. In this situation, the business owner can then discuss or try out the suggestion without committing to anything, or follow up with the consultant for more depth.
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.
Such a network is likely to have expert consultants from a variety of fields which can be helpful if you have 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.
As a small business owner, you want access to good advice at the right price, when you need it. With this in place, you’ll be able to overcome any challenge that comes your way, without accruing huge overheads.