Tag Archives: consultant

Why Would Any Business Ever Hire A Consultant?

True story: Charles Steinmetz. They called him the wizard of Schenectady. I’m quoting Smithsonian Magazine here:

Before long, the greatest scientific minds of the time were traveling to Schenectady to meet with the prolific “little giant”; anecdotal tales of these meetings are still told in engineering classes today. One appeared on the letters page of Life magazine in 1965, after the magazine had printed a story on Steinmetz. Jack B. Scott wrote in to tell of his father’s encounter with the Wizard of Schenectady at Henry Ford’s River Rouge plant in Dearborn, Michigan.

Henry Ford was thrilled until he got an invoice from General Electric in the amount of $10,000. Ford acknowledged Steinmetz’s success but balked at the figure. He asked for an itemized bill.Ford, whose electrical engineers couldn’t solve some problems they were having with a gigantic generator, called Steinmetz in to the plant. Upon arriving, Steinmetz rejected all assistance and asked only for a notebook, pencil and cot. According to Scott, Steinmetz listened to the generator and scribbled computations on the notepad for two straight days and nights. On the second night, he asked for a ladder, climbed up the generator and made a chalk mark on its side. Then he told Ford’s skeptical engineers to remove a plate at the mark and replace sixteen windings from the field coil.

InvoiceThey did, and the generator performed to perfection.

Steinmetz, Scott wrote, responded personally to Ford’s request with [the invoice shown here]: $1 for making chalk mark, and $9,999 for knowing where to make the mark.

Ford paid the bill.

Why do I retell this story? Three reasons:

  1. The best consulting is providing pinpointed knowledge and experience to solve specific problems. For example, don’t have a consultant write your business plan; have a consultant read and critique your business plan, recommend financing strategies, and point you in the right direction.
  2. Make a distinction between outsourcing and consulting. Outsourcing is having somebody else do the actual work. Consulting, in theory at least, is buying targeted know-how and experience.
  3. Not exactly directly related to this story, but just a reminder: turn to consulting carefully. Search for the expertise you really need, and always check references and talk to past clients.

And, for emphasis, this Facebook update from a friend of mine, Erika Leaf, yesterday. It says it very well:





(Editing note: my thanks to commenter Tim (no last name) who provided the link to the real story after I’d published this post with a general reference to that story and an apology “I heard this story a few years ago. I’ve exhausted my web search capabilities, but failed to find a name, date, or any corroborating evidence. It may be just an old legend.”)



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3 More Questions About a Business Plan Writer

I posted 10 questions on this topic last week.  Today I have three more, on the same topic.

It sounds attractive, doesn’t it? Get a business plan by hiring somebody to do it for you? I can see how you’d think of that as division of labor, like hiring an expert to do design, or programming; have an expert do a plan. And you can do that, if you’re careful; but you really have to understand the underlying management questions, what you’re getting, and what you want.

Still, here are 3 more questions:

  1. What would you estimate to be the hourly rate of somebody with business experience, financial knowledge, and computer knowledge to do a competent business plan?
  2. How many hours would you expect that person to take?
  3. What would you get if you multiplied that hourly rate question by the number of hours question?

I don’t know about you, but I’d estimate $200 or so per hour for that first question. It would depend on the market, and the specific person, but we’re probably talking about MBA or CPA. I’d say 20-40 hours for the second question, although that depends too, on other factors. And for the third question, multiply $200 times 20 hours and you get $4,000.

So what are you planning to pay that business plan writer?  And how is it that I see business plan writing advertised for a few hundred dollars? How do they make money like that? And if the plan writers’ prices are that cheap, is the plan quality cheap as well?

(Photo credit: Artem Samokhvalov/Shutterstock)