Common Risks Consultants Face On A Daily Basis
Consulting… it can be a risky and challenging business. Keeping clients happy, an unsteady income flow and data breaches can happen to any consulting business in the world.
You might not have a crystal ball, but considering what challenges could be ahead will give you an edge. Preparation promotes prosperity. Below are some of the most common consulting risks and ways to avoid them.
Try as you will, at some point you’ll have a dissatisfied client. So what can you do to keep your clients happy? And how can you limit the risks of a lawsuit or damage to your reputation?
Firstly, look at the possible cause of the problem. Some of the key reasons complaints might be made in the first place include: missed deadlines, misrepresentation, cost overruns, failure to deliver on expectations and use of sub-par contractors.
To avoid some of these issues in the first place you need to set achievable goals that you know you can deliver on within the timeframe. Make sure you constantly communicate with the client as well because if they are kept across the progress and changes they’ll be satisfied.
Set a list of clear expectations and put them in writing. Sign a contract that details the agreement, including project scope and costs. An attorney can prepare a standard contract template that covers all bases if you want further reassurance.
Sometimes even the clearest agreements aren’t always enough. You may still end up with a customer who wants to sue.
Professional liability insurance can protect you if a client claims your mistake or oversight caused them financial harm. It can cover legal defence costs as well.
Any small business can be the victim of a data breach or other forms of cyber crimes, and it can cost you a lot more than just financial loss.
A breach can have a serious impact on your reputation, and future business. Some businesses don’t survive.
If you store sensitive data with a technology services provider, look into their security protocols and the liability insurance they hold. Asking these questions in the first instance can protect your business if servers are compromised.
You need to play your part to prevent data breaches and other cyber attacks.
The best ways to do this include:
- Installing antivirus software and keep up-to-date with security patches and critical updates
- Use complex passwords and change them frequently
- Don’t open email links or attachment without confirming its source and validity
- Back up your files on a separate server.
- Consider working with an independent cybersecurity professional to assess the systems you have in place.
- Look into your insurance regularly. Cyber liability insurancecan cover financial losses in the case of a data breach or other cyber crime.
Unstable income, and markets
At times there can be a lot of uncertainty in consulting. Some causes, like markets and client volumes, can be out of your hands. But rest assured there’re still things you can do to reduce risk from cash flow issues.
- Specify payment terms and due dates in every contract.
- Request a fee structure that includes partial payment up front.
- Offer monthly payment options and the ability to pay by credit card.
- Set aside a portion of every payment as savings.
‘Feast or Famine’ income
Focussing too much time on current client, and not finding new ones, can lead to a vicious cycle. You need to think about how you can strike up a balance between existing clients and new opportunities. Set aside a number of hours, perhaps 15-20 hours every week, to focus on gaining new clients.
Scope creep is when a client asks for extras not agreed upon in the contract. You might be tempted to do the work to avoid any confrontation, or an unhappy client. And it often happens due to poor communication and ends with missed deadlines and resentment.
Consider the following to avoid consultant scope creep, detail all project deliverables and expectations in the client contract.
Continuously update clients on progress and obstacles.
Include possible scope creep scenarios in your estimates. Set expectations around the cost and work involved.
If you take on something outside your project scope, send the client an invoice with the charge zeroed out. Your client can then understand the extras you’re providing.
The costs of extending projects and doing extras for free can quickly add up, and could put your financial goals at risk.
Property theft or damage
What happens if your office is damaged or property stolen or destroyed?
Landlord’s insurance policy won’t cover these losses. So consider Business Owners Policy. It covers your office space, furniture and fixtures, supplies and office equipment. A business owner’s policy, which combines commercial property insurance and general liability insurance could save you some money.