When you base your business on reputation, the last thing you want is a complaint. That’s especially true of management consultancy.
Consultancy is now big business in the UK, growing at around 7 per cent a year to become a £6 billion industry.
During the last recession, when firms were shedding staff, many people chose to exploit their expertise and go into management consultancy. But while this niche has many advantages for the entrepreneur – you can pick and choose projects, your time can be turned into money – there are pitfalls, too.
So what happens when you become a victim of your own success and demand outstrips supply?
If you take on new staff, can you be sure they will uphold your values and provide the same service that you do? There are other issues that arise when you are – in effect – your own brand. If you fall sick, or are involved in an accident, your income is cut off.
Protecting your consultancy business
Many entrepreneurs are so focused on building their consultancy business and providing brilliant service that they don’t stop to think about how they would cope with challenges.
“Consultants very often have a set brief to deliver for a job,” explains Ciaran Morrissey, from Hiscox, which provides cover to 22,000 management consultants. “But what if they don’t deliver on those points, or they miss a deadline? This can lead to complaints and even legal action.”
Consultants need to understand their contractual obligations so they can be prepared. It’s crucial to take legal advice when drawing up terms – make sure you understand the fine print. It’s important not to overpromise and ensure goalposts aren’t moved over the course of the contract.
Professional indemnity insurance can help guard against the financial pain of missing targets, but it’s vital to nail down goals at the outset and stick to them.
“It’s also very important that consultants keep up with all the latest developments in their industry,” says Morrissey. “If your advice is out of date, that could be a problem.”
Keeping comprehensive records, showing progress and a detailed breakdown of the work you have done, is also a must.
It’s worth planning for sickness or injury. What will happen to your business if you are unable to do your job? Personal accident cover will provide cash for a deputy if something happens to you, but it’s worth thinking in advance about who that individual might be.
Dealing with an unhappy customer
Consultancy, at its core, is about the transfer of knowledge, and sometimes customers don’t like what they hear, resulting in a dispute. If there are problems with your work, the impact on your business could be substantial; you may have to return your fee, defend a claim or pay a settlement if your client proves that you have lost them money.
It’s important to have professional indemnity insurance so that these costs are covered. But a good insurer will do more than pay out money.
“It should help resolve disputes by getting all parties around the table,” Morrissey explains. “Try to get them to agree on what elements would mean that a brief has been fulfilled.”
Regardless of the scale of the issue – although a grumble will be treated differently to a formal written complaint – it’s important to tackle it head on and work towards a resolution. Sometimes the unhappy party just wants to be heard and will be satisfied with an explanation or detailed breakdown of services rendered.
That said, if the consultant feels that they have met their obligations in full, an insurer would back their client. “If our customer doesn’t think they’re in the wrong, we’ll defend them all the way to the courts,” Morrissey says. “If there’s a complaint, we also pledge to respond within 48 hours.”
Many consultants think that their liability ends once a contract is completed. This is not the case: it lasts at least six years after the work is carried out, perhaps longer. This is why there are forms of cover that will protect the consultant between projects, in case disputes arise.
Building a consultancy business can be hugely rewarding. Your expertise brings big gains for clients. Having proper cover and a decent risk-management strategy will allow you to focus on doing what you do best – helping people.
Content on this page is paid for and provided by Hiscox, sponsor of the Adventures in Business hub on the Guardian Small Business Network.
