When Startup Consulting Can Benefit Your Business

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When Startup Consulting Can Benefit Your New Business

The challenges to startups are many, and insights into how to overcome them can feel distant. Hiring a qualified startup consultant is one way to sidestep pitfalls, accelerate growth, and invest in sustainability.

It is a well-known fact that 20 percent of new businesses fail during the first two years of being open (U.S. Bureau of Labor Statistics). The failure rate climbs as time goes on to 45 percent during the first five years and 65 percent during the first ten years.

The causes for these failures include lack of financing, inflexibility, rapid expansion, a flawed business plan, poor location, or that the business is not satisfying a need.

To sidestep these pitfalls, business owners may choose to call on startup consulting resources.

What is a Startup Consultant?

Startup consultants often mistakenly get confused with business coaches or consultants, contractors, or mentors; however, the services they provide necessitate a separate category altogether. Just as there are many types of startups, there are many types of consultants & contractors who support startups. Let’s take a closer look at the role each of these types of consultants and advisors can play for startup businesses.

All consultants are not good consultants - this post identifies the qualities of a good consultant, so you make sure to hire a qualified one.

Startup Consultant

  • A startup consultant is an outside person or entity that is brought into a business on a short-term basis during the early stages of the company’s life cycle to help the business achieve a specific goal. Startup consultants are typically focused on assisting companies in laying a strong foundation for financial success and future growth. They work directly with the business owners to help them reach informed decisions on sustainable paths forward for their business. Importantly, startup consultants are not part of the team but rather remain independent of the business entirely for the duration of their engagement. Startup consultants are typically compensated on a project basis.

Business Consultant

  • A business consultant works with senior management teams in established companies to develop strategy at the corporate level in areas such as marketing, supply chain, or expansion. Business consultants also advise on areas such as change management, values, and business transformation. Like startup consultants, business consultants are most often compensated on a project basis.

Freelance Contractor

  • A freelance contractor is brought into a startup business to be a part of the team to fulfill a certain set of responsibilities. As they are more involved in day-to-day operations than a startup consultant, they also tend to be paid less.

Startup Mentor

  • A startup mentor is someone who has experience launching a startup themselves. The value they bring is in their guidance in a space (e.g., industry, market) that is similar to the one the client is trying to enter. Startup mentors may or may not be compensated for their contributions, and their time is typically given on an ad-hoc basis.

Startup Coach

  • A startup coach is a professional whose value is derived from the questions they ask of the founders. A coach’s role is to serve as a sounding board, an accountability partner, and a mirror to the founder as it pertains to the founder’s objectives and actions. Coaches are typically compensated on an hourly or packaged-services basis and may work with one or more people at the company at a time.

When Should You Hire Startup Consultants?

Startup consultants typically fill a short-term need for targeted work. They provide structure and focus for what may otherwise be a very organic and potentially disorganized germination period for a business. It is vital for a business owner to dedicate time early in the life cycle of the business to work on, not in, the business. If delayed for too long, the owner can become so mired in the everyday operational details that they risk unknowingly steering the business off course. (This is where hiring a fractional COO comes into play). A startup consultant asks questions necessary to help the business owner set realistic goals from the outset while preparing the resources and plans necessary to overcome inevitable obstacles.

Some of the areas in which startup consultants may lend their expertise include:

Market research

  • Performing in-depth market research is a necessary first step towards obtaining credible knowledge about competitors and target markets. Market research outcomes lay the groundwork for a business’s strategic decision-making. Startup consultants take a deep dive into the market segment a business is targeting, providing the founder with insights into industry trends and competitor strengths and weaknesses. Market research outcomes inform the foundation of a detailed marketing plan and are critical to developing a business’s unique value proposition.


  • A startup consultant can be vital to a business’s ability to sustain itself due in large part to the expertise they offer in strategy and planning. Founders benefit from the independent and educated perspective that startup consultants provide on the business idea, launch strategy, and financial sustainability. A startup consultant helps a founder put a strategic plan in place that keeps the business profitable long-term.

Task planning

  • The number of tasks necessary to transform a business idea into a business is overwhelming and can quickly lead to founder burnout and business failure. A startup consultant can prevent adverse outcomes by defining the steps necessary to bring a viable business idea (product or service) to market. For instance, they might plan marketing activities related to creating and sustaining a brand identity, identify the steps necessary to reach potential customers or create a roadmap for business development.

Financial business formation

  • Financial modeling is one of the most beneficial aspects of hiring a startup consultant. Founders are typically well-versed in their business idea but may lack the experience or skills necessary to build a financial model around it. A startup consultant works with a founder to examine the financial viability of their idea. Startup consultants can map realistic budgets necessary to operationalize a business idea, launch a product or service, and sustain the business long-term.

Operational and management framework

  • Startup consultants bring expertise on how to run a business day-to-day, including policies and procedures for staff, managing cash flow, and best practices for customer engagement. Moreover, startup consultants can help founders evaluate management strengths and opportunities for improvement, make outsourcing recommendations, and enhance recruitment and training efforts.

What are the Benefits of Hiring Startup Consultants?

With so many demands on a founder’s time and financial resources, it can be difficult to justify the investment in a startup consultant. However, the risks mitigated and opportunities seized on account of the expertise a startup consultant can offer stand to pay off the investment several times over.

Startup consultants benefit early-stage companies in the following areas:

Access to broad knowledge and skilled professionals

  • Due to the nature of their business, startup consultants tend to have a high volume, qualified network of subject matter experts and vendors they can call upon. Their network of reliable, skilled service providers saves the founder time and mitigates risk, enabling the owner to make better business decisions.

Validate business model

  • A startup consultant can assess a business’s capabilities, identifying opportunities and challenges to growth inherent in its business model. In this way, s/he helps the founder select and implement a sustainable business model.

Outside perspective

  • A business founder is undoubtedly the most passionate person within the business. While their belief in and commitment to the business is beneficial, it can also cause them to overlook internal and external threats. A third-party startup consultant has a valuable perspective to offer in identifying issues before they become unmanageable.

Risk mitigation

  • Startup consultants assess company procedures and hiring practices, finances, and more with an eye toward risk reduction and mitigation. While they are not attorneys and cannot replace the value that attorneys bring to the business, they can provide insight into favorable and unfavorable business practices before the risk (and consequences) of any one or more actions become too great.

Focus on measurable results

  • A startup consultant will partner with the business owner to identify realistic goals and key performance indicators (KPIs) necessary to reach those goals. By keeping track of a business’s progress toward reaching its goals, the startup consultant helps the business focus its operations on results that matter, week in and week out, towards meeting its goals.

How Much Does Startup Consulting Cost?

The cost structure for startup consulting varies from project-based fees to performance-based fees to monthly retainers. In all cases, the cost is determined based on the scope of work, the complexity of the services provided, the experience the consultant brings to the work, how competitive the industry is, considerations related to the physical location, and whether the work will be ongoing.

The decision whether to invest in startup consulting may be best made by weighing the opportunity cost of the time it takes, and the risk borne, going it alone.

How to Choose the Right Startup Consultant

Consider the following factors in evaluating potential startup consultants:


Ask the prospective consultant to share case studies with you that demonstrate their work with past clients. Having a hard time gauging what’s real and what’s marketing? Ask them for client references. Engaging in an honest discussion with past clients is an excellent way to get your questions answered and to learn more about what it is like to work with this consultant. Don’t forget to ask them to give specifics about their ROI.

Gain clarity on the type of help you need:

You wouldn’t go to an oral surgeon for a hip replacement, so don’t go to a tech startup consultant for help launching your in-person bakery. You may need a business generalist to help with your operations, or you may need a finance wizard to help tighten up your books and set financial KPIs. Before you hire the startup consultant with the best website or the one that helped your friend a few years ago, get specific about what your needs are so that you engage the best resource possible - for you. (Still not sure where to start? Here are the qualities of a good consultant.)

Consider your location needs:

Will you need the consultant to visit your office weekly, quarterly, or … ever? Can their work be done effectively virtually, or do they need to be in the field with the team? Consider the importance of the depth of the talent pool that you are drawing from as you consider where to source your startup consultant.

What to Ask When Interviewing a Startup Consultant

As with any interview, ask open-ended questions to get the most beneficial information. Start questions with “what” or “how”, remembering to ask just one question at a time in order to allow the consultant time and space to respond thoughtfully.

  1. What past client project best demonstrates your expertise in this area?
  2. What challenges have you faced in past client engagements, and how did you overcome them?
  3. What startup businesses in our industry would you like to work with?
  4. How do you pre-qualify a new potential client?
  5. Knowing that you are still getting to know our business, what aspects of our business would you pay special attention to first?
  6. We’ve shared some preliminary financial information with you. What areas of our business model and/or financial situation give you concern, and what areas give you confidence?
  7. How do you measure the results of the work that you do? After one-to-three years after the conclusion of an engagement, how do you gauge the success of your work?

Still not sure if you need to hire a consultant? Take a look at this post: When to Hire a Consultant.

The challenges to startups are many, and insights into how to overcome them can feel distant. Hiring a qualified startup consultant is one way to sidestep pitfalls, accelerate growth, and invest in sustainability.

Interested in learning more about Open Eye’s startup consultants? Contact us via info@openeye.email.

Anne Shoemaker
  • Strategy and Consulting

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