Is hiring a consultant a good idea for startups and what makes a consultant the right one? The bottomline is that startup consultants can be surprisingly useful, but you have to pick only those who launched their own startup (or two) in the past.
Here I will do my best to explain how to squeeze as much value as possible out of that bearded guy (or that lady with strange glasses) you’ve just signed a consulting services contract with.
The key is to understand what past-founders-turned-consultants are really good at and what is rather beyond their limits.
In the previous post I have shown where consultants can be useful and what they can do. Today we are going to continue with the second part of the story: what they can’t.
No, they can’t…
1) Know your company better than you
I don’t know how is it for you, but I really enjoy delegating tasks. When I hire someone new – and see that she (or more seldom he) is good – I try to transfer on their shoulders as much stuff as possible. Usually, this strategy pays for itself if you’re an overwhelmed startup CEO, but several times it resulted in serious problems for me and my company. This isn’t only because you lose control over what you have delegated, but also because some things just can’t be delegated at all.
An experienced guy, who went through fire and water with his own startup, may know just anything regarding your company business development better than you, right? It turns out they don’t.
2) Take your risks
Something will go wrong – sooner or later. This is perhaps the only thing guaranteed if you’re running a startup. Immediate natural human reaction in situations like this is to look around for somebody to put the blame on. Oh, there is this stupid bastard I have just hired for a pretty penny! He has been feeding me with bullshit. At the end of the day hadn’t he driven his own business to the ground? How could I be so foolish?!
Please don’t do that. You are the only father of every child of your enterprise – be it a success or a failure. You are the final decision-maker and it does not matter whether your wrong decision has been based on your own reasoning or on external advice. The sooner you admit this and start acting in a constructive way, the bigger is the chance for you to overcome this crisis and get out of it stronger.
Consultants normally share the interest in your overall success: this means they will make more money and eventually be able to add a nice line to their CV. Thus, their advice is usually the best they can produce out of their knowledge. Actually, it is extremely likely that they will notice the problem earlier than you do (see paragraph 1). Don’t excuse yourself from action by accusing them in all deadly sins. Do the opposite: sit down with your consultant and brainstorm over the best ways out of the crap. Feeling that their advice may have put you into trouble will make a good consultant work thrice as efficiently.
3) Recruit your co-founder and permanent team
In his best-selling book titled “Winning”, Jack Welch tells that during his 20-year-long tenure at the position of CEO of General Electric most of his time has been spent on talking to people: negotiating, hiring, firing and solving their problems.
Your company is nothing else but a group of people – and its future depends entirely on who those people are and what drives them. That is why third most often reason of startup failure is not having the right team. And that’s exactly why the HR is something you cannot delegate under any circumstances. First 3-5 employees are a matter of life or death for your company.
From my own experience I learned that I’m extremely useless at picking the right people. Some of my fellow entrepreneurs possess this talent: a short conversation, a deep look into your eyes – and they can say what’s inside you: crap or diamonds. I, in turn, keep making mistakes here again and again and again.
Yet I know that I still cannot delegate this work. My strategy is a trial period – a very long one, which starts way before the actual job offer. For example between the moment I first met my co-founder at YouTeam and the moment I offered him half of the business more than a year passed – and during this period we had at least 10 meetings in 4 different countries and over 30 Skype and phone calls.
You may well leverage your consultants’ network (see paragraphs 4 and 5 above), but from the moment they put you in contact with that candidate – you’re on your own.
By the way, during Jack Welch service as a CEO, General Electric value increased 4o-fold.
4) Own the product vision
I haven’t seen a single movie filmed by several directors which wasn’t crap. The Matrix by the Wachowskis is a classic exception that confirms the rule. Those who had seen parts 2 and 3, as well as Jupiter Ascending, will agree. A bunch of great innovative ideas may be born in a collective brainstorm, but there must be one person who decides what to stick to the board and what goes to the trash bin. Likewise, you can distillate lots of ideas from the customer feedback, but the customers only know their need (though often they don’t), they have no idea about the market, technology and other customers.
You are the one who started this, you must be the person in the team who possesses the deepest understanding of the market and concentrates all the information coming from the environment. Startup consultants may be good at generic stuff – but what they have been building is different from your project. The truth is that they can only cut – and may be good at it. Adding remains your exclusive prerogative.
5) Manage your business for you
In his totally fantastic book, which is a must-read for all aspiring entrepreneurs, founder of CD Baby Derek Sivers tells a dramatic story of success and failure of his startup – one of the first music stores online. The final chapter of the book explains his decision to sell the company well below its peak value. The reason was that after couple of years invested in building the business he thought that he can finally start giving himself some breaks and spend more and more time for other pleasant occupations – like composing music or travelling. This was achieved by delegating more and more executive tasks to the management he hired.
One year later, Derek suddenly realised that things are going wrong. The company started to lose its market leadership, the complaints from customers grew – curiously enough, at approximately the same rate as the salary and bonuses of the executives. This wasn’t necessary because those managers Derek hired were the wrong people. Simply the motivation of even best employees will never be the same as that of the founder. In behavioural economics this is called a “principal-agent problem”. You will be surprised how many founders, including myself, fell into this trap.“Delegate but do not abdicate!” ©
Finally, if a consultant has proven himself or herself exceptionally valuable for your business – consider this your lucky chip and do everything you can to keep him or her. Give them a seat at the board, grant them equity, make them your co-founders, become their real friend. Trust me: this will pay off. Startup is a long journey – and in overwhelming number of cases the success depends on what people you meet along the way.
Make sure you have not missed the previous post with the first part of the story: what startup consultants can do for your startup.