Nottonson: Beware consultant’s contract

In today’s business marketplace, entrepreneurs acknowledge they don’t know everything about their businesses. Wise business people seek the advice of those who have more experience in a particular aspect of a trade or industry.

By: Ira Nottonson

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In many cases, the consultant with a variety of experiences can prove even more helpful than those with experience in the industry itself. What you can expect from these consultants and what you need to pay for that expertise is, unfortunately, a little vague, especially with those people who have had limited experience in the use of such experts.

There is literally no end to the categories of advisors available to the needy business owner. There are those experienced in human relations, marketing and advertising, financial paperwork, investment capital, and valuation and sale (or purchase) of businesses. Others offer expertise in the future direction of the business including vertical and horizontal growth, merger and acquisition, procedures and protocol, manufacturing and distribution, legal aspects of all kind from contract recommendations to litigation, just to name a few.

Every business owner has the prerogative of hiring personnel to handle any or all of the above or hire a consultant for the purpose of handling a specific problem without the need to absorb all the collateral costs of in-house personnel.

The usual relationship between a company and a consultant is either for a designated job or for a designated period of time. In order for the consultant to allocate the appropriate time for the client it is not unusual for a contract to be offered which designates either the job to be done or the time frame within which it is expected that performance will be effected.

There will, of course, be a designated dollar amount allocated to this purpose. Keep in mind that the contract will, as all contracts are, have some language created by the consultant that might be unclear to the average business person not familiar with this relationship.

In many cases, the language might even be subject to ambiguity and could use a third person for a reasonable interpretation. This is not necessarily to suggest that legal advice be warranted in the case of every such relationship. It is meant to suggest however that an objective third party might eliminate the ambiguities before they become locked in concrete and problematic to either party.

Whatever the purpose or the time frame involved, the consultant is certainly entitled to be appropriately compensated for his or her expertise and time involvement. On the other hand, the entrepreneur is equally entitled to get value for money, to get what he or she is told will be the quid pro quo of the relationship. And then, of course, there is the basic ambiguity of the relationship itself.

There is no magic, and rarely will a consultant make a promise to do something that is either not possible or seriously problematic. There is a logic to each such relationship, and it is incumbent on both parties to recognize the problem, the potential approaches, and the reasonable ability of any experienced person to bring solution to the problem.

In every such relationship, there are expectations on the part of the entrepreneur that must be carefully examined. Just as a patient expects the dentist to fix the cavity for which he or she will be compensated, there ought to be a method by which the entrepreneur will have his or her expectations achieved relative to the payment to be made. It shouldn’t just be "I’ll do the best I can for the dollars you’re paying me" unless this is, in fact, what the relationship is designed to be.

Most of the time, there are more specific designations of success that are equivalent to the dollars being paid. As with all contract relationships, make sure that the words mean what you think they mean and make sure that both of you are on the same page in terms of expectations.

Ira Nottonson is a business/legal consultant for small businesses and a business-valuation expert. He lives in Boulder and can be reached at (303) 447-9672 or e-mailed at [email protected]. Nottonson will be teaching "Secrets of a Successful Business Plan" at the Boulder Chamber of Commerce. Call the chamber at (303) 442-1044 for information.