Tuesday, January 10, 2017

How to choose an advisor, mentor or consultant

This article was written by my colleague, John Rodenberg, in the Tacoma SBDC. John has been an SBDC advisor for over ten years and is regional manager for the Southwest part of the state. John is my unofficial mentor; whenever we meet for our staff training, I make a point to meet with him.

This was also featured in the South Sound Business Journal, November 2016.

Consultant, Advisor, Mentor or Licensed Professional for your Small to Medium Sized Business.........Which is Right?

John Rodenberg, left
Tacoma SBDC
My answer, as a certified business advisor with the SBDC would be “You bet, you may need all these professionals and more!”  But let’s look at the question in little more detail to see what the real answer is that works for you, the small business owner or entrepreneur.

This is based on my experience as Tacoma/Peirce County certified business advisor for ten plus years, having worked with over 1300 diverse clients.  

See our website www.wsbdc.org for the Washington SBDC (Small Business Development Center) network, to access a no cost, confidential, appointment with an advisor.

What are the differences between a consultant, advisor and mentor?

You can easily define and research these four categories or sources of business advice, using a search engine, Wikipedia or dictionary; I will generalize a bit here and identify them as:

Consultant – an industry or business expert who studies or analyzes your situation, process or environment and provides an authoritative report, usually for a fee.

Advisor – a one time or ongoing engagement with a person who has  experience and skills in the business world and access to data, research and other professionals to help you generate alternatives, solve problems and manage your business.  A fee may or may not be involved.  SBDC does not charge for their advisor’s time.

Mentor - supports a no fee one-on-one relationship over an extended time to assist you with the formation, growth and management of your business.  Larger firms have “internal” mentors, but as the leader of a small business, you will need to find an “external” mentor.

Licensed Professional - engaged for a fee for a specific purpose, on a contract or retainer basis, to provide advice and guidance on legal, accounting, insurance or other issues.

This article focuses on the advisor function, but all of these are necessary tools and are equally important in their own right.  The successful small business owner will learn how/when to reach out to each as needed.

Examples of SBDC Business Advising

Business advising can cover any of the five functional areas of business:  operations, human resources, marketing, financial and legal/organization.  

As you might expect, what a business owner does in one of these areas affects the others, so it is often important to have an unbiased, or outside, set of eyes and ears to provide feedback and act as sounding board.  Also, small business owners often don’t have time or resources to do extensive research.  

The SBDC has access to many nationwide sources of data such as Fintel, RMA, Reference USA and IBIS, some of which are also available at your local library.  This structured data helps in decision making and focus.

Here are three examples that will give you an idea of how an SBDC advisor can assist you:

1. New Business Owner 
Ray is an owner/operator licensed contractor in start-up year one.  He sought marketing advice from me initially and we developed a plan with a sales goal that is tracked monthly.   I also recommended cash basis accounting in QBooks and his outside bookkeeper agreed.  In reviewing monthly P&L and AR, we noted a large 90 day receivable of $8K and collection would be very helpful.  I referred this client to three attorneys who specialize in construction disputes and collection.  Estimating, bidding and profit planning are other areas we are addressing now.

2. Employee - purchasing business
Eli had worked as VP for a medium sized supplier of technical talent to major corporations for years.  The owner wished to retire and Eli was offered the opportunity to buy the firm, which he wanted to do.  Eli looked for outside advice to help him chart a course with a three year timeline to be in position to purchase the business.  We discussed asset vs. entity purchases, I found reliable reading material on the subject, developed a business plan, discussed equity and debt mix and when time came to apply for an acquisition loan, three lenders were referred.  Eli received attractive options for six figure term loans and he selected the best one. 

3. Business partner starting new practice
Dr. S was a successful chiropractor in a two-provider practice.   She wished to be sole owner and broke off from partnership to start a practice in a new location.  Original advising started with an organized search for leased or purchased space and she successfully navigated the commercial real estate market to find a location which an SBDC research study said was “under served”.  She is doing well in gross revenue and has cut back to a partial work week, so she can act more as practice manager.

Selecting an Advisor

Write down, your key needs or “pain points”.  Then, note your timeline and budget.  Then, ask for referrals and research providers.   Interview each and ask for background and references.  Lastly, be prepared to contribute to the process (after all, you are the expert in your business).  Get down to work following the plan you develop, and evaluate progress as you go.