Consulting to entrepreneurs - getting started

An individual wishing to consult effectively to entrepreneurs should first understand the process of venture creation. Once comfortable that you have a feel for the process, you must take inventory of your experience, education, and interests. From this self-analysis, you should be able to determine your potential contribution to the process of venture creation.

The nature of a specific venture may be such that you will become a member of the founding group. If so, you must develop commitment to the venture, have the motivation to make the venture happen, make sacrificies, and risk never being compensated for your time, energy and out-of-pocket expenses. You may be asked to invest your own cash in venture.

If you are not completely comfortable with the terms of this arrangement, being a member of the founding team will not be feasible or desirable for you. Acting as a consultant on a fee-for-service basis may be the preferred option for you.

If you are going to be a consultant, taking inventory of skills and experience is a critical first step. You must determine where you can make the best contribution and the area(s) where other professionals must be involved. To position yourself as a one-stop consulting service to the entrepreneur may be misleading to both yourself and to the client.

Perhaps the most important concern for the entrepreneur is identifying the real business opportunity and shapping the new venture to best take advantage in the marketplace. This step is a very creative one, requiring a special kind of thinking on the part of the venture founders and guidance from someone who has related and relevant experience. Unless this is your strength, avoid consulting in this area.

The technical or engineering aspect of the venture together with the marketing considerations -- market research and market strategy -- probably requires the advice of professionals in addition to the management accountant. There is very important role to be played here. As a professional, you may be in a position to refer a client to another professional. Your referral will add important credibility to the client and to the venture, in the eyes of other proffessionals. This networking function is key to sucess for an entrepreneur who often doesn't know where to turn, and is consequently at risk.

Perhaps the most important contribution the management accountant can make to the new venture is in helping to develop the business plan. I do not mean for the consultant to write the plan, but rather to provide direction and structure to the process and to ensure that all the important issues are adressed in a satisfactory manner.

With respect to the financial section of the plan, the education and experience of the managment accountant allow a significant professional contribution. This is often the weakest area for the entrepreneur. Dealing withit inadequately is the main reason for the failure of many start-up ventures. The involvement of the management accountant will add substance, and credibility to the plan, and should open doors dor its presentation, encouraging serious consideration by bankers and other investors.

What about fees? I strongly recommend that you address fees with the client at the outset of the engagement. Recognize that you may need to modify your hourly fee given the circumstances of the client. If the required modification is too great considering the financial demands of your own business, you may have to part with the prospective client. Remember that your contribution has value. Acting strictly as a consultant, you must be compensated or your time, as there is no equity sharing for you.

Once you agree upon a rate of compensation, either hourly or on some other mutually agreeable basis, document the specifics of the work that you to do in a proposal letter, including the terms of payment. Have the client sign in acceptance of your proposal. This is an important communication process that will help to avoid any misunderstandings about what you have agreed to do, and for how much. It will provide the basis for the working relationship throughout the term of the engagement. I would also recommend that you ask the client for a deposit up front as an indication of commitment to you, against which you will bill future work.

As a consultant, you should adopt an emphasis on "output" when dealing with the entrepreneurial client. Rather than simply focusing on the number of hours you have put into the project, be mindful of what has been achieved and what progress has been made. Achievement is foremost in the mind of the entrepreneur. Achievement is what brings satisfaction to the entrepreneur.