Top 5 Reasons Business Consulting Engagements Fail

Top 5 Reasons Business Consulting Engagements Fail

Many small business owners (and small business consultants) don’t get what they want out of business consulting engagements. To help you avoid that, we put together a list of the top 5 reasons business consulting engagements fail, and tips to help you investigate your options and make wise choices for your business and consulting options.

  1. Dependency Trap – increase your skill at running your company versus letting the consultant take the ball and run with it
  2. Expensive Experiment – some consulting firms are unclear about their impact to the bottom line.
  3. Smoke and Mirrors – watch out for fuzzy answers, vague outcomes, and hazy systems and timeframes
  4. Empty Suit – make sure your consulting firm does it all: teaches, listens, advises, focuses, motivates, and gets things done efficiently
  5. Eternal Leach – you want a clear beginning and end to the consulting engagement
Stay out of the dependency trap. There are different types of business consultants, some focus on projects and task-doing, some focus on overall strategy. Make sure your business consultant is in line with what you are looking for. The best fit is a consultant to help and steers but doesn’t carry the business.

Increase your skill at running your company. Get a business consultant to work with you, teaching you what you need to know, helping you implement your plans and build a business that works for you.

Many consultants promise that they will take care of things, if you will just let them take the ball and run with it. Some pull out the laptop and start running spreadsheets or toss around forms, and you have no idea what they’re doing or how they do it. If the consultant does everything for you, how will you and your company learn to function at a higher level, implementing your vision of what the future should be?

Seek out consultants who know how to convey what they do, so that you and your people can take over and function at a higher level without them. They help you, but don’t carry you. Hire business consultants who foster independence. Look for teachers who find out what you know, and build on it. Get multiple references that say that when the consultant leaves, the results stay with you.

Avoid an expensive experiment. Make sure you understand the ROI of working with a business consultant.

You want specifics about what will be accomplished, and what the endpoint is worth to your company. Whatever you do, expect to increase sales and improve efficiency, both of which give you more profit.
Some consulting firms are unclear about their impact to sales and the bottom line. Some talk a good conceptual game, but lack meat in terms of how they deliver a return for their clients. Others tie up cash flow with big payments early in the game. Some use your money to pay for travel costs – which does nothing for you.

Talk to other business owners who’ve worked with the consulting firm you’re interviewing. Ask about the length of engagement and total fees. Find out about the kind of gross and net profit results they got. Look for evidence the consultants have improved ratios and sale-ability of their clients’ businesses. Calculate your specific costs and likely payoff before you hire. In our diagnostic process with potential new clients, we include a payoff analysis and financial review before we take on any new client. Understanding if a client will see a real return on investment in crucial to the success of our clients and our consulting practice.

Beware the smoke and mirrors. Talk with the business consultant about how they keep clients on track, and what systems they use for documentation.

You want to get moving, cut through to what’s important, and get bottom-line results. You want a system that works every time. You want clear, understandable, legal deliverables. You want your company to be stronger, by taking it through a development routine.  Watch out for fuzzy answers, vague outcomes, hazy systems or timeframes. Beware of superficial tax or legal maneuvers. Steer clear of lengthy reports full of jargon. Watch out for boilerplate solutions that worked for someone else but may or may not work for your company. Ask how the firm keeps its clients on track.

Look for 4 things: diagnostic tools to assess the fit upfront, a system that works, a way to customize their system to your environment and needs, and user-friendly documentation written in words you understand. Ask for examples of how they use the systems and documentation to ensure their clients stay on track and achieve the results that were promised.

Steer clear of the empty suit – a business consultant who talks a good game, but fails to deliver.

You want to be sure your consulting firm does it all: teaches, listens, advises, focuses, motivates, and gets things done efficiently. You want both strategy and tactics – a balance of big picture and specific steps you have to go through to get there.   Beware of firms that lack the depth of education, experience, and tools. Watch out for consulting firms that make big, unrealistic promises, or who say you need to change but can’t fill in details on how, specifically, that’s going to happen. Steer clear of business consultants who miss the point, haven’t already done something similar to what you need, or who approach each engagement as unique and can’t draw parallels to other successes. Also, watch out for consultants who pitch their company as the only authority you’ll ever need; no one has all the answers.

Check into the consultants’ education and work experience. Find out if your business consultants are skilled and experienced at working on your type of needs, and if they can balance strategy and tactics. Then find out if they can get across what they know, so their students perform better. Get the support that helps you work ON the business instead of working IN the business. Look for consultants who can teach you to fish and coach you to progress.

Keep away from the eternal leach. Sometimes its hard to say goodbye, the business consultant should demonstrate that they’re willing to walk away.

You want a beginning and an end to the consulting engagement. You want consultants who are even more critical than you are at assessing whether you should work together, or not. If you do work together, you want a cap on expenses and an easy way out without penalty fees.  Watch out for consultants who demand lengthy contracts and penalties. Beware of business consulting engagements that tend to expand, rather than wind down. Think twice about business consultants who run the billing clock, or who don’t cap their fees. Contracts, open-ended billing and penalty clauses burn through cash, limit your options, and lock you in for the consultant’s benefit, not yours.

Look for consultants who rely on results, not contracts, to keep and grow their client relationships. Expect the consultant to demonstrate that they’re willing to walk away unless they know they have a great fit. Find out if your prospective consultant caps their fees and spreads out payments, in order to have some skin in the game with you. Ask how they know that an engagement has reached its endpoint, and how they exit.

Looking for another good read? Try this article from Entrepreneur Magazine: When to Hire a Consultant