Three reasons why all

Three reasons why all


2020-04-07 21:53:00

Three reasons why all consultants should be investors

How to get really effective help for developing your own business

I sat on the open terrace of the San Francisco Samovar tea room, which is located in the heart of Yerba Buena. It was mid-summer, but 55-degree temperatures and harsh coastal winds created a feeling of late autumn.

“I thought that this consultant would help establish business contacts in order to increase the number of clients, but after signing the agreement on the provision of consulting services, she did not get in touch for six months,” said a friend of mine who opened a company for the remote delivery of goods to Europe.

“I've met this before,” I said. “She invested in your company?”

“No,” my friend answered. — She said that she does not have available funds, but she wants to help.

For several weeks, my friend tried to influence the consultant, but in vain. He terminated the contract due to default, having lost six months of valuable time during which he could already develop the business.

In order to succeed, any startup needs the help of consultants, especially in the early stages when mentoring and coaching are no less, if not more, than capital.

Consultants help to form a basic knowledge base, skills and abilities, provide highly specialized information and advice on business connections and human resources. Often they play a decisive role in deciding whether to close key trading operations, maintaining important employees, or conducting advertising campaigns to change direction.

Nevertheless, very often entrepreneurs complain about consultants because they do not show interest, provide assistance very slowly or do not get in touch. Of course, I experienced it in my own skin. In almost all cases, when I frankly told consultants that they did not fulfill obligations, I heard an apology in response, but their behavior did not change.

The problem is inconsistency incentives. Although all consultants worry about the companies they are involved in, the question is how much? Usually they occupy regular positions in other places where there are certain obligations, the implementation of which takes time, which limits the ability to provide advice.

If we compare the contribution of consultants with the dedication of the founders and the management team, we will see a striking difference. Some important element is missing in this equation.

The easiest way to go is to give all consultants the right to invest in a company. Even if we are talking about a small amount, this will help ensure the timely implementation of important KPI indicators, slightly increase the volume of investments and human potential, and even weed out consultants who want only to obtain corporate rights, and not contribute to the success of the company.

1. Investments mean compliance with KPI

After graduating from the business accelerator program several years ago, I was shocked that in my friend’s company, only five employees were searching for corporate clients using basic software such as Salesforce and Nvidia. How did he do it? He convinced every consultant to invest in a business.

— Not all consultants can invest $25,000 or $50,000, so we lowered the bar.

Even the $3,000 investment dramatically changed our results, ” said the founder. — They feel like real partners in the company and have an incentive to help achieve KPI.

For a startup, achieving key performance indicators is an important step towards increasing investment and making a profit. The whole team is working on achieving CPI. The company strategically develops these steps to achieve a specific goal or level of effectiveness. Startups are often limited in resources, so entrepreneurs turn to consultants for help in order to achieve KPI.

But there is one important nuance: if the company cannot achieve KPI, this can turn into a collapse. The consultants will calmly return to their regular work or go to advise others.

To level the playing field, ask all consultants to invest at least the minimum amount in the company. If the consultant cannot make a minimum investment, ask how much he can invest and let him invest this amount. Although this may sound trivial, one should not underestimate the psychological value of raising capital for a consultant.

2. An investor attracts an investor, and an employee attracts an employee

One of the most important aspects of raising capital is that investors like to join other investors who have already invested in the company. For them, this not only minimizes business risks, but also creates a common value and makes it possible to collaborate with like-minded people. If your consultants invest in a company, they become a valuable network of recommendations for other potential investors, as they not only advise, but also invest. The message that the investment conveys, regardless of size, is very effective.

This theory also works for new employees. When deciding whether to hire a company, often for key employees such as sales managers, developers, designers, product managers, and partners, the opinions of those they trust are important. The fact of investing is not only a consultant’s obligations, but also a message through which a sense of confidence is transmitted to potential employees.

3. Screening consultants who only want to attend.

If consultants also invest, it is easier for the founders to filter out those that are of little value or even reduce the value, since they bring little benefit. There are businessmen or specialists who want to join the so-called hot companies, but in the long run they bring minimal value. Despite this, they continue to participate in equity, taking the place of those who could bring more value. By tying the participation of consultants to investments, smart entrepreneurs weed out candidates looking for a buffer for writing to resumes and leave those who truly believe in their company.

For any business at an early stage, consultation and coaching are just as important as capital. Consultants provide knowledge, advice and business contacts that can support a young company or, conversely, harm it. Such advisers may also not work at full strength for a long time due to insufficient incentives. The best way to solve this problem is to make all consultants investors. This will ensure increased investment and improved human resources, and will also help achieve KPIs. At the same time, you can weed out consultants who do not believe in your company.


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