Business
Startup Consulting: A Comprehensive Guide
Establishing a business is only half the battle — ensuring it will last is another. To win this fight, bringing in an outside perspective who can identify the weaknesses in your business strategy and provide solutions is a must-have. This is where startup consultants come in.
As a testament to this, Eric Ries — a startup consultant who worked with popular brands such as Intuit and Toyota — helped catapult companies into the household names we know today. And by hiring the right startup consultant, your brand can be a powerhouse too.
In this article, we’ll discuss what startup consulting is, its advantages and disadvantages, and where you can find the best business consultants.
What is Startup Consulting?
The success of your business is predicated on your ability to sustain your momentum and certify long-term growth. Scaling ensures sustainable growth and, when done correctly, it can provide the following benefits for your business:
- Increased operational efficiency
- Innovation
- New customers
However, scaling is a tall order, especially for newcomers and startups. One small mistake could spell disaster for your business. That’s why having a mentor with experience and expertise in proper scaling is invaluable for your business.
Startup consultants are a third-party entity that helps your new business grow by analyzing key statistics of your business, assisting in financial decisions, creating a business strategy, mentoring, and more.
What Startup Consulting Brings to the Table
Starting a business is different from growing it — sustaining growth comes with many tasks that startup consultants can help you with. Think of them as a swiss-army knife, someone who can come in and perform the following tasks for you:
Market Research and Creating A Winning Strategy
The key to surviving in business is to create a lifelong need for your product or service. To accomplish that, you’ll need effective market research to understand your demographics.
According to the US Small Business Administration, these are the six variables you must know to understand who your audience is:
- Demand
- Economic Indicators
- Location
- Market Saturation
- Market Size
- Pricing
Startup consultants know how to get these data with haste and analyze them. From there, they can give you the following inferences:
- Indirect or secondary competitors
- Market share
- Potential market penetration barriers
- Strengths and weaknesses
- The target market of your competitors
- Window of opportunity
With this information, you can increase your visibility in the market and create a well-informed business strategy. Since startup consultants are objective, they can quickly identify what you’re doing wrong and improve on them.
Consultants can amplify your market impact by shifting or improving your strategy on:
- Internal Cash Flow: Create a sustainable budget for your business that ensures maximum revenue
- Opportunity Management: Identify internal and external growth potentials for sustainability
- Outlook and Vision: Manage your expectations and set realistic goals for the immediate and long-term future
- Production: Increasing the efficiency of your business
Financial Management
According to CB Insights, over 38% of failed businesses say that the primary reason for their closure is running out of cash or failing to secure funding. With experienced consultants, you can easily avoid this pitfall and learn how to manage your budget well.
To illustrate the importance of experience in financial management, Zippia reports that startups whose owners already have a successful business have a 30% chance of being profitable. Meanwhile, first-time owners only have 18%.
Startup consultants bring the experience of working with countless owners in the past. With this knowledge, you can create a better financial strategy together and avoid the common mistakes which have plagued previous startups like:
- Establishing bad partnerships
- Ineffective and costly marketing
- Pushing growth too fast
- Unsustainable burn rate
Streamlining Strategic Communication
In a study conducted and validated by the Journal of Communication Management, it was found that there are significant flaws in startups’ internal and external communications. This includes the following:
- Branding
- Financial allocation
- Owner centricity
- Stakeholder relationships
Better communication results in a 25% increase in workplace productivity and a 96% brand loyalty, which, in turn, results in more revenue. Startup consultants can provide the proper channels to reach more investors and establish a compelling narrative to attract them.
Moreover, better internal communication can streamline the tasks of your team members. Knowing how to communicate with your team is one thing, but listening to and implementing their suggestions are another. Consultants can assist you in developing communication ethics and etiquette within your startup.
Managing Owner Hubris
Startup consultants provide not only insight into the business itself but also the psyche of the business owner.
Like it or not, ego is prevalent in entrepreneurs, and, for the most part, that’s a good thing. A recent study reports that self-confidence results in a 6% mean increase in business revenue. However, self-confidence becomes too much at a certain point and becomes hubris.
According to Entrepreneur, these are the key problems with entrepreneurs with over-confidence:
- Not listening
- Prioritizing status over service
- Refusing to accept mistakes
- Taking credit for others’ work
- Underestimating challenges
A different study considers unfounded visionary power and recklessness due to perceived invulnerability to be the main symptoms of hubris in business owners.
The ideal startup consultant has worked with many business owners before. This ensures that you, as an entrepreneur, won’t veer into the mistake of overconfidence, and — in case you do — they know how to call you out on it and bring you back into leading your startup by example.
Third-Party Perspective and Services
When issues arise within your startup, your perspective may sometimes be clouded by a bias that handicaps your decision-making. Remember that “if there’s a fire you’re trying to douse, you can’t put it out from inside the house.” Dealing with internal issues sometimes requires third-party opinions to solve.
Coaching and mentoring by someone experienced and unbiased are indispensable in startups. Beyond solving internal issues, hiring a well-connected startup consultant means you also have access to relevant people that can help popularize your brand.
Most consultants also know which tools can best help propel your startup’s popularity. From productivity tools like ClickUp or Notion to automation tools like HubSpot or Zapier — consultants know it all.
The Disadvantage of Startup Consulting
It’s not all rainbows and butterflies when you hire a consultant. There’s a lot of apprehension regarding startup consultants, and most of it comes from their cost.
According to Thimble, the average fee of management consultants is between $100 to $350 per hour. This isn’t a chump change, especially for startups with limited funding. There’s a lot of uncertainty that comes with that money, including:
- Capacity of the consultant to deliver results
- Potential vision mismatch between the business owner and the consultant
- Unguaranteed ROI
Moreover, some executives are starting to pivot towards using technology instead of people. For instance, Fuel Cycle’s chief strategic officer Rick Kelly says consultants are unnecessary in market research and that the whole process can be automated instead.
HubSpot says that a possible solution for this is charging based on ROI. However, this requires a lot of trust and access, so your consultant gets a fair wage.
Where To Find The Best Startup Consultants
Once you’re convinced your startup needs a consultant, the next step is knowing where and how to hire one.
It’s always better to hire from established companies. This ensures that the consultant you hire is well-connected and vetted intensely. They cost more than average, but well-known startup consulting companies guarantee ROI. Here are some companies for you to consider:
You also have the option to hire from freelancing websites like Upwork or Fiverr. They’re generally more budget-friendly but also have a lot of variability. The following are some reasons why hiring from established consulting businesses is better than freelancers:
- Lack of Accountability: Freelancing websites have little oversight over what their freelancers do. If your consultant delivers subpar results, you can do little to nothing.
- Lack of Contractual Confidentiality: Startups often deal with confidential information, which includes contracts, patents, financial statements, and business strategies. Without a contract, your freelancer may leak this to your competitors for better pay.
- Lack of Expertise: It’s difficult to assess the skill level of a freelancer, which means you could end up paying for someone with limited experience. This could stunt the growth of your startup and jeopardize its future.
If you really want a freelancer to consult for your startup, vet them diligently. Only hire someone with tons of experience, and make sure to read through their customer feedback and conduct an interview.
Startup Consulting: An Overview
Despite its cost, startup consultants are a worthwhile expense for new businesses. They’re an all-in-one package that can help in your startup’s management, finances, marketing, communication, and investor outreach.
However, the best thing you can get out of a startup consultant is their experience. They’ve worked with businesses that failed, survived, or thrived. They know the ins and outs of startups and what makes or breaks one.
With this experience in your back pocket, your startup can grow from a small office into an enterprise. This is what makes consultants a good investment.
