Why The External Consultant Model Works

In 2020, data revealed that consulting was a $250 billion dollar industry. Figures were down at the time due to the pandemic, so it’s safe to assume that this number has only grown in the past year.

There’s no doubt that consultancy holds appeal for many businesses; after all, what company wouldn’t want access to the best and brightest minds in any given field?

Still, investing in an outside opinion is just that – an investment. Consultants can cost more than $100 per hour to hire, and if you’re paying by project, the bill can quickly climb into the many thousands. With that in mind, it’s important to make sure that the external consultant model truly works before making the leap.

With that in mind, let’s delve into external consulting and explore whether or not it’s the right decision for your business.

What Is External Consulting?

External consulting is the act of hiring an outside firm or individual to provide advice and guidance on a specific issue or problem. This could be anything from financial advice to marketing strategy, and everything in between. 

For instance, you might hire someone to resolve problems like:

  • Finding product-market fit. It’s not always easy to know whether you have a product that people actually want to buy. A consultant can help you determine if your product is ready for market and, if not, how to adjust it.
  • Improving efficiency. There’s always room for improvement when it comes to efficiency. From process changes to implementing new technologies, a consultant can help you find ways to work smarter, not harder.
  • Growth strategy. It can be difficult to determine the best way to grow a business. Should you enter new markets? Should you acquire other companies? A consultant can help you develop and execute a growth strategy that makes sense for your business.
  • Internal conflict. Sometimes, the biggest problem a business faces is internal conflict. This could be anything from disagreements among team members to problems with company culture. A consultant can help you identify and resolve these issues before they cause irreparable damage.

Of course, consultants aren’t always there to solve problems; they might also be hired to take advantage of opportunities. For instance, you might hire a consultant to help you:

  • Develop a new product. If you have an idea for a new product or service, but don’t know how to bring it to market, a consultant can help. They can provide guidance on everything from market research to product development to go-to-market strategies.
  • Launch a new business. Starting a business is no easy feat. From putting together a business plan to securing funding to building a team, there’s a lot that needs to be done. A consultant can help you get your new business off the ground and ensure that it has the best chance for success.
  • Enter a new market. Expanding into new markets is an exciting but risky proposition. A consultant will know how to assess the risks and opportunities associated with a new market and help you develop a plan for entering it.
  • Gain a competitive edge. In today’s hyper-competitive business landscape, it’s more important than ever to have a competitive edge. Consultants can identify your unique selling proposition and develop strategies for capitalizing on it.

Types of External Consultants

Now that we’ve answered the question “what is external consulting,” it’s time to take a look at the different types of consultants that are out there. 

Management Consultants

When your company is struggling with inefficiencies, a management consultant can be brought in to help you streamline your processes. These consultants are usually experienced in change management and have a deep understanding of how businesses operate. 

Operational Consultants

Similarly, operational consultants are experts in improving the efficiency of your company’s operations; however, they’re specifically focused on the day-to-day processes that keep your business running. These consultants can help you optimize your workflow and make sure that your team is using their time effectively. 

Financial Consultants

If your company is having financial difficulties, a financial consultant can be brought in to help you get your finances back on track. These consultants are usually experienced in financial analysis and have a deep understanding of how businesses operate. 

Strategic Consultants

Strategy lives within all businesses; it’s the long-term plan that dictates how you’ll achieve your goals. A strategic consultant can help you develop and implement a comprehensive strategy for your business. These consultants are usually experienced in change management and have a deep understanding of how businesses operate. 

Human Resource Consultants

HR consultants live and breathe people. They’re experts in understanding how your employees operate and what motivates them. These consultants can help you develop and implement comprehensive HR strategies that will improve your team’s performance; they’ll help with everything from recruitment to retention. 

IT Consultants

When your IT infrastructure is falling apart, an IT consultant can be brought in to upgrade your systems and get things back on track. They can help with computing, networking, and software development; they’ll also usually have a deep understanding of how businesses operate. 

Marketing Consultants

Marketing consultants are experts in getting your company’s name out there. They can help you develop and implement marketing campaigns that will reach your target audience and help you achieve your business goals. 

There are a few more lesser-known types of consultants, such as sales consultants, but these are the most common. 

What Are the Benefits?

Since hiring an outside consultant to help with specific projects or tasks can cost your company to the tune of $100-$300 per hour, it’s important to understand the benefits that warrant this type of arrangement.

Bringing in New Perspectives

The last thing you want is for your company to become a bubble. When all your employees come from the same general background and share similar opinions, it can lead to groupthink – a phenomenon in which people within a group reach faulty decisions because they are too afraid to speak up against the majority. 

An external consultant may be just the circuit breaker you need. By definition, they are not part of your company’s culture. They don’t have the same baggage or share the same perspectives as your in-house employees. As a result, they can provide an objective view of your company’s processes and offer outside-the-box recommendations for improvement.

Think of it almost like a psychologist or therapist for your business. It can be difficult for employees to be completely honest about what they think is wrong with the company when their livelihood depends on it. An external consultant can get to the heart of the matter without having to worry about stepping on toes or hurting feelings.

Improved Efficiency and Productivity

Oftentimes, an outside perspective is all it takes to help a company see how it can work smarter, not harder. 

Bringing in an external consultant is a sign that you’re open to change and willing to invest in making your company more efficient. This type of mentality can be contagious, leading your employees to also buy-in to the idea of finding new and improved ways of working.

In many cases, an external consultant is hired to help with a specific project or task. Once they complete their work and share their insights, they move on to other clients. This can be beneficial for your company because it allows you to take what you need and leave the rest. 

There’s no need to worry about an outside consultant trying to make long-term changes or overhaul your company’s entire way of doing things – they’re only there to help you improve upon what you already have in place.

Flexibility

Another advantage of working with an external consultant is that it provides your company with flexibility. 

You can hire a consultant for as long or as short as you need them. If you only need help with a specific project, you can bring them in for a few weeks or months and then let them go when the job is done. 

You also have the option of hiring multiple consultants to work on different projects simultaneously, which can be beneficial if you need to implement several changes quickly and don’t have the internal resources to do it all at once. 

The flexibility that comes with working with external consultants can be a lifesaver for companies that are dealing with sudden changes or challenges.

Cost-Effectiveness

While hiring an external consultant can be expensive, it’s important to consider the alternative – doing the work yourself or assigning it to your employees. 

In many cases, it’s more cost-effective to hire a consultant than to have your employees take on additional tasks outside of their normal job descriptions. This is especially true if the work requires specialized skills or knowledge that your employees don’t have. 

It’s also important to consider the opportunity cost of having your employees work on projects that are outside of their area of expertise. By assigning these tasks to an external consultant, you free up your employees to focus on what they do best, which can lead to increased efficiency and productivity.

Risk Reduction

When you hire an external consultant, you transfer the risk of the project to them. This can be beneficial for your company in several ways. 

First, it frees up your employees to focus on their normal job duties without having to worry about taking on additional projects or tasks. Second, it allows you to avoid the cost and hassle of having to train your employees on new skills or knowledge. 

Third, if the project is not successful, you can simply end the contract with the consultant and move on – there’s no need to worry about firing employees or dealing with other negative repercussions.

Improved Morale

Bringing in an external consultant can also improve morale within your company. 

Your employees will appreciate that you’re taking steps to improve the efficiency and productivity of the company, and they’ll be more likely to buy-in to the changes that are implemented as a result. In addition, by freeing up your employees to focus on their normal job duties, you’ll help them to feel less overwhelmed and stressed. 

Improved morale can lead to increased productivity, which can benefit your company in a number of ways: higher quality work, more engaged employees, and lower turnover rates.

Are There Any Downsides?

As with any business decision, there are always potential downsides to consider. Here are a few of the potential drawbacks of working with an external consultant: 

  • There’s always the possibility that the consultant will not be a good fit for your company, which can happen if their personality clashes with your company culture or if they’re not able to adequately meet your needs. 
  • External consultants can be expensive, so you need to be sure that you’re getting a good return on your investment. 
  • If you’re not careful, you could end up relying too heavily on the consultant, which can create problems if they leave or are no longer available. 
  • There’s also the potential for conflict if the consultant works with other companies in your industry. 

Overall, however, the advantages of working with an external consultant usually outweigh the potential drawbacks – as long as you’ve considered every angle and carefully selected the right consultant for your needs.

Choosing Your Consultant

Deciding which consultant to go with almost requires you to diagnose your company’s specific problems, as if they were treatable illnesses. This is the first and most important step, as you need to be clear about what exactly you want help with before you can start shopping around for a consultant. 

To clarify what exactly you need from an outside professional, ask the following questions of your internal team: 

  • What are we struggling with at the moment? What are our constraints and bottlenecks? 
  • What processes or areas need improvement? 
  • Do we have the in-house expertise to solve these problems, or do we need outside help? 
  • Are there any personality conflicts that an external consultant could help diffuse? 

Once you’ve answered these questions, you can begin to look for a consultant who has the specific skills and experience needed to address your company’s issues. But don’t stop there; it’s also important to find a consultant who you feel confident will be a good fit for your company’s culture. 

The best way to get a sense of whether or not a potential consultant will be a good match is to schedule an initial consultation (most consultants offer these for free). 

This gives you an opportunity to “interview” the consultant and get a feel for their personality and approach. It also allows the consultant to learn more about your company and get a better understanding of your specific needs. 

You’ll then need to clarify the scope of the project and agree on deliverables, timelines, and compensation. This step is important in setting expectations and ensuring that both parties are clear about what’s expected. 

Finally, it’s also important to have a plan for transitioning out of the consulting relationship once the project is complete. This will help ensure that your company doesn’t become too reliant on the consultant and that you’re able to effectively take over once they’re gone. 

Why Does the External Consultant Model Work?

As consultants ourselves, the ProsperSpark team is well versed in the immense benefits that an external consultant can bring to a company. From our perspective, the external consultant model works for several key reasons: 

  1. An external consultant is objective. They are not invested in the politics or culture of your organization, which allows them to provide unbiased recommendations and observations. 
  2. They are experts in their field with a wealth of experience that they can apply to your unique situation. 
  3. External consultants are typically hired for a specific project or time period, which means they are laser-focused on achieving the desired results. 
  4. Engaging an external consultant signals to your team that you are serious about making change and willing to invest in outside help to make it happen. 
  5. An external consultant can provide an objective “second set of eyes” to review your plans and offer suggestions for improvement. 

Of course, no solution can be cut-and-pasted to achieve success in every situation. The external consultant model is no different; it might work well for one of your goals or problems, but not so well for another. The key is to evaluate your needs and carefully select a consultant who will be the best fit to help you achieve success. 

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