Consultants can be helpful experts, but sometimes they show up to fill a need for which there’s purpose.
In this Tough Things First Podcast, Ray Zinn discusses when consultants make sense and how to decide when the time is right.
Rob Artigo: Rob Artigo here once again, your guest host for this edition of the Tough Things First podcast. I’m a writer and investigator in California. Big back is always a pleasure Ray, how you doing?
Ray Zinn: We’re doing just fine. Thanks, Rob. Good to have you back on the program.
Rob Artigo: I’m sure this is a subject you can identify with and probably you’ve heard plenty of stories and experienced it yourself is, the tech industry… And I think I relate this to Hollywood, as there’s always this bubble around… I don’t even know if it’s a bubble, but sort of this fog, this cloud around the tech industry, because there’s money there and in Hollywood, the same thing. There’s always people on the periphery trying to separate ambitious people from their money. And I mean that in ways like, they’ll say, “Hey, you come to me, I will build out your business plan. Or I will help you create this or I’ll design something for you. Or I’ll do an advertising campaign for you all. I’ll show you how to do this on the internet, or use Yelp to get some business.”
And it turns out really all they’re doing is, doing something for you, you could have Googled or watched a YouTube video and figured it out for yourself and only takes five seconds. Right? And you end up paying them thousands of dollars and the return is nothing. So let’s get to the point here is that, there are people in Silicon Valley, there are people in industries where there’s money that are just waiting to take maybe a naive younger person or a new entrepreneur and extract some money from their wallets. That doesn’t mean that there aren’t legitimate consultants out there or people that can really help you. So that’s what I want to talk about here. Would you agree with my intro there? That I’m correct in saying that there are people out there waiting to take money away from people, for projects they don’t necessarily need to be paying for?
Ray Zinn: Well, I’m sure there are some. I don’t know that they’re prolific. They’re-
Rob Artigo: Vultures, not like vultures?
Ray Zinn: Well, you know how they vote. So I think there are people who are opportunistic. My dad used to say that a consultant is somebody who doesn’t have a job. So I got to be careful about when we refer to about a consultant. A medical doctor is a consultant, if you want to look at it that way. A teacher, a professional, either a high school or college or whatever teacher, they’re consultants. And so, the term consultant… A good father or a good mother is a consultant. And my parents were good consultants for me. It depends upon where you need help. I believe in going to the doctor to get physical checkups and to have them consult with me on what I need to do, whether to lose weight or whether to change my eating habits or sleep habits, or whether exercise. A physical trainer, a person who works with you in an exercise program, they’re a consultant.
There are consultants and then there are people who are just trying to separate you, as you said, from your money. I don’t think there are that many, at least in my experience that are not good. Another one is a CPA firm, they’re consultants. Tax preparers are consultants. There may be a few consultants that are not really worthwhile, for carrying their weight, worth their pay as you would. A consultant is anybody that you would go to, to get help that you can’t handle yourself. So, if you can handle yourself, there’s no need of a consultant. I know people that do their own barbering, and sometimes it looks like it. Or I know people who go to the restaurant because they don’t like to cook. It just depends upon what your needs are.
Rob Artigo: Yeah. I think for the purposes of this podcast, I’m thinking… And I appreciate the fact that you wanted to separate the difference between, what I’m referring to as one of these people that are trying to separate ambitious persons from their money versus a consultant that is valuable. So there are plenty of valuable consultants out there. And I guess what I’m getting at is, what we want to be able to do as entrepreneurs in our businesses, I’ll give you one example. I came from a radio background, 20 years in radio, and a couple of times they would bring in… The company that I was working for, the radio station I was working for, decided to bring in a consultant. And the consultant spent a week looking at how operations worked in the newsroom and with the FM radio stations and the AM stations.
And looked at how we approached imaging and different things, and then came up with ideas for how to brand the company better and how to make it more consistent and a more concise messaging. And I never found anything of any value, at least as an employee on, ranking file type in the newsroom where I felt like they were giving us anything that we didn’t already know needed to be done. But the company ended up paying for it anyway. And I suppose they got some value out of it, but when I’m a leader of a business and I sit down and go, “Hey, we need to bring somebody in.” How do I know that it’s something that I do need to get somebody from the outside to come in and take a look and help us out? And then how do I know if that person is going to be the right person, that’s going to give us quality for our investment?
Ray Zinn: Well, it’s like, let’s say you have a heart problem and your physician is suggesting that you have a quadruple bypass or something. You might want to get a second opinion. And so a second opinion is necessary whenever there’s something really serious with the company that would require a second opinion. So I look at a consultant as somebody who’s going to offer a second opinion. You may have a health issue and you’ll get online and you’ll look up some resources to help you understand your medical problem. But then you’ll go to the doctor and say, “Here’s what I read online. What do you think?” So generally, a consultant is brought in many times because something really serious is wrong. And maybe it’s the board of directors is demanding that you get a second opinion.
Maybe they’re not happy with the way the current management is solving the problem or dealing with the problem. They want a second opinion. So they’ll hire a consultant to come in and look at the situation. Maybe it’s also, maybe the leadership of the company brings out a second opinion just to bolster what they’re doing is correct. That they’re on the right path because, it’s called drinking your own Kool-Aid if you don’t get somebody from the outside to come in and do a deep dive into what you’re doing. Consultants again, all depends upon how serious the situation is and whether or not you need a second opinion. So I refer to a consultant as somebody who really is there to offer a second opinion, or to be able to do something that you cannot do, because you lack that skillset yourself. For example, like a tax preparer or a CPA or something like that.
Rob Artigo: Right. And you have to have somebody doing your payroll. I don’t care how small your business is, you should have somebody doing your payroll because that can become a problem with the IRS really quick. And you just need those… You need experts helping you out if you really want to be a success and streamline things. Here we are as business leaders that we have to make a decision as to who to hire, so we look at who’s out there and maybe we ask for recommendations, it’s like hiring an employee, you have to do your due diligence. Did you have experiences with Micrel, where you had to bring somebody in to take a look at what was going on so that you could get that… Like you said, that other perspective, an outside dispassionate perspective?
Ray Zinn: Well, only to the extent we talked about like a CPA or a… Oh gosh, let’s say, a board member might come in and help us take a look at a particular operation that they got that knowledge and skillset. But we didn’t use a lot of consultants in a situation where you’re just looking for somebody to come in and give a second opinion of what you’re already doing. I’d say that 99.9% of the time, the consultants that we use, we did not have the resources or the ability to really look at that particular problem. And so we hired somebody with that expertise. I can’t think of hardly a time that we brought in a paid consultant to look at something that we could do ourselves, but we wanted a third opinion or a second opinion.
Rob Artigo: Okay. I can’t help but think of Marcus Lemonis said, the profit on CNBC that he goes around and invest in companies. And he literally is that outside guy who comes in… Well, he usually brings in money and investment and then becomes a stakeholder in the company. But he is the ultimate consultant when it comes to many of these businesses, because he’s got an expertise in the way big picture runs that these other people don’t. And when you are running a business, I think that perhaps if you find that you’re running a foul or your business is not doing well, you find that you aren’t really handling the business operations well, that if you find somebody who can help you with those situations, who could say, “This is what you’re doing wrong, and this is what you need to do.”
That’s the kind of consultant that could help small businesses that are just getting started that have found that they are struggling for the first couple of years, bring somebody in and go, “All right, here’s what you need to do to fix your major problems.” That’s different than going to a company like Micrel, that is running well, that is profitable, 99% of the time, it’s just one year where it wasn’t. You didn’t need that because you were running the company right.
Many of the entrepreneurs who are perhaps listening to the podcast are listening to it and going, “All right. Well, I’ve got a smallish business. I’m struggling a little bit, and I’m not sure what I’m doing wrong.” This is where you get into a situation where I opened talking about, somebody’s paying for something they don’t need versus something they do need. And you mentioned the do need part. What would you say to those entrepreneurs who find themselves struggling and want to potentially reach out to somebody who could come in and look at the way they were operating everything and say, “This is the way you need to do. This is what you need to fix. You need an accountant. If you don’t have an accountant, you need to have one?”
Ray Zinn: I’ve just recently heard of a franchise that provides training for customers. You can join this group of outside members that will be part of a board of directors group, as you would… An informal board of directors where, you pay X number of dollars a month and you meet once a month and you have experts there or even each other, where you could help consult with each other and help solve problems. And so there’s a number of those kinds of franchises available. So I would recommend that if you’re a small company that you look at possibly joining one of these franchise groups that does have these informal meetings, where you bring your problems to them, and then they talk about it as a group and they offer suggestions. It’s pretty interesting. I thought it was a pretty neat way of helping small companies who don’t have the resources to hire good complex boards, that they can at least talk among themselves as a kind of a talk group and they take time to help solve each other’s problems.
Rob Artigo: Around here, if you’re looking for office space, you can get a desk and an area to meet every once in a while. And those kinds of benefits for a small company where you’re not having to take on a lease, long-term obligations or having to hire a bunch of people. You can join one of these groups and you can get some good information. So technology can really help us out if we stay within our means while we build it into a profitable company, which is obviously the goal. Thank you, Ray. Really appreciate it. You can join the conversation at toughthingsfirst.com. Your questions and comments are always welcome there. Follow Ray Zinn on Twitter, Facebook and LinkedIn. And of course you can get the texts, Ray books, Tough Things First, and The Zen of Zinn. Thank you again, Ray.
Ray Zinn: Thanks, Rob. Appreciate it.