What do advisors or advisory firms do?
Firstly, in order to discuss what advisory firms do, we should look at the difference between advisory firms and consultancy firms. The difference between these two usually varies from firm to firm. However, in practical terms, consultants usually work on specific operational projects with deliverables to meet the clients’ strategic objectives.
Advisors, on the other hand, often take a less technical approach, and may offer a combination of research, due diligence, and advice on high level business matters for the company. Advisors typically work directly with the highest level of management, whereas consultants may work with various teams at various levels.
Advisory vs. consultancy services
The services consultants typically offer are project management, product development, infrastructure management, problem solving, research, and feasibility studies. Services advisors typically offer are risk management, overall business strategy, and long-term planning.
Of course, services and roles for advisors and consultants vary greatly on the type of advisor or consultant. For example, a formal financial advisory may work more closely with a client than an informal business advisor. Legal advisors also take on a variety of roles depending on their specialization.
Advisory firms may have multiple advisors in the same area of interest (for example, sustainability advising) or, they may have advisors with various areas of expertise and therefore serve a wide range of clients. “Good” advisors will usually have years of experience in a certain type of business, have a proven track record, and are known in their field.
Unfortunately, anyone can call themselves an advisor, so it’s wise to ensure you do your due diligence before engaging anyone as an advisor for yourself or your company. If you are looking to hire a well-known consultancy firm, you can be sure that the firm has already vetted their consultants. These firms will cost significantly more than independent consultants and/or advisors, however.
Why companies hire advisors
No matter the size, most companies will need to engage advisors at some point or another. In order to launch, pivot, scale, or restructure a business usually requires outside help, no matter how large or small the company is. Start-ups usually have the highest needs for strategic advisors because their team, concept, or business model may or may not be proven.
For example, a start-up with a concept to build a software platform for solar energy companies may seek help from an energy advisor, sustainability advisor, or an expert in the solar industry. Even though the team may consist of experts in these areas, an advisor can offer an objective perspective on various aspects of their business.
Larger companies may hire a combination of outsources consultants and advisors depending on their business needs.
When to hire an advisory firm
If you run a business, it’s important to always have knowledgeable advisors that you trust. Many companies engage advisors informally when they start a business, but the relationship may require more formality as the advisor(s) are required to dedicate more time. Whenever your company is planning a change, facing a problem, or looking to grow is when you should consider formally engaging advisors.
For example, if you’re looking to sell your company to a competitor, a corporate advisor will be crucial in assisting you with the structure, strategy, and management of the sale. Not to mention, one of the biggest assets and advisor can offer is their network. Strategic advisors in your industry will often be the best resources for engaging the right people.