The Role of Consultants: Excerpts from “The Private Equity Handbook”

Per the CEO of a Private Equity-backed Company:

I have to say that my own personal opinion of consultants has changed dramatically over the last two decades. As a young guy, I used to joke with a bit of arrogance, “If you can’t do, teach or consult.” Since then, I have totally changed my tune. As a leader, as a CEO, I recognize that there is a time and a place to bring in consultants.

  • EBITDA: Consultants represent an add back. Even though you’re expensing cash, it’s not a permanent expense. Consultants can be expensive, but it’s a one-time cost, and if you have the cash, don’t sweat it!
  • Best Practices: Consultants spend a significant amount of time working with companies, and they pick up best practices. They come into an organization and impart wisdom that the company itself does not have.
  • Different Views: Within a company, everyone has a job, a task list to complete, and so it’s not always easy to take a step back and conduct a successful self-assessment or assess a project when the goal is to focus on serving current and existing customers.
  • Consultants come in with a fresh set of eyes and will quickly spot what you can’t.

We bring in consultants frequently. They help us look for process bottlenecks, help redesign existing processes, and help us build a better mousetrap. In this way, we can serve existing customers and future customers more efficiently and cost effectively, increasing your EBITDA by improving margin.

As an example, I’m working on a large redesign of the sales organization and account management in my current company. Sure, I could probably solve this problem by hiring a couple of employees and taking a few years to do a project, but the consultants can provide the capacity and completely redesign the sales process from the top to the bottom in a couple of months. At the end, I have a new comp plan, new job descriptions for the different players, and a manager’s playbook that discusses metrics and the cadence that should be put in place.

Takeaways

You built the business and know every aspect of it. There’s not a single consultant out there who can come in and tell you how to run your business better.

That was my attitude when I came into the world of Private Equity and running companies, but I very quickly rethought that position. The consultants aren’t necessarily experts in your business, but they are experts in certain areas of running a business. I now fully embrace consultants.

The key is to assess exactly where you are. Do you know everything? Do you have the expertise? And more importantly, do you have the bandwidth? If you do, fine. Consultants probably aren’t necessary. But if there are problematic areas of the business or ones that could use improvements and you don’t have the time or expertise to attack them, consultants can help.

Ask for help and move forward.

Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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