Consultants in the Startup World: A Critical Perspective
Why I would never hire a startup consultant myself
At the age of 6, I started drawing cars. After years of practice, they became increasingly realistic and also futuristic. One day, I showed my older brother, who was studying automotive engineering, my latest creation. A car without wheels! The vehicle would hover over the highway based on electromagnetism, just as I had seen on TV with the latest trains in Tokyo. A great idea, of course, but through my brother’s feedback, I learned at a young age that what should theoretically be possible often doesn’t really work in practice.
That’s the essence of why I usually have ‘something against consultants’. Although this does not apply to every consultant, I notice that most have been drilled during their training to work with (outdated) theoretical models.
Moreover, I have rarely come across a consultant who has dared to take a risk as an entrepreneur themselves. They mainly give a lot of advice and know everything better, but don’t do it themselves. Consider that if their advice was really that great, they should all be able to build a million-dollar empire.
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One startup consultant is not like the other, but they do look a lot alike
A genuine startup consultant usually has one area of expertise and knows a little bit about the rest. They know a lot about setting up a financial model, for example, and use other obvious models to advise the startup on how to approach the market, how to set up an organizational structure, and more.
Even though one startup consultant is not like the other, all their knowledge is based on theoretical models. This doesn’t necessarily have to be a bad thing, provided that most consultants lack any form of creativity or vision. Allow me to explain.
Models are developed based on an analysis of how one or more successful companies have done something. This means that all models are based on past successes. Most models do not take into account that market conditions, purchasing behavior, and technology are changing at a rapid pace.
In the past – and unfortunately, sometimes still – a target group approach was used based on age, gender, and income segmentation. With the rise of the Internet and social media, the so-called OMNI channel approach was born. The previously mentioned factors play almost no role in this approach. With OMNI channel, it’s all about contact moments and shopping behavior. This has made dozens of target group segmentation models completely useless.
Another example of a model that is no longer applicable is the traditional marketing model of the “4 P’s” (Product, Price, Place, Promotion). In the digital age, where customer experience and relationships play a central role, these are just a few aspects of the complete matrix that you have to take into account.
The famous Porter’s Five Forces model, which helped traditional businesses analyze the competition in their sector, has also become irrelevant for many modern startups. Especially in the tech sector, where disruption often comes from unexpected corners and transcends traditional competition analyses.
Most startup consultants are too conservative
In a time when yesterday’s knowledge is already outdated today, you have to be disruptive as a startup. All successful businesses that have started in the last 10 years had a completely different approach or a completely different product or service than the standard. This revolutionary innovation made their startup succeed. Startup consultants can contribute little to nothing to this because they are too conservative.
The problem with disruptive ideas is that they are barely or not at all measurable or can be mapped out. Startup consultants struggle with this non-measurability. When Uber started, there was no model that could capture its market approach. The same applied to Instagram, Whatsapp, and Airbnb.
Startup consultants can’t validate innovative concepts
If you ask a startup consultant to validate your concept for your startup, it’s like asking an airplane builder to validate Elon Musk’s idea of flying to Mars. There will be aviation technical aspects that the airplane builder knows something about, but this idea is too advanced for the person. Simply too many unknown factors come into play that the airplane builder has no clue about.
With probably all good intentions, a startup consultant can attempt to validate your concept, but usually, this is pointless. I have never made or seen a disruptive business plan that runs and can be executed exactly as intended.
This does not mean, of course, that you can’t build in some apparent certainties to increase the chance of success. But the certainties I’m talking about here are so simple and obvious in nature that they can usually be found for free online. Think for example of a checklist of what skills you think are necessary to execute your startup idea.
When is it useful to hire a startup consultant?
There are a few circumstances when it is wise to hire a startup consultant. This depends on your own level of knowledge, the involved stakeholder, and your startup idea.
Low knowledge level: If you know very little about a certain topic, you can hire a startup consultant to explain the basic knowledge required. Many startups have no experience setting up a financial business model. By learning from existing financial business models, you can create your own model and somewhat estimate what your financial future will look like and what capital needs you will have.
Stakeholders asking for support or validation: Stakeholders such as shareholders can sometimes be very conservative. They also sometimes want apparent certainties such as validation by a third party. If you depend on these stakeholders, often there is no choice but to hire a startup consultant and have them produce a report or advice.
A conservative startup idea: If you want to start a bakery, clothing store, or another conservative business, a startup consultant can provide a lot of insights. If you hire a startup consultant with experience, this can prevent many beginner mistakes, and the costs will quickly outweigh the damage you would otherwise incur.
What is the alternative to a startup consultant?
When I started my first business, I had no start-up capital. Therefore, I was forced, but also happily, to rely on my network. I told everyone, whether they wanted to hear it or not, about my progressive plans and always asked for input and advice. Sometimes the advice was about a color they didn’t like, but other times it really led to new insights.
I have benefited most from the entrepreneurs around me who were willing to talk to me and also had a disruptive approach. They often challenged me to be even more disruptive in my approach and ideas.
Despite the fact that there were also consultants among the people I asked for advice, I am a big advocate of learning by doing. The mistakes you make often teach you faster than advice, and sometimes you discover new methods that don’t work in theory but do in practice.
Furthermore, hiring startup consultants can be relatively costly, and advice over dinner with an acquaintance is almost costless. You have to eat anyway, right?
Conclusion: five reasons not to hire a startup consultant
Below are the five reasons not to hire a startup consultant. Of course, every startup is different, and you can’t lump all startup consultants together. Therefore, this article is merely a personal opinion, formed by 30 years of entrepreneurship and not advice.
Depending on theoretical models: Many consultants rely on (often outdated) theoretical models that aren’t always relevant or effective in practice, especially in the rapidly changing startup environment.
Lack of entrepreneurship: Many consultants haven’t taken the risk of becoming entrepreneurs themselves. They give a lot of advice but have little practical experience.
Lack of creativity and vision: Most consultants lack creativity and vision. They base their knowledge and advice on existing models and past successes, without considering rapidly changing market conditions, consumer behavior, and technology.
Startup consultants are too conservative: In a world where disruption is key to success, many consultants are too conservative. They struggle with concepts that aren’t easily measurable or definable.
Startup consultants can’t validate innovative concepts: Startup consultants aren’t good at validating truly innovative concepts, because they’re too complex and far-reaching to fit into existing models or frameworks.