My family enjoys watching the TV show Shark Tank for many reasons: interesting products, it's a great business class, helps us refine our own sales pitch, and (of course) there is at least one train wreck each episode. But what about for you? Is a consultant or an investor the right move for your business?
Investors can bring an immediate injection of cash liquidity, which can help propel your business to grow when opportunity is present. They recognize the potential upside of your business, and thus a powerful opportunity to expand their money, and choose to buy in at today’s valuation hoping to cash out later at an increased valuation. (This can lead to pressure, though, for decisions to be driven by growths in revenue and profitability, so make sure you align on more than just money!) As a result, investors are active participants because they have the proverbial “skin in the game”. (Otherwise, if all they contribute is liquidity, why not go to the bank for a line of credit?)
Taking on a strong personality who exerts strength and asks tough questions might sharpen your your decisions and bring reinforcement to your leadership. Also, typically investors are selected because they bring a unique perspective, experience, or talent to your team which you otherwise did not have. Finally, there are times to sell the business, many of which revolve around personal circumstances – family, health, the painful ones like death or divorce, or simply the wearying of your passion for the business – and having an investor already onboard can help. (Review your company’s Strategic Plan to see what exits may potentially present themselves.)
Consultants are another type of business influencer. Consultants let you keep all your equity, meaning if you grow as a profitable business and eventually sell the gains are all yours; they instead get involved on a fee-based structure, usually scaling with their hours. Consultants are contracted, meaning like you can grow the relationship it can also end easily, parting ways upon much simpler, pre-agreed terms; investors, instead, would demand to be bought out. Top consultants, like investors, still invest great time in companies, and the best ones feel personally invested in your success.
If you struggle with the idea of having an investor asking tough questions about every decision – perhaps because you gravitated to entrepreneurship to make your own autonomous decisions – then having a consultant who gives advice but still lets you choose may have more appeal. Consultants can easily demonstrate the ROI on their services in your growth, quality, and profitability, and typically do a good job maintaining the data to do so (knowing their contract could be ended if not). Finally, if you look at your Clifton StrengthsFinders Assessment (or another similar rubric) and only find a few of the consultant-related Strengths – Maximizer, Analytical, Context, Futuristic, Ideation, Input, Intellection, Learner, Strategic – then you might consider using a consultant to help move your company forward. (If you don’t have a Strategic Plan yet for your company, that might indicate your need for a consultant!)
In either case, what will your employees think about outside help? You might be surprised! No one can be expected to know everything about business, so many teams are open to the insights and wisdom as long as it’s a cultural and value fit. Bringing in outside experience often highlights difficulties you may be blind to; if you take their advice, eliminate obstacles, and grow your company substantially, when looking back you should feel proud of the decision you made.