Consultants can help startups leverage their limited resources. But startups can shoot themselves in the foot when founders use consultants at the wrong time or in the wrong way. Here’s why.
Your Process Doesn’t Work
A friend of mine asked me to chat with a startup he’d invested in. “They’re deep into Customer Development,” he said. I waited for the shoe to drop – and it did, as he continued carefully, “But they don’t seem to be making much progress. I think your process doesn’t work.”
So I met the entrepreneur and asked him how his search for a business model was going. “Great, but we’re having a bit of a problem getting traction.” (Anytime I hear an entrepreneur talking in euphemisms, I get nervous.) After a bit more discussion, I discovered the “problem in getting traction” meant revenue was zero.
“We’re in Customer Validation but we can’t seem to close a deal.” Hmm, I asked, “Can you go back to the beginning and tell me about your Customer Discovery process? What were your original hypotheses and what did you find?” I wanted to smack him when he said, “well our consultants said…”
The rest of his story was mostly a blur. Honestly I didn’t hear much detail other than a long litany of how other people who didn’t work for the company got out of the building and talked to customers. I started paying attention to the words again when he concluded with, “I just don’t know what we’re doing wrong?”
You Can’t Outsource Personal Experience
Here’s what I told him:
A startup exists to search for a scalable and repeatable business model.
It can’t be delegated.
Let me say it again: Getting customer feedback can not be delegated.
Why? Founders get out of the building (physically or virtually) to test their hypotheses against reality. There are times when customers are going to tell you something that you don’t want to hear. Or you’re going to hear something completely unexpected or orthogonal to what you expected.
Consultants Don’t Pivot, Founders Do
It’s hearing this first-hand data that makes a founder decide to Pivot (the process of iteration in search of the successful business model.)
The breakthroughs and aha moments can be random, unpredictable—but only the founders can find and make them.
Coming out of my daze, I asked: “Why weren’t you the one talking to customers?” The answer, “Well I was too busy coding and building the product. But I knew getting customer input was important so I hired this great consultant who told me all about the features customers need.“ Ouch.
Using consultants as your proxy when you were supposed to be out there learning means you’re not really doing Customer Development and don’t understand the process.
When Do I Use a Consultant?
So should your startup ever use a consultant? Of course.
Consultants can add tremendous value to your start up once you believe you have found a scalable business model – i.e. you think you have product/market fit.
Sean Ellis, a consultant who works with early stage companies, believes that “the cost of a consultant’s time can never be justified working with startups pre product/market fit – the failure rate is just too high.”
Sean believes that, “Consultants can improve the growth trajectory after your first business model is found. (In reality, once you think you found the right model, most startups will go through multiple iterations on optimizing revenue and their business model.) This help in finding the optimal model, (which can easily result in millions of dollars in incremental valuation) is where a consultant can help. At that point it is easy to find a win/win on the cost of the consultant’s time.”
I couldn’t agree more.
Lessons Learned
- No consultants as you search for your business model
- Get all the help you need after you found a repeatable model
- If your too busy coding to get out of the building yourself find a co-founder.
