Do You Need a Startup Consultant?

Experience is what you get when you didn’t get what you wanted.

So you’ve made up your mind at last. You gathered up your courage — and you will give it a shot. This brilliant idea just can’t wait any longer. If you miss it this time, the next time might never happen. You are finally ready to disrupt the market with a new startup.

But as you begin researching the market and putting together the strategic blueprints — it starts to feel like this is an entirely new field for you. And deeper you dig, more question marks are popping out. How much will this cost? Where to find the right people for my team? Do I need a co-founder? Shall I charge a premium price or go for a low-end leadership? How do I acquire my first customers? Is it a workable idea altogether?

The answers Google gives you are rather ambiguous and when you talk to your friends — they either praise your idea or try to persuade you to abandon it. Being a new business owner is hard work, you probably do not have much experience (unless you’ve successfully sold your previous startup).

A startup is usually a small business that has been created recently, might still be searching for its product-market fit, works in constant uncertainty, and has quite a limited number of resources at its disposal. Taking into account these challenging circumstances and the startup’s need for growth, having unbiased feedback or advice would be a must. And that’s what startup consulting is there for.

Startup is usually a business that works in constant uncertainty and has very limited resources at its disposal.

Hiring a skillful business startup consultant to look at your business plan and provide some business guidance might save you a lot of time and be one of the best solutions if you are about to decide your startup has reached a stalemate.

Startup consulting services: what to expect?

That is the first time you think about hiring someone professional. Someone who has both the expertise in management consulting and experience to advise you what to do or at least to point you in the right direction. But here comes another question: are startup consulting firms worth the extra money? Are they able to generate the value that will make a difference for my super-early-stage business?

The short answer is they are. But not every IT business consultant is of the same efficiency as a startup. And there is a limit on what they can do for you.

A startup differs from an established business not only by the year of foundation. The two most important distinctions are:

a startup operates in a much higher uncertainty;
a startup’s resources are much more limited.

This is why most of the high-end expertise of the likes of McKinsey, BCG, Deloitte, and co. will be irrelevant. Most likely you’re also not able to afford them — so let’s move on.

The other type of people you must avoid at any price is “the theorists”. Precisely for the two above peculiarities of a startup, only practical experience counts here. Massive startup movement is a recent phenomenon (see this article) — and specialized startup consultancies are even more recent. The embryonic industry has so far produced neither robust quality standards nor enough competition to filter-out the incompetent. This is why you have to be very careful. And this is what God (and Reid Hoffman) created LinkedIn for. Search for the profiles of the consultancy partners and if there is no record of an own startup (or at least of working on an executive position in an early-stage company) — no Oxford MBA should stop you from trashing them.

How to Find a Perfect Startup Business Consultant?

Surprisingly, but an ideal startup consultant would be a startup founder who once failed. Sounds quite paradoxical, right? How someone who did not succeed in their own venture can produce valid pieces of advice for another startup? It turns out they can!

The thing is that most startups fail, no matter how great the idea can be. By no means I want to discourage you, but according to Paul Graham of YCombinator, almost every single startup is doomed (and that “almost” is as much as 0,4%. Alas!..). Businesses fail due to lack of experience and poor market research and customer research, ideas fail because of wrong implementation and harsh competition, and companies fail due to lack of funding.

The reasons can be various: insufficient resources, they couldn’t hire the right team, the market turned out to be non-existent, etc. 65% of startups fail because of conflicts between the co-founders and another 23% fail because of the wrong team, so it is important to know that the failure isn’t necessarily the founder’s fault. Based on this research, conducted in the 90s by Stockholm School of Economics, University of New York, and Universidade Nova de Lisboa, a maximum of 22% of the company’s performance depends on the decisions of CEO=Founder. It is worth mentioning that the object of the research was huge Fortune 500 corporations. In the world of startups, the correlation is many times smaller.

All of the above is actually good news. Failure is normal in the world of startups. It means that there exists a large (and growing) segment of past founders who are not necessary some dumb incompetent wishy-washy losers, but rather normal guys, smart and ambitious — just like you. The only difference is that they may have less money and much more experience.

An ideal startup consultant is a failed past founder. There’s a large segment of competent and ambitious past founders who may have less money and much more experience than you.

Some of them are already trying to monetize that experience by starting a consultancy (marketing strategy consultancy, sales, or business management consultancy) or working as freelancers. Others are just wandering around looking for opportunities. This gives you some flexibility: having a bit of spare money allows you to hire the former, while the latter may be lured into becoming your mentor for a small chunk of equity. Yet keep in mind that since you’re in fact offering a percent of zero, the second way may be harder than it seems. Success largely depends here on your personal communication skills, as the prospect mentor literally has to believe in you and in your idea (yes, exactly in this order).

Here are three simple steps that will help you pick the right people. LinkedIn profiles, though a useful basic reference, seldom provide a full picture. Some founders even consider that the unsuccessful projects are not worth recording at all. That’s why the key source of information for you is a personal meeting or at least a Skype call. Believe me: it is well worth the time.

1. Look for the external evidence of their expertise. Any startup consultant must have the following qualities:

they make sense to you;
they tell you something new;
they are relevant to what you care about;
they have some years of experience, a track record in a startup environment;

YouTube videos, Quora threads, and conference gigs are good strong points as well.

Some startup consultants have written a blog or already managed to publish a book (or two). While being a cool fact by itself, this doesn’t necessarily mean that you have to give the authors any priority over those who haven’t produced a heavy paper brick yet. To publish a book became fairly easy in our days — so before sending them a contract, persuade yourself to read the first chapter or the summary.

Also, it turns out, for some reason, that publishing a book often promotes the author in their own eyes from a conventional consultant to a guru — with obvious (multifold) implications on the rates.

2. Ask them about their startup. What problem was it solving and for whom? How far did they make it? (The rule of thumb here is simply “the farther — the better”). How many active users did they have? Did they raise the seed round? How about Series A? The most important: what do they think stopped it from being an ultimate success? You are looking for honest, clear, and coherent answers, which will give you an impression that they learned from their own mistakes and can prevent you from repeating them.

Ask them about their work methodology — how they managed people, budgets, how they spoke with investors, how they treated co-founders. You want them, again, to make sense, to sell your achievements, not actions.

3. Tell them about your startup. A good consultant will firstly ask you a few questions to clarify the overall picture — and then he or she will tell you something new about your business. They need to give you a glimpse of the riches of their expertise at the very beginning. True experts are never afraid of doing this. However, don’t try to extract too much free advice. At the end of the day, this sales process is mutual — and you need to be a good client yourself to be able to hire a good consultant.

4. Try to find someone who is not living off a business of startup consulting services. They may not even call themselves startup consultants. They might not even be offering to consult anyone. Just try to find someone who has a certain entrepreneurship experience, a good reputation on the market achieved through hard work, someone who is a successful or a growing business owner. Ask them to be your mentor, your IT consultant, your marketing or sales or growth consultant. Offer them a reward — a payment or return a favor in a different way. Some people may have not enough time to do this as a full-time job, but they may charge you for an hour of talking, and that hour might be more valuable than 10 hours of a self-pitching startup consultant.

So you finally did it. You’ve done your homework, conducted a dozen of interviews — and at the end of the day, you signed a contract with the world’s best startup consultancy (from the price/quality perspective, of course). Now, what’s next?

As consultants become part of your startup, the first thing you need to know is when you can count on them, and when you’re on your own.

This is precisely the topic of my next article 😉

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