General Real Estate, Real Estate

How to Select and Use Management Consultants

For many entrepreneurs, consultants are less expensive than hiring staff, especially when a specific problem must be solved or a project calls for expert assistance. Choosing a consultant is a very important decision that you should make only after carefully researching and interviewing potential consultants. Many skilled consultants can provide invaluable services¡ªif you can find them. Nowhere are the options so abundant and the quality so variable. The price you pay for consulting services varies tremendously. Proceed with caution.

First, consider whether you want a generalist or a specialist. You may need several different consultants to help you. The person with expertise in finding a location for your business most likely will not have the skills you need to set up your books. Be wary of “can do all” types. Second, consider the consultants’ track records. Whom else have they worked for and what services did they render? Obtain references from other entrepreneurs so you can verify performance.

The best way to find consultants is through referrals from your banker, lawyer, accountant, and fellow entrepreneurs. The government is also a good resource and sometimes provides consultants at no charge through the Small Business Administration (SBA). Some of these consultants are paid by the government; others volunteer their services. Colleges and universities are a source for both private consultants and those working under federally funded programs. You might also look in the Yellow Pages under management consultants and shop around.

In the beginning, founders are short of cash and often try to find low-cost educational programs or government-funded management-assistance programs such as those offered by the SBA. Typically, independent consultants charge anywhere from $100 to $1,000 a day. Well-known consulting firms usually charge higher fees. Unfortunately, it is difficult to judge consultants solely on the basis of the fees they charge.

Narrow your selection process down to a few consultants and interview them in depth. Ask about their expertise and approaches. Be sure that you are comfortable and can communicate with them. Evaluate their enthusiasm and openness. Try to determine their interest level in your project. Ask for sample proposals based on your needs. Evaluate their proposals by looking for outcomes and objectives they intend to accomplish. Inquire about their fee structure. Is it hourly, daily, or a fixed fee? You want to hire a consultant who works fast but effectively.

A good book on hiring consultants is Herman Holtz’s Choosing and Using a Consultant. Ask your librarian for reference books or articles on consulting. Don’t underestimate the amount of time it will take to find a consultant who has the expertise and enthusiasm you need.