There are many business owners who get confused as how to “franchise my business”. Well, before taking the decision to franchise your business, you need to go through a lot of preparations. It is not just a decision that can be implied within a day. Give some time to research and analyze the market before coming to a conclusion as how to franchise my business. Take help of a franchising consulting firm or some experts to help you make the right decision.

The very first thing that you need to understand is whether your business or company is good enough to undergo such a big a step. You can know if you can franchise your business if it possesses the following qualities:

Business Longevity: Franchise experts say that it is a good idea to franchise your business if it has been in operation for at least three consecutive years and generating profit. Also the size of your business should be good enough to attract other investors. Franchising will be successful only if the company possesses a proven track record of success.

Unique Business Concept: The competition in the franchising industry is quite high, so before deciding on how to franchise, make sure your business concept is unique and easy to duplicate. Organize your business system and concept before thinking of franchising it. Success in franchising industry is very much depended on how well investors are able to replicate your system and concept.

Profitable Business: Your business concept must have the ability to make money. Your business must have a consistent record of financial success so that investors can show their trust in your franchise business. Ultimately, it is the motive of everyone to earn and make money. If your business is profitable, it is just the right time to franchise your business.

Affordable Business Format: Most of the investors look at the initial investment while searching for the right franchise business opportunity. If the initial investment is very high then very limited people will be interested in buying your franchise. Along with cost of the franchise, investors also inquire about the return on investment. If your business format can promise high ROI, many will be interested in your business concept.

Marketability Factor: Before you franchise your business, make sure your business idea is easily marketable. Many companies franchise their business when many investors are asking them to franchise their business. This ensures that the business concept is very unique and that is the reason why potential business partners are ready to invest.

Franchises offering master franchising

Generally, a master franchise manages two separate businesses – one stands as a single franchise and the other as company expansion. As such, an extensive set of skills is required, which is also the reason why the kinds of entrepreneurs who succeed in operating franchises differ significantly. The franchise opportunities vary widely as well, covering markets that range from car repair to pet care.

As a guide for entrepreneurs who want to pursue opportunities in master franchises, listed below are the top 10 from various industries:

· ServiceMaster Clean – a company with a solid footing in the cleaning industry. It is reputed for its superior quality of service.

· ProntoWash – a global leader in the car wash field. It offers convenient and environment-friendly services.

· Tossed – A franchise enterprise in the health/food industry with a huge potential for growth.

· Heits Building Services – A company that has established a reliable name in the commercial cleaning niche.

· Tasti D-Lite – A company with a highly popular trademark product. It offers franchises across the US.

· Max Muscle Sports Nutrition – A company that’s very well-known within the sports nutrition and weight loss industries.

· Maid to Sparkle – An established company offering franchises in the residential cleaning market.

· Russell Watergardens & Koi – A company with a widely known brand and a firmly established national presence.

· Spring Green Lawn Care – A company that provides its franchisees with financial security, flexibility, and freedom.

· All American Ice Cream and Frozen Yogurt – A fast-growing company in the frozen yogurt and ice cream market.

The company names mentioned above are all promising and highly profitable master franchise investments. They prove to be very viable options among aspiring entrepreneurs. You should remember though, that while these opportunities are great business prospects, they require responsibilities from prospective franchisees. When you become a master franchisee, you will be responsible for enlisting other individual franchisees, as well as giving them the necessary support and training. In addition to that, you need to know more about the market, the parent company, and the target area that you are eyeing.

Mastering the Master Franchise Agreement

A master franchise agreement generally covers three major points:

1) Master franchise fee – should be paid before you begin operations.

2) Franchise fee – shared with the franchisor after a successful sale to a new franchisee.

3) Franchise royalties – also shared with the franchisor.

You may be required to provide support and training to new franchisees, depending on the terms stated on the franchise agreement. You may also need to get the approval of the franchisor for any new franchise agreement. Furthermore, some single franchise agreements have an option for an upgrade to a master franchise agreement. This is a very lucrative option, especially if you have already mastered your local market and are aiming for major expansion and development possibilities.

Look at all they do!

Calmly, Jason continued, “It’s not just to send us a lead, John. First, they find the lead. We don’t! Keep in mind, it costs us about $10,000 just to find a good lead. They find the lead, they educate the lead, they introduce the lead to our concept, they teach them about our business, they send us only leads that make sense for us, and they get them ready for us to close the deal.”

“We’re in the wrong business, my friend!” I said to him. “With as many people who call me about buying a franchise every year, I need to be in that business.”

Good brokers deliver quality franchisees

Jason laughed. He knew I was teasing, but I thought $15,000 was a lot of money, and I still do. However, after agreeing to several contracts with brokers, and paying them up to $15,000 for their services, which resulted in quality franchise sales, I changed my opinion.

Used to be I’d tell my clients, “Don’t use a broker to sell your franchises. You don’t need to! You can do the lead generation and selling on your own. I’ll show you the process.”

That was then. This is now. And for several years it’s been a different world for everyone.

Not all brokers are created equal

I’m still cautious about using brokers. Too many of them are not dependable. Too many of them are in it for the money and they do not add value, which is truly matching a franchise prospect with the right franchise opportunity.

However, like everything else that involves contractual relationships, when you bring together the right parties, you make beautiful music. Or perhaps in this case you make beautiful franchising.

Making beautiful franchising

David Omholt, founder and CEO of The Entrepreneur Authority (TEA), is making beautiful franchising with franchisers. He’s doing it for dozens of companies represented by his network of brokers scattered across the USA. Years ago, before he launched TEA, David visited with me for some start-up advice. I thought he was crazy!

Who needs brokers? Do what? Launch a brokerage service? Why?

Franchisers don’t want that. Franchisers don’t need that. Good luck, pal.

Integrity sets TEA apart

As it turned out, Omholt didn’t need my advice because he had a well thought out plan – his background as a consultant with Accenture prepared him for his launch. What helped him most of all, however, was his commitment to integrity. This wasn’t a quick-buck artist who was going to rope people into buying businesses they didn’t want and weren’t prepared to operate – this was a guy who understood the value of building relationships and serving the same customers over and over and over again.

I still thought he was crazy to launch a brokerage, but I trusted that he would do so with integrity. In fact, he’s the only broker to have won the Chairman’s Award at the American Association of Franchisees & Dealers, in recognition of the standards he has set for brokers.

So I asked David Omholt about why franchisers should use brokers. Here’s what he told me:

Three good reasons to use brokers

Local scaling. “We’re surgical by nature,” he said. “We work locally so we meet prospects face-to-face. We’re not just working Internet leads, or talking to faceless people. We know the local marketplace, we get to know who’s looking for a franchise in that marketplace, and we get to know them personally. We target a specific market so we can find good franchisees. We help a franchiser cluster their units in a region because we’ve got the region covered. We’re the franchiser’s best source for filling in their markets.”
Better royalty producers. “We can find the better franchise candidates and match them up with the franchise opportunity that makes sense for them, and as a result they become better producers for the franchiser,” Dave continued. “We meet face to face with every candidate. We get to know them. We understand their likes and dislikes. We know the kind of business they want to own and we also get a sense for the type of business that they will be good at developing. And we don’t represent just one franchise, so we’re not limited, and the prospects know that. An in-house sales guy has one franchise to sell and he’s going to sell it to that prospect. But that’s not our situation. We have many different types of opportunities to sell and we can afford to match the prospect to the best opportunity. That’s how we find the better fit. We can see the mistakes and cut them off at the pass, so once our candidates become franchisees, they tend to be the better royalty generators.” . . . I can personally attest to that point. TEA found some of the best producing franchisees for HomeVestors. Those candidates would not have bought a HomeVestors franchise without TEA leading them to the opportunity – knowing that at the time it was the best opportunity for that candidate.
Cost optimization. “We’re efficient for a franchiser because by outsourcing to us, a franchiser can reduce in-house development expenses,” Dave explained. “A franchiser can bring down the cost of supporting an in-house development team by utilizing brokers who will find the best prospects for the franchise company. Since we’re paid on performance only, it’s not a hard check to write when we deliver a candidate. Plus, that candidate has already been educated – we’ve answered all their general questions – so the in-house team can quickly zero in on a prospect’s specific concerns and close the deal. We reduce the franchiser’s expenses.”
Numerous brokers to choose from
Franchisers who work with brokers generally work with more than one – they don’t often restrict themselves to exclusive deals. The latest issue of the Franchise Opportunities Guide, published by the International Franchise Association, lists more than 25 companies that provide brokerage services to franchisers.
Franchisers will find that the commission structures are similar among brokers – they’re all in that fifteen k-plus range – but their capabilities will vary. Since they’re not all created equal, it’s important to do your due diligence before you sign a contract with a broker.

Who knows what that broker is doing?
One of my concerns about brokers – and a concern that many franchisers voice – is controlling what they do and say. “How do I know what the guy is telling prospects about our business? . . . How do I know that she’s not misleading candidates financially about our opportunity?”

Brokers do not close the deals
Those are valid concerns, and they need to be addressed with the brokers at the time of forming a relationship. Keep in mind, however, that brokers do not close franchise sales. For $15,000 you’d think they would – but it’s better for the franchiser and the franchisee that they do not!

Franchiser closes the deal, or not
They lead the candidate to the franchiser’s sales team, and it’s the sales team’s job to close the sale. As Jason Killough told me when we initially discussed using brokers, “They tee up the deals for us. They don’t close them.”

The franchiser has the opportunity to ask the candidate what they know about the franchise, what the broker told them about the business, and what they expect if they become a franchisee. “We have the chance to agree to a sale or to deny it. It’s always our decision,” Jason assured me.

No deal no broker fee no beautiful franchising
So if a candidate was misled, the franchiser doesn’t close the deal, at least not without correcting the misinformation. Of course, if the deal doesn’t get closed, the broker also doesn’t get paid. And a broker who misinforms one candidate is likely to do it again, and that’s a broker who will quickly wear out his or her opportunities to make beautiful franchising.

Premises, leases and mobiles
Lease provisions usually allow the franchisor to take over the lease at the end of the term, and also if the franchisee defaults during the term
Often the franchisor will lease the property itself and grant a sub-lease to the franchisee. You are responsible for paying the rent, so you should ensure the amount negotiated is a fair market rent
Mobile franchises usually contain terms that set out the sign writing and other décor required by the vehicles from which the business is operated, and possibly for any major items of equipment
One issue that is often overlooked is the need to ensure that the length of the franchise term coincides with the length of the lease term.
Requirements
Every Agreement should contain clauses setting out the initial and continuing requirements of both franchisor and franchisee
• Examples of franchisee requirements include minimum operating hours, insurance, engagement of staff, and uniform requirements.
• Examples of franchisor’s requirements include maintaining the manuals, providing products, and training
• Records of accounting must be up-to-date, with regular reporting and auditing
• Intending franchisees should pay careful attention to the requirements since breach of any may entitle the franchisor to terminate the franchise.

Intellectual property
Intellectual property is a key element of most Franchise Agreements, specifying legal ownership rights by the franchisor concerning patents, copyright, trademarks, designs and even operating systems. Other relevant laws include the Fair Trading Act and common law rules prohibiting the copying of a business’s identity.
Sale of the franchise
Most Agreements will allow the franchise to be sold during its term, but you should note that as a franchisee your rights to sell the business may be restricted.
• The franchisee may have to give the franchisor the right to buy the business first known as right of first refusal, which in itself can destabilize the value of that business and the goodwill for a selling franchisee
• If the franchisor chooses not to purchase, they may rigorously control the sale process
• The incoming franchisee must be approved by the franchisor
There may be a transfer approval fee, which the franchisee will need to pay to the franchisor when a sale takes place. This is designed to cover the franchisor’s costs involved in training the incoming franchisee.
In some Franchise Agreements, the term of an existing franchise for sales purposes covers only its unexpired remainder, unless the Agreement provides for the franchisor to offer a new Agreement for a full new term.
Termination
Franchise Agreements provide for circumstances in which the Agreement may be terminated in advance of the original ending date. These include:
• Bankruptcy, company liquidation or criminal conviction of the franchisee
• Termination of leases to the franchise premises (where premises retention is important).

Termination provisions should be considered carefully as they are often points of disagreement. There are frequent misunderstandings by franchisees as to what happens at the end of a term and procedures vary from one franchise system to another. However, it should also be kept in mind that if the franchise is operating well and the franchise relationship is a good one, it is likely that both franchisee and franchisor will want to renew the Agreement.
Disputes
Although disagreements between franchisors and franchisees are usually solved through discussion and negotiation, mediation and arbitration are also effective methods for working out disputes and less damaging to franchise relationships than legal proceedings.
Other terms
The Entire Agreement clause is especially important as it usually states that what is contained in the Agreement overrides anything which may previously have been promised unless it is expressly referred to in the Agreement
As a franchisee, you should be certain that anything on which you have relied in selecting your franchise is included in the Agreement in some way
The Definitions section, usually close to the beginning of the Franchise Agreement, contains key definitions. One of the most important is Gross Sales, the figure on which the franchisor’s royalty is usually based. Usually this covers substantially every type of transaction carried out by the business and almost every payment received. Often it will include sales made, whether or not payment has actually been received.

The simplest definition for franchising is: “A method of doing business whereby a franchisor licenses trademarks, systems and methods of doing business to a franchisee in exchange for a recurring ongoing consideration i.e. a royalty fee or a franchise management fee”.

Franchising is a form of a business by which the owner (franchisor) of a product, service, or method obtains distribution through affiliated dealers (franchisees). A franchisor is expected to offer assistance in organising, training, merchandising, marketing, and giving direction in return for a consideration.

Franchising usually involves a contractual arrangement between a franchisor (a manufacturer, a wholesaler, or a service sponsor) and a retail franchisee, which allows the franchisee to conduct a given form of business under an established name and according to a given pattern of business.

DOES FRANCHISING IMPLY THAT YOU ARE SELF-EMPLOYED?

In some respects, NO. You still have to answer to someone else and follow his or her direction. You don’t really own the business; you own the assets you’ve purchased in order to establish the business. If you consider that you are in business for yourself, but not by yourself, then YES…you are self employed.

FRANCHISING IS THE FASTEST GROWING BUSINESS ECONOMIC MODEL

Globally, franchising is the most popular and the fastest growing business economic model. It assembles business relationships that allow people to share brand identification, a proven method of doing business and a successful marketing and distribution system. When most people think of a franchise, they think fast food. Franchising, however, long ago grew beyond the burger and fried-chicken shops. Today franchise concepts span over 70 different product and service sectors, including such businesses as auto-repair shops, children’s art centers, fitness clubs, law & consulting practices, and many home based businesses. The franchising business model has turned into a major economic engine globally and it is one that’s providing increasing opportunities for companies and individual entrepreneurs alike.

For South Africa, and for Africa as whole, franchising is a perfect vehicle for the economic empowerment of the historically disadvantaged sectors of the population. This brings with it the need for the establishment of more franchises. That is, franchising businesses that are established, that has a unique offering and where the method of doing business has been tried, tested and perfected. Apart from empowering companies and individuals, there should be a particular focus on identifying labour intensive businesses that have the potential to make a significant and positive impact on employment creation as well as those businesses that have a product or service offering for export markets with the ultimate objective of booming local economies.

THE ADVANTAGES OF FRANCHISING

1. An investment is usually made into a proven business.

2. A faster start up, developing a customer base quicker, and experiencing profitability quicker are key attractions.

3. There is a known quantifiable proven formula.

4. Owner transition and training is available, and there is full control of strategic direction and ability to thoroughly review past records and company history.

5. The biggest advantage of franchising appears to be the reduction of risk you will be taking for your investment.

6. You also usually get better deals on supplies because the franchise company can purchase goods and supplies in bulk for the entire chain, and then pass that savings on to you and the other franchise units.

7. Customers are dealing with a “known” rather than an “unknown.”

THE DISADVANTAGES OF FRANCHISING

1. Some franchises can be very expensive. Franchisors expect you to follow their operations manuals to the letter. No flexibility on your part.

2. Buying a franchise is like marrying someone you haven’t known for long.

3. The relative security offered by franchisors may be exaggerated. Some franchisors are in for a quick buck.

4. Franchising as a pyramid scheme. Some companies try to make money by just collecting franchise fees, and won’t spend the time or money necessary to help their existing franchisees succeed.

5. Overcharging for supplies. Some franchisers may require you to buy supplies exclusively from them at inflated prices.

6. Fees for unnecessary training.

7. Misleading sales presentations. Some franchisors over-promise the moon in their pitches to prospective franchisees

BUSINESS OWNERS: IS YOUR BUSINESS FRANCHISE READY?

An appropriate first step in the decision to franchise is an examination of the question of whether or not a business concept is actually “franchisable.” Any organization seriously considering franchising should undertake this analysis before implementing a franchise strategy. While it is impossible to determine the franchisability of a business concept without a significant amount of analysis, most franchise experts are guided by the following criteria to assess the readiness of a company for franchising and the likelihood that it will achieve success as a franchisor.

1. Credibility: To sell franchises, a company must first be credible in the eyes of its prospective franchisees. Large organisation size, number of outlets, years in operation, strength of management are key credibility factors.

2. Differentiation: In addition to credibility, a franchise organisation must be adequately differentiated from its franchised competitors. This can come in the form of a differentiated product or service, a reduced investment cost, a unique marketing strategy, or different target markets.

3. Transferability of knowledge: The next criterion is the ability to teach a system to others. To franchise, a business must generally be able to thoroughly educate a prospective franchisee in a relatively short period of time.

4. Adaptability: Next, measure how well a concept can be adapted from one market to the next. Some concepts do not adapt well over large geographic areas because of regional variations in consumer tastes or preferences.

5. Refined and successful prototype operations: A refined prototype is necessary to demonstrate that the system is proven, and is generally instrumental in the training of franchisees. The prototype also acts as a testing ground for new products, new services, marketing techniques, merchandising, and operational efficiencies.

6. Documented systems: All successful businesses have systems. But in order to be franchisable, these systems must be documented in a manner that communicates them effectively to franchisees.

7. Affordability: Affordability merely reflects a prospective franchisee’s ability to pay for the franchise in question. This criterion is as much a reflection of the prospective franchisee as it is of the actual cost of opening a franchise.

8. Return on Investment: This is the real acid test. A franchised business must, of course, be profitable. But more than that, a franchised business must allow enough profit after a royalty for the franchisees to earn an adequate return on their investment of time and money.

9. Market trends and conditions: While not an indicator of franchisability as much as general indicators of the success of any business; these trends are key to long-term planning. Is the market growing or consolidating? How will that affect your business in the future? What impact will the Internet have? Will the franchisee’s products and services remain relevant in the years ahead? What are other franchised and non-franchised competitors doing? And how will the competitive environment affect your franchisee’s likelihood of long-term success.

10. Capital: While franchising is a low-cost means of expanding a business, it is not a “no cost” means of expansion. A franchisor needs the capital and resources to implement a franchise program. The resources required to initially implement a franchise program will vary depending on the scope of the expansion plan. If a company is looking to sell one or two franchised units, the necessary legal documentation may be completed at low costs. For franchisors targeting aggressive expansion, however, start-up costs can run into Hundreds of Thousands and more.

11. Commitment to relationships: Successful franchisors focus on building long-term relationships with their franchisees that are mutually rewarding. Unfortunately, not all franchise organizations understand the link that exists between relationships and profits. Strong franchisee relationships enable the franchisor to sell franchises more effectively, introduce needed changes into the system more easily, and motivate franchisees and their managers to provide a consistent level of products and services to their customers.

12. Strength of management: Finally, the single most important aspect contributing to the success of any franchise program is the strength of its management. More often than not, new franchisors will try to take everything on themselves. In addition to absorbing several new jobs for which the franchisor has little to no time, the franchisor needs to exhibit expertise in fields in which he or she may have little or no experience: franchise marketing, lead handling, franchise sales, ad fund management, training, and multi-unit operations management.

ENTREPRENEURS: HOW TO SELECT THE RIGHT FRANCHISE

Buying a franchise can be a daunting task. With thousands of franchises in over 70 different industries available worldwide, finding the best franchise can be like finding a needle in a haystack. Moreover, the best franchise for your neighbour might be a disaster in the waiting for you. How do you invest in the right franchise?

1. Why?: First, you must ask yourself certain questions and be very objective. Why do you want to own a franchise? If it’s to get rich or to get on easy street and not have to work, then franchising will probably not meet your expectations. If you are like many people who have the dream of owning your own business (but not being on your own), being your own boss and having control of your life, then franchising may be for you.

2. Strengths: Be realistic and fully understand your strengths and weaknesses. Invest your strengths into the right type of franchise. Don’t explore every franchise opportunity. Select only those you believe co-incides with your strengths

3. Research: Compile a list of the franchises that interest you. Go through their websites and set up meetings with the franchise manager/director.

4. Disclosure Document: Study the franchise disclosure document or prospectus. Here you want to see strong financial history, experienced people in key positions, and a company that has been in business for 3 years or more, the longer the better, has a large number of outlets and has few closed or bought back.

5. Franchise Agreement: Closely examine the franchise agreement. This is the contract between you and the company. Franchise agreements are always biased in favor of the franchisor, that’s just the way it is. This can be good and bad. The company can be unfair in it’s dealings with you and the franchise agreement may allow this, on the other hand you should want a strong franchisor.

6. References: Call as many franchisees as possible. Call at least 10. Find out how they are doing. The key question is “Would you buy this franchise again?”

7. Visits: Visit personally as many operating units as possible. At least three. Often the owner or manager will be more forthcoming in person than over the phone.

8. Verify Financial Information: If everything still looks good, then contact the sales rep and get as much definitive sales information as possible. Most franchisors will not make earnings claims but they will provide information with which you may extrapolate gross sales.

9. Advisors: If everything still looks good then go for it. If you are unsure, speak to qualified advisors.

THE FIVE REASONS FRANCHISES FAIL

Generally, on a global level, 30% of small independent businesses fail within the first year, with less than 20% going beyond year 5. Franchises, on the other hand, are significantly more successful. Less than 5% of franchises fail. The reason(s) for failure could be a number of factors, most of which could have been prevented by due diligence during the early phase. The following are the main reasons franchises fail:

1. The Idea. Whether you are franchising your own company or buying into a franchise system, how the concept is received by the community is critical. While burgers seem to have universal appeal, not all food chains meet with majority approval. Also, if your business model is complicated you are in for a struggle. You want to create an operational standard that can be taught to and replicated by any businessperson. A company may be successful when run by the entrepreneur who dreamed up the concept, however, if the business model or prototype is not easily duplicated the chances for success are not so optimistic.

2. Bad Location. Ask seasoned franchisees to name one of the most important keys to a successful franchise and undoubtedly they will say, “Location, location, location.” Even with a well-branded name, if you are off the beaten path, inconveniently located or in an isolated area the opportunity to be as lucrative as possible diminishes.

3. Poor Marketing/Advertising. Many well-established and reputable franchisors have marketing and advertising funds into which franchisees contribute monetarily. Chains like McDonald’s and Subway have national campaigns, while other types of franchises may advertise on a local level. Some franchise concepts require a lot of legwork on behalf of the franchisee. Depending on the business you chose, you may have to solicit your own clients, as in technical and computer support franchises. If you are considering a concept that requires outside sales skills and you lack them, you may want to rethink your choice.

4. Competition. There are approximately 160,000 franchises in operation in the US. That means a lot of competition. If your market already is saturated with a concept you may want to consider something that still is popular but not yet tapped out. Medical spas and restaurants offering healthy choices are gaining ground among the public but there is abundant room on the business owner side.

5. Unrealistic Expectations. New franchisees are notorious for having very high expectations for their businesses. It may take 2-3 years before you see a profit and if you don’t plan for that you may sink before you have a chance to swim.

A word to the wise: If you don’t like people you should not buy a franchise. If you want to make it you have to put in long hours and work with all kinds of personalities. It’s an undeniable fact that some people are more difficult to interact with than others. As a business owner you need to be able to interact well with people from all walks of life. The ability to manage employees also is essential to the success of your business.

Consultants can provide real value on many occasions but they can also be your worst nightmare. Some clichés include;

“A consultant will ask you for the time and then steal your watch.”

“Two things you don’t want to watch —– Sausage being made & a group of consultants trying to solve a problem.”

Worst Nightmare

The Hanging-on Strategy —- Consultants can become your worst nightmare in many ways. Some consultants have perfected hanging-on and use it as a proactive growth strategy. When a project starts nearing its end, new problems seem to mysteriously get identified. It may start as a training issue; the training issue grows into a management issue, a technology issue, a channel issue. Each issue can turn into another consultant project or an extension of the original project. Before you know it your costs for the consultant’s advice and assistance becomes a major factor on the expense side of your profit and loss statement.

Unclear expectations——- Some consultants are so skilled at presentations and proposal writing that deliverables become very intangible and they are not measurable. If they are not measurable, accountability goes out the window. This alone can turn your consulting experience into a nightmare. The scope of the project may have a continuous creep that costs you more and more money. Deliverables should be clearly defined and documented. However, even if you have done your homework and feel you have clear expectations things can go wrong.

Employee involvement ——-Your risk of failure is exponentially higher if you have not involved your key employees in the decision making process of hiring a consultant. It is essential that you have employee buy in when you decide you need a consultant.

Accountability ———-Consultants like to say they can lead a horse to water but they can’t make them drink. In other words, consultants can’t execute the plan for the company. As a result, it is very difficult to hold consultants accountable for the results. Often times the consultants make a fantastic presentation and sell their firm based on expertise they don’t really possess. They are skilled at quick research and can be convincing in demonstrating their breadth of knowledge about your business based on this quick research. On many occasions the impressive partners of the firm may seal the deal and then send in a bunch of MBA kids to do the work. It’s a fantastic learning process for the MBA’s that you end up paying for.

Who is in control —— Hiring the wrong consultant can be dangerous, it can cost you sales, profits and even employees if you are not careful. Don’t turn your business over to a consultant. Don’t make the mistake of thinking they know your business better than you. There isn’t any consultant out there that knows your business better than you and your employees know your business. If you do hire a consultant, stay involved and manage the process.

A variety of flavors —- Consultants come in a variety of flavors. They consist of former sales people, former vice presidents, MBA graduates, former CEO’s, former accountants, and even former waiters. There are many professional career based consultants that have developed impeccable reputations. There are also a lot of consultants that are consultants because they are between jobs or retired and bored. Most consultants can be very convincing of their expertise and many can back it up with performance. But, there are those that sound impressive simply because they are exceptional speakers and presenters. Some quote problems similar to what you may be experiencing from work with prior clients. That in itself does not guarantee that they can help solve your problems. Some can, some can’t. Some may do an excellent job for you but some may not.

Walk the Walk —- The problem with some consultants is the fact that they haven’t really walked the walk. They haven’t walked in your shoes. Most have some business experience but many have never owned their own business. Many lack the entrepreneurial experience of starting a business from scratch and growing a substantial revenue stream. Some have never owned or sold their own business prior to becoming consultants. Many lack the experience of running a family owned business, meeting payroll or managing cash flow. Some are well educated, some are not.

The Value of an Experienced Consultant

The right consultant can provide tremendous value to your firm. Just having an unbiased, outside pair of eyes look at your firm can reveal things that you as president and your executive staff can’t see. This is not uncommon because you’re caught up in the day to day operation of your business. Additionally, a consultant does not have the emotional, compassionate attachment to people and processes that you and your management team have developed. As a result, the consultant can help you identify and resolve issues that have gone unnoticed or ignored.

Consultants provide value not because they can do things you don’t know how to do but they often provide value because you and your team may not have the bandwidth to devote the time necessary to address many issues your company may face. This is especially true if those issues involve market or channel research. Research projects and technology projects are often the types of engagements that fall into this category. Training and employee development support are two other area’s where consultants provide exceptional value. The consulting industry is a huge and growing industry that is fast approaching the $100 Billion Dollar mark. A market of this size attracts many players. There are many professional, competent and trust worthy consultants out there but there are also some that may not be able to live up to your expectations. Sales & Marketing Management Magazine Surveys have indicated that over 75% of business executives responded that consultants are necessary for business success. These same survey results concluded that over 50% of the firms utilizing consultants were dissatisfied or only somewhat satisfied. Companies with less than $10 million in revenue reported a much higher confidence level in consultants than companies with over $10 million in revenue

So What Do You Do if You Think You Need a Consultant?

Start by utilizing the creativity and initiative of your own staff to identify the extent of your internal issues. The perfect vehicle to do this is called a “Discovery Analysis”. The discovery analysis utilizes a questionnaire that stimulates a thought-provoking process designed to identify issues and challenges that impact company profitability. The following sales discovery analysis is an example of this process. It will identify issues and challenges within the sales functions of the company. Being sales specific means that you must involve key sales personnel in the process. The independent answers to the questions posed should direct you to very focus-specific areas within your organization that need attention. The Owner/President, Vice President of Sales, Sales Managers and both inside and outside sales representatives should complete this discovery analysis.

A discovery team meeting should be held to review the results of this process. Each team member should prepare an independent S.W.O.T. (Strengths, Weaknesses, Opportunities and Threats) analysis based on their responses after completing this questionnaire. Only the three most critical areas in each category should be recorded:

Strengths: The three biggest strengths the company has that create competitive advantage.

Weaknesses: The three most critical weaknesses that must be addressed to maintain or create new competitive advantages or at a minimum put you on a level playing field with the competition.

Opportunities: The three biggest opportunities for your company to create competitive advantage, improve market share, increase revenues or create cost reduction through process improvement.

Threats: The three biggest threats created by either the internal or external environment. This may include government regulations, internal politics, competition activity or other external influences.

All responses should be collated from each group. Common areas of concern should be highlighted. A minimum of a one-day retreat attended by all management and key personnel is encouraged to ensure that proper attention and discussion is given to every area of concern that is identified through this discovery analysis. The following ten questions are examples of the 75 questions on the sales discovery analysis questionnaire.

Sample Sales Questions:

1. Do you record and monitor customer complaints?

2. Do you maintain a customer complaint database to track patterns and identify recurring problems?

3. Do you use this information to improve performance and increase customer satisfaction?

4. Do you solicit customer feedback?

5. Do you provide customers with a single point of contact?

6. Do you track customer satisfaction with internal operating statistic fill rates?

7. Can you identify waste in operating costs, such as the high cost of errors?

8. Do you receive phone system statistics to analyze calling behavior?

9. How do you measure customer satisfaction? Do you have a formal system? Such as a report card?

10. Does your sales force involve suppliers in the selling process?

You may find that by using this process you have identified th

Consultants are distanced from the daily politics of your business. They can provide you with unbiased opinions and fresh perspectives. The thing is, they can only do this if you allow them to do it.

I’ve done the consulting gig for years. In the process, I observed and experienced clients using my services well and not using my services well. I have listened to associates’ stories of how clients work with them, too. Sometimes the clients get great value for their money, and sometimes they get less than that.

How to Make the Most of Your Consultant Dollar

Isn’t the most important thing about working with a consultant that you get valuable results for your money and build a meaningful business relationship at the same time?

In order to do this, you must go into a relationship with your consultant with ‘collaboration’ in mind. The two of you must work together in order for the consulting relationship to work. As the client, you must be a willing participant in the business relationship with your consultant.

In order to get value for your consulting dollar, you must allow your consultant to learn and know about many aspects of your business.

If you go to a doctor with a pain in your side, but then refuse to let the doctor look at it and test it because you’re too modest or afraid of what he will tell you, the doctor won’t be able to help you.

Several years ago I consulted at a company to help them use software to create reports they needed. They did not want to show me their existing reports, however. How could I help them create the new reports if they refused to show me the existing reports? Like a patient who was afraid to show the doctor the pain in his side, this client was afraid to show me their reports. Two people at this client actually clutched the reports to themselves like patients holding their hospital robes closely.

After some explanations and coaxing from me, they finally let me see their pain and allowed me to help them. (Just for fun, I’ll tell you that this company is an underwear manufacturer, and leave it at that!)

A consultant’s role is to give you business information that you need in order to make informed decisions. They do not have the responsibility to make your business decisions, nor do they have the control. The responsibility and control (which go hand-in-hand) are yours.

Before You Decide to Work with a Consultant

First of all, know what you want. Define it before the consultant agrees to work with you. Write it down. List quantifiable and/or tangible objectives. Write out what you think you want the consultant to do.

What goals do you want to accomplish?
What is the scope of work?
What results do you want the consultant (and your business) to achieve?
What do you think is the timeframe?
What is your budget for this project?
As You and the Consultant Agree to Work Together
Discuss how the consultant works. For example, what methodology does she use to gather information, process it, draw conclusions, and make recommendations? There is no magic answer to this question. Most consultants, over time, will develop their own methodology to perform their work. Just make certain they have a plan that is the basis for their methods.

State the scope of work: what the consultant will deliver, when they will deliver it, and how they will deliver it.

State who will do the work (if there is a team of consultants). Also state where the consultant(s) will perform the work.

Agree on the timeframe, money, and invoicing.

List points of time at which you and the consultant will touch base to discuss where the project is at, how it is coming along, and if adjustments need to be made. It’s a good idea to schedule regular meetings or conference calls so that issues do not become surprises.

What Else to Look For?

“The worst consultants believe their companies are smarter than their clients, instead of recognizing that they’re extensions of their clients’ resources. Junior consultants in several well-known firms especially show this trait; it’s part of their firms’ core cultures,” writes Peter Keen of Computerworld. He continues, “Arrogant cultures make lousy partners and are in the rip-off business without realizing it. Because they believe they’re so much smarter, they make many mistakes that the more collaborative and respectful consulting firms don’t make.”

Look for consultants who want to form a collaborative effort with you and your business. Likewise, you must collaborate with the consultant in order to get the most bang for your buck.

Two More Do’s and Don’ts

Treat consultants as consultants, not as employees.

If you treat consultants as insiders rather than as outsiders, you will not receive the benefits of having them work with you. This is more of a mind process for you as the client. If you think of your consultants as an extension of your employee base, you may not be able to hear them when they tell you important information. Remember, as outsiders they are able to skip most of the politics and inefficiencies of your company in order to unearth diamonds in the rough. These are the hidden diamonds you are paying them to find. If you treat them as if they are employees, you will hinder that creative process for which you are paying them.

Treat consultants as adults.

Believe it or not, sometimes clients treat consultants as if they were children. This happens most often when consultants are told to not contact certain people for information, even though the contact and the information is important for the consultant’s work. I’ve also heard about consultants being scolded as if they were children.

On the surface, the reason that consultants should not be treated like children is obvious; no one wants to be treated like that. It’s humiliating. The deeper reasons are the same as for not treating consultants like employees: clients who treat their consultants like children will not get the benefits out of the consultant that they are paying for.

In Conclusion

Working with a consultant can be rewarding for your business. It’s up to you to define your goals, how you want a consultant to help achieve those goals, participate in a collaborative relationship, and let the consultant do their work in order to give you value for your consultant dollar.

Glory Borgeson is a business coach, author, and speaker, and the president of Borgeson Consulting, Inc. She specializes in working with executives in the “honeymoon phase” of a new position (typically the first two years) to coach them to success. Glory is the newly appointed executive’s Secret Weapon!. Top athletes have a coach; why not you?

Since that time, I have had to employ a number of consultants, I have been a consultant myself for almost 20 years, and I have worked with many other consultancies both large and small. The following suggestions for selecting a consultant are based on my experience as a manager and in the consultancy field.

What are the three targets that one must hit to successfully select a consultant? (Note; I am using the term “consultant” to refer to either one person or a consultancy firm). Firstly and most obviously, the consultant must be able to actually do the work. Secondly, the consultant must be able to fit in with the people in your organisation and particularly those who will be working on this project. Finally, if the consultant is good, you should always improve your own knowledge as a result of the project.

1. Can the consultant do the work? Seems obvious, but there are some traps. For instance, I remember when starting out as a consultant in partnership with another (who was also new to the role), submitting a tender for a fairly large job and being selected in the final few for interview. Individually, we’d had some experience in the type of work, but not as a partnership, nor had we worked in the prospective client’s industry. We won the job. Why? The client saw in us some creativity and freshness that was not evident in our competitors. However, this was an unusual client. Normally, I would not suggest taking on a consultant (like us) who has not had the depth nor breadth of experience in the project. So, unless one of your criteria is “freshness”, in terms of selecting for experience here are some tips:

o What are your specifications? Be very clear on the outputs you will require in the project. These should always be measured in terms of quality, quantity, time and cost. Use these output criteria to compare consultants.

o Who has recommended this consultant? Check their references – ask for the contact of the last job they did. When checking references, use your above “output criteria” as a guide.

o Are you looking for someone to implement solutions to a problem you have identified, or are you looking for someone to help you identify and clarify the problem? Or both? Sometimes it can be useful to split the project into these two parts.

o In discussion with the prospective consultants, do they really give you the time to say what you want before jumping to conclsuons? If they appear to “have all the answers”, chances are they do not listen very well.

o Does their suggested solution appear to be specifically designed for you or is it a “one size fits all”? Be wary if it is not specifically designed to meet your project criteria.

o Do they explain the things they can’t do as well as those they can? This is always a good test of integrity, truefulness and reliability.

o Is their initial response to your request up to your quality standards, sufficiently detailed (but not overly so) to make a decision, and within your time expectations?

o Does the consultant have depth of expertise in the subject matter and breadth of expertise in its application?

o Ask the consultant what is unique about him or her? What makes them stand out from all the other consultants you might choose?

2. Secondly, will the consultant fit in with the people they will be working with? This is a critical implementation issue, as whilst they might be able to do the work, if they can’t work harmoniously with the people, the results will be less than optimal. For instance, we once worked on a major government project (total budget in excess of M$43) where the client continually kept us at arm’s length (for example, on a residential workshop, we were not encouraged to eat or mix socially with the client project leaders). We met the output requirements for the client, but had we been allowed to work more closely with the client, they would have received a lot more value added service. In this case, the client should have selected another consultant.

The following tips will help ensure you get the right client/consultant match.

o Is the consultant likely to be able to gain the respect and trust of your key stakeholders?

o Could you trust this person (people)?

o What is the process they will use? i.e, How will they work within the organisation? How will they be seen? Try to visualise the consultant working with you and the other people as they complete the project. Will it work? Is it likely to be a good partnership?

o Who specifically (from the consultancy) will be working on the project and what will be their role? For example, will the people you are interviewing be carrying out the work? Be wary of consultancies that have “front people” that win the jobs, then send in less experienced people to do the work.

o Ask the consultant to describe what a “good working relationship” looks like to them. Is the description the consultant gives you of a “good working relationship” likely to be, and to be seen to be, a partnership?

3. Thirdly, will you be able ot learn from this consultant? One of the reasons you hire a consultant is that you (or your organisation) does not have the depth nor breadth of experienece to successfully carry out the project. One of your aims should be to increase your own experience through this project. For example:

o Why did you decide to employ a consultant? What were the gaps you could not fill internally?

o What will you be likely to learn from this consultant?

o Will you increase your knowledge of both process management (how the consultant works) as well as content management (their area of expertise)?

o Will the consultant strengthen and support your role in the organisation?

Finally, if all of your criteria have been met and you cannot decide between two apprently equal consultants, consider setting them a small task or part of the project to complete as part of the selection process. For example, some years ago we were in competition with another large consultancy for a sizeable project with an initial budget in excess of M$1. The client could not decide between the two of us, so he asked us each to undertake a small project (for which he paid us both), which would ultimately become part of the larger project. When we each completed the small project, he had an excellent idea of both our capability and the manner in which we worked. After all, isn’t the final selection criterion is actually trying the consultant out?

Oh, yes. In case you’re wondering, we won the job!

Copyright © 2006 The National Learning Institute

Bob Selden has been a consultant since 1987. Prior to th

INTRODUCTION

The need for outside contract services is nothing new. IT-related
consultants have been around since the computer was first introduced for
commercial purposes. Today, all of the Fortune 1000 companies have consultants
playing different roles in IT, either on-site or offshore. Many companies are
satisfied with the work produced by their consultants, others are not. Some
consultants are considered a necessary evil who tackle assignments
in an unbridled manner and charge exorbitant rates. For this type of
consultant, it is not uncommon for the customer to be left in the dark
in terms of what the consultant has done, where they are going, and if
and when they will ever complete their assignment. Understand this, the
chaos brought on by such consultants are your own doing.

IT consultants offer three types of services:

Special expertise – representing skills and proficiencies your company is currently without, be it the knowledge of a particular product, industry, software, management techniques, special programming techniques and languages, computer hardware, etc.
Extra resources – for those assignments where in-house resource allocations are either unavailable or in short supply, it is often better to tap outside resources to perform the work.
Offer advice – to get a fresh perspective on a problem, it is sometimes beneficial to bring in an outsider to give an objective opinion on how to proceed. A different set of eyes can often see something we may have overlooked.
Whatever purpose we wish to use a consultant for, it is important
to manage them even before they are hired. This means a company
should know precisely what it wants before hiring a consultant.

ASSIGNMENT DEFINITION

Before we contact a consultant, let’s begin by defining the
assignment as concisely and accurately as possible; frankly,
it shouldn’t be much different than writing a job description
for in-house employees. It should include:

Scope – specifying the boundaries of the work assignment and detailing what is to be produced. This should also include where the work is to be performed (on-site, off-site, both) and time frame for performing the work.
Duties and Responsibilities – specifying the types of work to be performed.
Required Skills and Proficiencies – specifying the knowledge or experience required to perform the work.
Administrative Relationships – specifying who the consultant is to report to and who they will work with (internal employees and other external consultants).
Methodology considerations – specifying the methodology, techniques and tools to be used, along with the deliverables to be produced and review points. This is a critical consideration in managing the consultant. However, if the consultant is to use his/her own methodology, the customer should understand how it works and the deliverables produced.
Miscellaneous in-house standards – depending on the company, it may be necessary to review applicable corporate policies, e.g., travel expenses, dress code, attendance, behavior, drug test, etc.
Many would say such an Assignment Definition is overkill. Far from
it. How can we manage anyone if we do not establish the rules of the
game first? Doing your homework now will pay dividends later when
trying to manage the consultant. Assignment clarity benefits both
the customer and the consultant alike. Such specificity eliminates
vague areas and materially assists the consultant in quoting a price.

SELECTING A CONSULTANT

Armed with an Assignment Definition, we can now begin the
process of selecting a consultant in essentially the same manner
as selecting an in-house employee. Choosing the right consultant is
as important a task as the work to be performed. As such, candidates
must be able to demonstrate their expertise for the assignment. Certification
and/or in-house testing are good ways for checking required skills
and proficiencies. Also, reviewing prior consulting assignments (and
checking references) is very helpful. Examining credentials is
imperative in an industry lacking standards. For example, many
consultants may have a fancy title and profess to be noted experts in
their field but, in reality, may be nothing more than contract
programmers. In other words, beware of wolves in sheep’s clothing.

Ideally, a consultant should have both a business and technical
background. True, technical expertise is needed to perform IT
assignments, but a basic understanding of business (particularly your
business) is also important for the consultant to adapt to your
environment. This is needed even if you are using nothing more than
contract programmers.

In terms of remuneration, you normally have two options: an hourly
rate or a fixed price. For the former, be sure the work hours are
specified, including on-site and off-site. Many clients are
uncomfortable paying an hourly wage for an off-site consultant. Under
this scenario, routine status reports should be required to itemize
the work performed and the time spent. However, the lion’s share of
consulting services are based on a fixed price contract. Here, the
role of the methodology becomes rather important. Whether you are
using “PRIDE” or another Brand X methodology, it is important the consultant
and client both have a clear understanding of the project’s work
breakdown structure, the deliverables to be produced, and the review
points. From this, an effective dialog can be communicated in terms
of managing the project. Further, the methodology becomes the basis
for the preparation of estimates and schedules.

After examining your candidates, it now becomes necessary to
balance the level of expertise against price. Sure, a senior
person can probably get the job done in less time, but perhaps
the costs may be too high for your budget. “Expertise” versus
“expense” becomes a serious consideration at this point.

Whomever is selected, it is important that a written agreement
be prepared and signed. The agreement should reference the Assignment
Definition mentioned above and any other pertinent corporate
verbiage. Very important: make sure it is clear that the work
produced by the consultant becomes your exclusive property (not the
consultant’s). Further, the consultant shouldn’t use misappropriated
work from other assignments. Finally, add a clause pertaining to
workmanship; that the consultant will correct at his/her expense
any defects found; e.g., defective software, data base designs, etc.

MANAGING THE CONSULTANT

The two most obvious ways to manage consultants is by having
them prepare routine status reports and project time reports. Such
reports should be produced on a weekly basis and detail what the
consultant has produced for the past week and detail his/her
plans for the coming week. You, the client, should review and
approve all such reports and file accordingly.

A methodology materially assists in tracking a consultant’s
progress. As a roadmap for a project, the methodology takes the
guesswork out of what is to be produced and when. Without
such a roadmap, you are at the mercy of the consultant. Along
these lines, I am reminded of a story of a large manufacturing
company in the UK who used one of the large CPA firms to
tackle a major system development assignment. The system was
very important to the client, but lacking the necessary in-house
resources to develop it, they turned to the CPA firm to design and
develop it. Regrettably, the client didn’t take the time
to define the methodology for the project and left it to the
discretion of the CPA firm. The project began and the CPA
firm brought on-site many junior staff members to perform
the systems and programming work. So far, so good. However,
considerable time went by before the client asked the senior partner
about the status of the project (after several monthly invoices). The
senior partner assured the client that all was well and the
project was progressing smoothly. More time past (and more
invoices paid) with still nothing to show for it. Becoming
quite anxious, the client began to badger the consultant as
to when the project would be completed. Finally, after several
months of stalling, the consultant proudly proclaimed “Today
we finished Phase 1….but now we have to move on to Phase
2.” And, as you can imagine, there were many more succeeding
phases with no end in sight.

What is the lesson from this story? Without a methodology roadmap,
it is next to impossible to effectively manage a consultant. The
project will lose direction almost immediately and the project will
go into a tailspin. The only person who wins in this regard
is the consultant who is being paid regardless of what work
is produced. Instead of vague generalities, you, the client,
have to learn to manage by deliverables.

CONCLUSION

My single most important recommendation to anyone considering
the use of outside consultants is simple: Get everything in
writing! Clearly define the work assignment, get a signed
agreement spelling out the terms of the assignment, and
demand regular status reports.

I am always amazed how companies give consulting firms
carte blanche to perform project work as they see fit. Abdicating
total control to a consultant is not only irresponsible, it is
highly suspicious and may represent collusion and kickbacks.

There is nothing magical in managing consultants. It requires
nothing more than simple planning, organization, and control. If you
are not willing to do this, then do not be surprised with the results
produced. Failure to manage a consultant properly or to adequately
inspect work in progress will produce inadequate results. So, do
yourself (and your company) a favor, do your homework and create a
win-win scenario for both the consultant and yourself.

Hire a consultant for their field of expertise.

For the business:

Define your goals and expectations before you begin your consultant search. The more focused your requirements, the more effective your selection of a consultant will be.
For the consultant:

What do you really know? What are your demonstrated strengths? Define your area of expertise narrowly. Work towards developing a result-based portfolio.

Hire a consultant to solve problems.

For the business:

If something needs tweaking in your company, allow your well-qualified consultant to do their job. You may think your problem in staff retention is on the manufacturing floor, when it may lie in faulty HR practices. Offer your consultants your thoughts, but be open to their observations. Their overview and fresh perspective may give your company new clarity.
For the consultant:

Tap into your intuitive side. Examine each situation as it stands. Textbook rules are not always the only way to approach a challenge.

Hire a consultant to supplement existing staff.

For the business:

Do a comparison of total employment cost. A full time employee, with benefits and other perqs added, will almost certainly cost more than a consultant. In addition, a consultant may complete work faster and more efficiently than house staff.
For the consultant:

When creating your proposal, be realistic in your time estimates and fees. Factor in your own overhead, travel, benefits and taxes.

Hire a consultant to implement changes.

For the business:

The well-positioned consultant as outsider can be more effective in gaining consensus among employees. Without immersion in daily operations, change proposed by consultants may be accepted more readily by employees.
To the consultants:

To direct change in a company, be certain you understand the psychology of change. Change can only be effectively created through a perception of benefits to the staff. Prepare for resistance, and be ready to change objections to positives.

Hire a consultant to train.

For the business:
Consultants are available to teach almost any skill. Be certain their experience comes from practice, not theory. Hands on training shouldn’t come from book learning alone.
For the consultant:

Have practical experience to offer.

Hire a consultant to be the “fall guy”.

For the business:

Keeping company morale high may require an outside heavy to make cuts or unpopular adjustments to your company. Fully explore options with your consultant, and inform them of your plans to downsize, consolidate or restructure.
For the consultant:

You get paid to do something no one else wants to do. Be prepared and accepting of your responsibility if you accept this kind of assignment.

Hire a consultant to start your business.

For the business:

A start-up consultant can assist you in all phases of start-up from initial funding and business plans to growth planning. Determine your own weaknesses and work with a consultant that has the skill set you lack.
For the consultant:

From online businesses to Fortune 100 companies, new ventures need your specialized talents. Review your own skill set for tools which would benefit a start-up.

Hire a consultant for their contacts.

For the business:
A consultant may be able to provide you with elusive introductions for fund raising, entertaining, community support or lobbying. Even if this is not your primary reason for hiring a consultant, explore how their contacts may benefit your company.
For the consultant:

Your personal networking can be a bonus to your clients. Offer appropriate contacts to your clients and potential clients. Expanding your sphere of contacts will not only benefit your business, but clients will appreciate your introductions.

Whether your company is considering a consultant, or you are a consultant, understanding the key reasons for contracting help can make your efforts more successful.