Be Selective When Picking a Turnaround or Restructuring Consultant
Turnaround consultants are experts at helping you quickly change processes in your company to increase profits, decrease costs and improve cash flow. Businesses use their services when something in their business is significantly out of balance. Many business owners who hire turn-around consultants don’t even know what part of their business needs help and many of them can’t prioritize what needs to be done first.
A good turnaround consultant can typically assess and help implement 15 – 20 ways to immediately make a positive difference in your company. Within a few months though, many turn-around consultants have made all the difference they are likely to make. Those that know it is time to decrease the engagement or even better, fire themselves.
Using a turn-around consultant can be very expensive. Good ones can charge upwards of $250 per hour and they spend a lot of time on site during the beginning phase of the process. A good turn-around consultant can more than make up for his cost in increased efficiencies, increased profits and better business practices.
If your business is thinking about using a turnaround consultant, here are some suggestions on keeping the benefits of using them high while keeping the costs affordable.
If possible, pick a consultant that has substantial experience in your industry or closely related industries.
The Turnaround Management Association (TMA) is the main trade organization for consultants. Their website gives good information about its members. Most really effective turn-around consultants are members of the TMA. You can search for them in their database. You can search for consultants by geography or by vertical market.
Before you call your first prospective consultant, try to determine the most critical issues you need help with. If it is loan restructuring, find a consultant who can provide references you check that has had substantial success working to help companies restructure debt. If you are a manufacturer who determines you need process engineering help, find one who has that kind of experience.
Once a consulting engagement is started, have a weekly meeting with the consultant. Don’t give them a “blank check.” Make sure the benefit you are getting from their work is what you expect.
When you have hired a consultant it is presumed that you will follow most if not all of their advice and guidance. If you don’t you will be wasting your time. Hire someone you can trust to give you good advice.
Lastly, as improvements are being seen in the processes, you may be tempted to extend the engagement. You may think that since the consultant has made such a big difference in your company, another 40-80 hours of work will make as much difference.
In practice the law of diminishing returns affects the process. When the cost of the consultant is higher than the financial benefit they can provide you it is time to end the engagement.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
You may contact Sam directly at: sam@lesliethacker.com
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EXTRA: If you have questions for Sam regarding business financing, the credit market, and similar issues, please send an e-mail. Your questions will be recorded and Sam will answer the best ones in his podcast show.
