The Business of Business Consultants
From small to large businesses, business consultants are hired regularly for various reasons. Business consultants may be hired to manage employee benefits, like 401Ks and healthcare, or they may be hired to simply hire other employees.
One of the biggest money makers for consulting firms is providing customized training programs and assets to improve employee productivity. Paying for speakers to come and rally up your employees is an entire industry of its own.
This is because many great businessmen and women know their respective niches and market, they know what needs to be done but they don’t always know how to sell that vision to their employees. Sometimes a fresh set of eyes from a 3rd party can pinpoint the disconnect between a CEO’s vision and whats really happening on the ground.
Businesses also hire consultants to manage finances, employee safety, advertising and promotions. Of the top ten consulting firms, most are related to the management consulting, finance and investment industries. Famous all-star firms you may have heard of:
. Ernst & Young (Accounting)
. Deloitte Consulting (Financial)
. Bain & Company (Management Consulting)
. Booz & Company (Management Consulting)
. Mercer LLC (Human Resources)
. McKinsey & Company (Management Consulting
. Boston Consulting Group (Management Consulting)
. Price Waterhouse Coopers LLP (Accounting)
. Monitor Group (Management Consulting)
. Oliver Wyman LLC (Management Consulting)
These consulting groups are comprised of partnerships, privately held or publicly owned enterprises. Booz & Company has been in business since 1914. McKinsey & Company was established in 1926. These are the two oldest of the top ten. Some of these consulting groups were part of the "Big Eight" in Accounting in the 1980s. These included Touche Ross, Price Waterhouse, Coopers Lybrand, KPMG, Arthur Young & Co, Ernst & Whinney, Haskins & Sells and Peat Marwick Mitchell.
All of these businesses were either merged or were incorporated to create some of today's top ten business consulting firms. One exception is Arthur Anderson LLP which surrendered its CPA licenses due to its involvement with the Enron scandal of 2001.
The more successful Price Waterhouse is a consortium that is comprised of related consulting firms in over 150 countries. Their services include actuarial, tax advisory, assurance, legal and financial advisory. In 2014, Price Waterhouse had a revenue worth of $34 billion.
Ok so great, there are some big firms that make a ton of money, they must be doing something right...right?
So back to the million dollar question, are they really worth it?
Business consultants perform investigatory inspections of business operations to reveal flaws and potential problems based on their business clients' requests. For example, a large business may experience a sudden downturn in employee productivity that causes loss of revenue. A business consultant may spend several weeks observing the workflow of employees to determine precisely where the problems with lack of productivity exist. In other cases, a business consultant may be called upon to provide employee training when a new cycle of business strays from the established business operation.
Most of the time they just simply look for where your “leaks” are. Where are the spots were efficiency could be improved. And out of all those spots, which are leaking the most and have the highest priority? Maybe a companies data analysis workflow could be improved with interrogations software. Simply combining tools like BI on Hadoop for big data or excel and SEO reporting for marketing could cut an employees workload in half. Maybe it could even let a business downsize and maintain productivity.
Business consultants generally calculate their fees in the same way most lawyers do: on a predetermined hourly consulting rate. However, these fees may not include "extras" like consultant travel expenses, from one client's business location to others, where multiple facilities exist. Consulting fees also do not include any additional equipment, cost of telephone or internet communications or hotel accommodations, where applicable. Meals may also be part of a business consultant's fee. To determine if business consultants are really worth the cost, the extent of the work involved should be clearly outlined in the scope of a proposal.
Review the Business Consulting Proposal
The business consultant will usually provide a written proposal that outlines their responsibilities and the work to be performed, as well as any client responsibilities to provide certain information or employee interface, in the case of training. The business consultant proposal should also determine the extent of the client's rights to keep their business information proprietary and inaccessible to competitors. This can be outlined in a proposal's "Performance Guarantee." Be sure to check the business consultant's license and also the terms of their business liability insurance. If there are gaps, the business owner who hires the consultant should resolve these issues with the consultant or their own insurance agent.
Business Consultants and Cost-Effectiveness
When it comes to management consultants for business, they can be a business owner’s greatest asset. This depends on the willingness of the business owner to take the advice offered by the business consultant. Too often, business owners hire a management consultant who presents them with their findings and then ignores the consultant's recommendations. This isn't cost-effective use of a consultant's time and advice. The general purpose of hiring a consultant is to improve or alter training, safety, financial and production to make these areas of business highly profitable.
Six Signs to Know the Worth of a Business Consultant
Ok you you have decided maybe getting a consultant may be a good idea. You don't want to just throw your money at anyone right? You want some serious ROI with this endeavor. Here are some signs to look for when scoping out a potential consultant:
. Business reputation - Find out who they have consulted for, call those companies and get the lowdown on what the effect really was.
. CPA licensing - Don't hire someone who is not licensed. Thats a no brainer.
. Types of services offered - Make sure they offer consulting in areas you need.
. Clientele - Are the business they usually help related to yours?
. Expertise of consulting staff - Are you going to get the fresh new intern promoted on your case, or the veteran with a killer track record?
. Recommendations by business associates - Word of mouth validation. Always a good thing.
At the end of the day, consultants work, they get results, hence why the industry is booming. The question you need to ask is : "Are those results going to make me more money than I paid to get them?
I would say if you do your due diligence, and hire the right consulted the answer will be a resounding YES.