It has become standard practice in the consulting industry for a business owner to pay for consulting, even when the consultant doesn’t provide any positive results.  This is partly why every business consultant should be performance-based.

To make matters worse, in a strong economy, the consulting industry unfortunately becomes overcrowded with individuals who are unqualified to consult.  Most often, they have limited knowledge, skills, and experience.  Yet, they seek this alternate path because they are presently able to bear the financial risk of unsteady or nonexistent income, at least for the time being.

It goes without saying that the vast majority of these consultants demand upfront fees to protect themselves, in the event that they don’t provide any real value to a business.  Some get away with it.  Some don’t.

The real issue, however, is not with them.  Those individuals come and go.

It’s with the long-standing consultants that continue to profit from requiring upfront fees, business after business, without any accountability or guarantee of positive results.  It’s about deceptive and unethical business practices.  It’s about scamming business owners.

And, it’s time for all of that to change.

*Click here to first learn more about What Is Performance-Based Consulting?

Why Every Business Consultant Should be Performance-Based

For some reason, it has become the norm in the consulting industry to take payment from a business owner without any promise of delivery of value.  A business consultant can often provide zero results and walk away, having already been paid for their time and service.

Why is that?

You pay your CPA; they prepare and file your taxes.  You pay your landlord; they maintain your building and unit.  Wouldn’t it be outrageous if you paid your hairdresser for a trim and they instead kept your money and booted you out the door?

Not to say that these unfortunate things don’t happen.  Of course, they do.  But, that’s why we have litigation, so you can sue them and recoup your money.  A case against that hairdresser would be a no-brainer.

So, if you wouldn’t agree to let your hairdresser keep the $75 for doing nothing, why would you agree to let a business consultant keep their $10,000 (minimum) consulting fee, if they didn’t benefit your business at all?

More importantly, why has this become common practice in the consulting industry?

The reason is actually quite simple – greed.

The majority of business consultants need that upfront fee to remain in business, make a living, go on vacation, and avoid bankruptcy, even if it comes at the expense of their own clients.  Yet, if they were honest and confident in their abilities as a business consultant, they wouldn’t need those upfront fees.

This leads us to our next point in why every business every consultant should be performance-based.

If Confidence Is Key, Performance-Based Is Lock

Aside from it being unethical and bad business practice, the real concern is why 88% of consulting engagements are not performance-based.

Luckily, the answer to this question is also very straight-forward – lack of confidence.

If a business consultant is confident in their ability to produce positive results, they would have no objection to basing their compensation off of their performance.  It’s as easy as that.

In fact, they may even prefer it.  True performance-based consultants, who choose their clients carefully, often receive far greater compensation than traditional consultants, all while proportionally helping their clients’ businesses.

This is because performance-based business consultants have more control over their compensation.  If they want to produce more output, they must inject more measurable and valuable input.

Every Business Consultant CAN be Performance-Based

Some business consultants refuse to acknowledge that their work can fit into a performance-based model.  They argue that the services they provide do not necessarily produce monetary value for their clients.

That’s a load of bologna.

Each and every business consultant, in one way, shape, or form, can translate their performance to monetary value.  This doesn’t mean that it must to be directly translated.  The conversion may very well be indirect.

For instance, a human resources consultant probably won’t have nearly as much of an impact on a company’s bottom line, compared to an operations or business turnaround consultant.  These performance-based consultants often share in things like the additional revenue, cost savings, or net profit that they help their clients achieve.

However, the success of the HR consultant’s performance can be matched to certain milestones or benchmarks, which in turn, translate to distinct amounts of compensation.

All it takes is a little creativity and innovation to make it happen.

And, if a business consultant still refuses to believe that their compensation can be based off of their performance, it comes down to one or two things.  They are probably not very good at what they do.  Or, they aren’t confident that they can legitimately help a business owner’s specific situation and business.

Otherwise, they’d switch to performance-based.

For performance-based business consulting, contact The Business Turnaround Group.

Share Your Thoughts

Your email address will not be published. Required fields are marked *

Follow by Email
Facebook
YouTube
LinkedIn