Do start-ups need consultants?

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A look at the conditions under which organisations should seek the services of the specialist.

What’s ailing the organisation? Consultants, like doctors, can be relied upon to make accurate diagnosis and write powerful prescriptions.
What’s ailing the organisation? Consultants, like doctors, can be relied upon to make accurate diagnosis and write powerful prescriptions.

K. Srikrishna

Consultants are people who borrow your watch and tell you what time it is and then walk off with the watch,” wrote Robert Townsend, former CEO of Avis, in his trenchant bestseller Up the Organisation. Even if there is a modicum of truth in this observation, does hiring a consultant make sense for a start-up?

Consultants, especially those who wear their own watches, have a useful role to play in specific circumstances. They, much like doctors, can make an accurate diagnosis and even write powerful prescriptions. However, swallowing the pill, diet control and follow-through have to be done by the patient; your company in this instance. If you go to the doctor (or consultant) merely to assuage your spouse (or board of directors) but don’t follow through, little real benefit will accrue.

As a start-up, even if you can afford to hire a consultant, when does it make sense to do so? Regular readers, who share my views on the need for a strong board of advisors/directors for a start-up, may wonder if a consultant is needed at all when they have such a board of advisors? Is there then, any difference between an advisor and a consultant? How do you ensure that you get the value you seek from a consultant and when do you know you are pouring good money after bad?

Specific tactical task

The best time to hire a consultant is when you have a specific tactical task — that can be easily defined and well measured — to be done. Typically, such tasks may arise in any part of your business be it sales, engineering or even administration. For instance, when you desire to expand your business internationally, you may hire a consultant in that market. Such a consultant will ideally bring the relationships required and, at times, the specific domain expertise. If structured correctly, hiring such a consultant may be the easiest to justify to yourself as they are in the direct path of revenue generation. Unlike a board member or advisor, who may be able to provide introductions, a good sales or business development consultant will execute the tactics required on the ground to achieve your objectives.

Even when your company has the skills to get a certain job done, there are times when it makes sense to hire consultants. For instance, setting up a computer network for your business or fulfilling regulatory requirements are best done with consultants so that your time is spent on the core activities of your business. Many entrepreneurs fall into the trap of feeling that hiring a consultant as a network administrator or a user interface designer is a needless expense, unlike a sales consultant who can generate revenue. My advice to such entrepreneurs is to consider themselves as consultants, with an appropriate daily/hourly billing rate, and determine where their time is best spent. Rarely does setting up a network or an excise duty process match up to the fund raising, relationship building or product development demands of your business!

Unique expertise

Many companies, as they grow, find that they need specific expertise. Some of these requirements, such as a quality manager or documentation manager, may be sourced in-house. However, they may find that they don’t have the right expertise to shortlist, interview and hire such a person. Similarly, when developing a software product for multiple platforms or documentation in other languages or filing for patents you may find that you need the advice of an expert with specific or unique expertise. These are good instances to hire a consultant. Much like when you have a specific tactical task and it makes sense to hire a consultant, these are instances when you don’t have the expertise and option to do it yourself.

Some activities such as raising capital or filing for patents will require unique expertise. And, even if these services are required repeatedly, you are likely to go the consultant route each time. For others such as product development or documentation, you may hire a consultant the first time and subsequently bring on the expertise in-house if the quantum of work justifies the additional expense of having someone on your payroll. Unlike the case of specific tactical tasks for which you may hire consultants, the decision to hire a consultant in the case of tasks requiring unique expertise is easier, even if more expensive.

Specify and measure

In my experience, that has been gained through repeated failure, the hardest part about working with consultants is not the decision to hire them, but figuring out if the engagement is working and when to terminate it, in case it is not. Common mistakes companies and, in particular, entrepreneurs make when working with consultants include the failure to specify explicitly the desired outcomes for the engagement; a clear set of metrics to measure progress; and the terms and conditions under which you would disengage.

These mistakes, while easily stated and comprehended, are not always easily avoided. This is because it takes time and thought to clearly delineate an issue or problem for a consultant to work on, as it does to specify in sufficient detail what the desired outcomes are. Entrepreneurs may feel that, “if we have to specify something in such detail, it might be easier to do it ourselves.” This is a common fallacy that many people hold. Similarly, the feeling that “we are hiring a consultant because they are the experts and therefore they should know what needs to be done” is another fallacy. Even when the outcomes and metrics are explicitly defined to mutual agreement, sometimes things don’t work out. It is very hard to terminate an engagement at that time, if you have not spelled out the terms and conditions and mutually agreed to the consequences of disengagement. It is, therefore, critical to nail these down before you engage a consultant.

Finally, as with any hiring you do, before you engage a consultant, talk to their previous clients. Ask for multiple references and, if needed, meet with them in person. If none of them are wearing watches, as Robert Townsend fears, you might want to think twice!

(The writer was founder and CEO of Impulsesoft Pvt Ltd, which grew from a bootstrapped organisation of two people to a global leader in Bluetooth wireless stereo music prior to being acquired by SiRF Technology Inc in 2006. He blogs at

(This article was published in the Business Line print edition dated December 1, 2008)
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