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Practice Management > Building Your Business

Seeking Help: How Not to Work With A Business Consultant

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These days, with the stock market rising to record levels while advisors face margin compression and increased competition from robo-advisors and breakaway brokers, more firm owners than ever are reaching out to business consultants for help. Yet in my experience, many of those firms won’t get the help they need — or maximize the help they get — for one simple reason: Their owners aren’t ready to work with a consultant.

Over all these years working with owners of advisory firms, I can usually tell within the first two prospect meetings whether an owner-advisor is ready to take advice. If they aren’t, I know that I’ll just be wasting my time and their money. I’ve learned that building successful advisory firms requires three things: the drive to create the business you want, the humility to admit that you don’t know everything, and the confidence that you can do it. Then nothing can stop you.

Without those three traits, firm owners are prone to making mistakes that make it nearly impossible for a business consultant to help them reach their goals. Here are six of the most common roadblocks that I’ve seen owner-advisors run into.

1. Assuming they know what the problem is. “We need an organizational chart,” or “a compensation plan,” or “a succession plan,” or “new technology,” etc. If I had $10 for every time an initial client meeting started this way, I could launch my own custodial platform. There seems to be a part of the human psyche that takes great comfort from knowing the reason for our failures or shortcomings. The problem is that nine times out of 10, thinking that we know what the problem is prevents us from finding out what the real problem is.

I’m not saying that you shouldn’t have ideas about what your firm needs (heck, you’re going to have them anyway), but to get the best results from working with a business consultant, keep your ideas to yourself — at least at first. Let the consultant do her or his own evaluation of where your business is and what it needs to be more successful. Then listen to the assessment and, most importantly, the reasoning behind it. If you’re not convinced your consultant is on the right track, at that point you can reveal your theories and have a discussion about which vision makes the most sense. However, you’ll need to check your ego at the door: Good business consultants will have seen hundreds of firms like yours and, most likely, the dismal results of solutions just like yours.

2. Wanting the consultant to validate them. In my experience, this is the motivation of the majority of firm owners who are not ready to take business advice. Deep down, whether they admit it or not, they are looking for someone to say, “Wow, what a great firm. It’s hard to believe that it isn’t more successful, but I’m sure it will be if you just keep on doing what you’re doing.”

Now, come on back from Fantasy Island. Sure, it’s possible that a consultant will say that about some of the things you’re doing. But, honestly, if it were true across the board, you wouldn’t be looking for a consultant, would you?

The truth is that independent advisory firms are relatively simple small businesses, and their owners tend to face the same challenges and try the same solutions. It’s not that business consultants are any smarter than advisors are, it’s that we’ve seen these same challenges and solutions and outcomes over and over, hundreds of times. We have a pretty good idea that when you are facing X and you do Y, you’ll get Z.

The most successful firm owners set their egos aside and benefit from their consultant’s experience. No, we’re not right all of the time — some firms, with some owners, in some markets really are different — but we have a much better chance of finding a successful solution than trying one that’s consistently failed in many other cases.

3. Looking for quick fixes. Instead of thinking they know what to do, some advisors go the other way and expect too much from a consultant. Even the best consultants aren’t miracle workers (not even me). In my experience, what holds most advisory firms back is the lack of a solid foundation: inconsistent client services, outdated technology, poor financial management, erratic hiring with little or no training, arbitrary comp structure, a non-existent sales pitch and firm story, no strategic plan or succession plan, etc. None of these is an easy fix, and bringing these firms into the 21st century is going to take a while. It’s ironic that most advisors say the same things to their clients, but when it comes to their firm, they want big results tomorrow.

4. Listening to other sources. A surprising number of firm owners have a difficult time fully committing to one business consultant. Now, don’t get me wrong — I’m a big fan of using outside specialists in certain areas: recruiting, legal and compliance, technology, sales and marketing, public relations, to name a few. These are all fields in which specialized knowledge and experience yields better results at a lower cost. However, some owner-advisors start gathering additional business advice from presentations, books and websites, and sometimes go so far as to hire another consultant. In my experience, this almost never yields better advice or results.

More often than not, this failure to make a commitment to one consultant creates confusion. The owner will pick and choose conflicting advice that isn’t based on a single strategic plan, greatly reducing the chances of success for the firm as a whole. It’s far better to hire one consultant; if you’re not satisfied with the results, fire her or him and get somebody else.

5. Making bad decisions. As I’ve written before, this mistake often is a direct consequence of the success of the independent advisory business model: That is, independent firms tend to have high profit margins — as much as 50% of revenues in some firms. That means firm owners often have excess capital at their disposal. I know that doesn’t really sound like a bad problem to have, but bear with me here.

The problem with having “too much” capital is that owners have a tendency to spend it — often unwisely. For one thing, they’ll often double down on bad decisions: Rather than assessing the chances for a good outcome, they’ll simply throw more money at a project to see if it can be salvaged. On the other hand, this affluence can also lead to giving up too soon on some projects, thinking “Oh well, we gave it a shot.” You see that either way can lead to bad decision-making.

Contrast this approach with firms that have fewer resources: startups, for instance. In my experience, the owners of these firms tend to listen to advice more and to make better decisions. That’s because they usually can’t afford to waste their capital so they are more likely to make informed decisions (rather than trying this or that), and commit to making sure their decisions result in successes.

6. Refusing to learn from their mistakes. Again as I’ve written before, every advisory firm is a work in progress, which makes growing the business a learning process. Because every firm is little bit different, even consultants get it wrong sometimes. But good consultants — and firm owners — are compulsive about learning from our failures. What went wrong? What happened that we didn’t expect? What could we have done to get a better outcome? Eventually, you start to realize that nothing is a failure if what you learn from it leads to success in the future.

In contrast, there seems to be a notion among some owner-advisors that “living in the present with an eye toward the future” means to forget about the past as soon as it happens. Personally, I suspect this stems from an insecurity about being less than perfect: They don’t want to think about their failures or be reminded of them. When pressed, quite often they’ll spin a web of excuses — and blame — as to why things didn’t work out.

A good consultant will help you learn as much as possible from your successes and failures alike, increasing your chances of future success. If you can’t bring yourself to do that, no consultant in the world can help you.

— Read Overcoming Mental Mistakes That Limit Your Firm’s Success on ThinkAdvisor. 


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