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Advice vs. Consulting
There is nothing I love more than sitting down with a fellow entrepreneur (I’m more of a wantrepreneur) and talking shop. We certainly have a lot of great start ups here in Utah and its always exciting to meet new and upcoming entrepreneurs. I often get asked to lunch to talk about various issues and problems inside local startups. I have found that a lot of people like to go to lunch with someone outside their organization just to get a different perspective on things. That’s smart. I’m always more than willing to get together over lunch to talk about anything.
But how do you know if a relationship has passed from friendly advice to consulting? Here are several key indicators:
- When you’re spending more than 30 minutes per week giving free advice to the same person/company.
- When you start to incur non-reimbursed expenses.
- When you attend meetings on behalf of the company.
- When you’re calling in continual favors on behalf of the company.
So how do you transition? Its not hard. When you see the above factors playing out in a relationship, use something like this:
“So and So, I really enjoy spending time with you. I appreciate the fact that you seek me out for advice. Given that I have started to spend more time with you and that I’ve even incurred some personal expense, I think with regards to your business we have crossed over from ‘friendly advice’ to consulting. I’m more than happy to spend time with you and help you - I’d like to be even more involved - but that means we may probably should enter into a formal relationship where there is some form of compensation exchanged for the value I’m providing you. What are your thoughts on that?”
Well…at least that’s the line I use. After all, if you’re providing value shouldn’t you be compensated for it?
The one exception to this is that I have a strong policy of never charging students a consulting fee. It especially annoys me when educators use their position to get paid consulting gigs inside student startups. I’m aware of one such “professor” who charges students for consulting. On top of this being a huge conflict of interest - it is also my understanding that this person’s “consulting” lacks the value he charges. It makes him look bad and it makes his school look bad.
