Spend money to make money, the saying goes. But sometimes you have to spend money to keep making money, or to keep out of trouble. Sometimes you have to buy an expert’s time and know-how.
Small business owners are known more for their resourcefulness and ingenuity than their big budgets, but sometimes expert advice is invaluable. “It’s important for retailers to be resourceful, but it’s more important to be smart,” says Daniel Butler, VP of merchandising and retail operations at the National Retail Federation. And sometimes being smart means recognizing that you don’t have all the answers.
Other specialty retailers, leasing agents, suppliers and industry insiders can be great sources of guidance, often free of charge. And retailers rely on their input all the time. That’s not to say that free advice isn’t useful—it is, says Baldwin Tom of The Baldwin Group, Inc. (Washington, DC) and national chairman of the Institute of Management Consultants USA. “Free information can help companies zero in on where they need the most help.” Then they can look for a specialist with a particular expertise.
But sometimes you really need an expert to advise you. Paying for a respected consultant’s advice, either by the project or by the hour, can help you make informed decisions, which in turn can help your company grow. Here are seven situations when you’d be wise to pay for expert advice.
A big purchase. Whether you’re considering buying a warehouse, purchasing a new piece of equipment or acquiring a new supplier, you’d be wise to ask for a second opinion from someone who handles that type of transaction frequently. Otherwise, says Butler, if you go it alone, “you may end up spending money on something you don’t need or on the wrong product,” especially with technology. And after you’ve made the purchase, make sure you have access to experts who can guide you in using or implementing it.
Situations involving accounting or legal issues. Unless you’re a CPA or an attorney, don’t try to bluff your way through financial or legal situations such as an IRS audit or a court hearing. A misstep at any point in the process can become extremely costly and potentially deadly for your business. Paying for expert advice up front will help you avoid mistakes or oversights that would mean additional trouble. Expert advice can save you money in the long run.
Situations involving legal compliance. Fines can be hefty if you’re out of compliance with state laws and codes. And because you’re expected to be aware of every rule and regulation governing your products and your business, especially when food is involved, says Butler, it’s worth it to know where you stand, and to outline how to get up to code if you’re not.
Improving sales. Since 75 percent of purchases are impulse buys sparked by the merchandise that’s in a store, says Kathleen Socha, president of Phase One Design Services, Inc. (Atlanta), effective visual merchandising and inventory management are critical to a cart or kiosk’s success. Paying a consultant to help improve the appearance of your selling space can dramatically improve sales and will often more than pay for the cost of the advice. Some malls provide access to visual merchandising experts.
Adding a job position. Before you commit to creating a new job or hiring a key person, it might be worth the time it takes to assess your current and future hiring needs with the help of a human-resources consultant. An HR consultant can help you define the skills your existing staff lacks for your business, and help identify the best person (or “package” of skills and experience) for the job. An HR consultant can also help you calculate at what point you can afford to make an investment in that position.
Making a big change. When you recognize the need to change in order to survive in a changing market, or to compete effectively, or to break away from the pack, bring in industry experts to guide you, says Tom. Unless you’ve engineered sweeping changes like these before, don’t attempt this without the help of professionals: a trial-and-error approach could end up weakening your competitive position or damaging your revenue stream.
Negotiating with mall management. “Consultants can help negotiate more favorably with mall management,” says George Whalin, president of Retail Management Consultants (San Marcos, CA). Mall owners exercise a good deal of control over carts, since they typically must reflect the mall’s brand and image. For that reason, an objective consultant may be able to spot opportunities for change that would benefit both you and the mall. They may also have access to information about operations at other malls that could benefit you, such as lease rates, vacancy rates and terms.
Finding good help
“You can find a lot of [information] for free on websites, such as white papers and case studies,” says Tom, as well as helpful guidance through associations and trade groups, which may have reports and statistics to share. He also advocates benchmarking companies with “stellar processes,” such as a return policy, frequent-buyer program, money-back guarantee, or just-in-time delivery. In other words, find companies that are known for their superiority in a particular aspect of doing business, and use them as role models. Then look for ways to change your processes (or create new ones) to mirror theirs.
As you study other companies, keep an eye out for any mention of consultants who have worked with them. Add those names to your list of experts you may want to hire.
Supplier organizations and trade associations in your product category (toys, sunglasses, gifts, etc.) are often knowledgeable about who’s good at what, so ask them for recommendations. Also ask fellow retailers and reach out to your network of business contacts for names of consultants they’ve used or have heard good things about. Then start zeroing in by researching them online, if you wish, and calling their offices.
Once you’ve narrowed your list of potential consultants to a few strong contenders, carefully assess how well they meet your particular needs. The first thing to do is determine their qualifications and capabilities, so ask questions like these:
- How often have you helped a company in the same situation? (Ask for examples.)
- Who are your typical clients? (Look for expertise in working with smaller independent retailers vs. chains or big-box retailers, says Butler.)
- Who would we be working with—a senior partner, or a junior staffer?
- Do you charge by the hour or by the project?
- What do you estimate this project will cost?
- How long would you expect it to take?
- What are the potential benefits of taking this course of action? How does that translate to time, dollars, units sold, or other quantifiable factors?
- What assurance or guarantee can you give that this course of action will improve my business or situation?
- What’s the downside if we don’t address this issue right now?
- Tell us about a company in a similar situation that benefitted from your advice. (Ask for specifics: dollars saved, or generated, or whatever is applicable to your situation.)
- Ask for references.
Consulting fees vary widely by specialty and by geography, but smaller companies should expect to pay at least $75-$150 an hour, or a day-rate of $1,500-$8,000, says Whalin. (Law firms often charge much more.) Once you narrow your list and get fee quotes, compare the fee with the potential benefit you’ll get from making those strategic changes. In most cases, the improvements should far outweigh the investment in expert help.
“There’s always an advantage to having someone who doesn’t have a vested interest in your business giving you advice,” says Whalin. “They’ll tell you what you need to hear, not what you want to hear.” And if they have the expertise and experience you’re looking for, it may be worth every penny.