If you decide to engage a financing consultant, be prepared to trust your instincts when deciding which one to hire. Most likely you can get a reference from an attorney, an accountant, or the last banker or venture capitalist who turned you down, but financing consultants are typically a breed unto themselves with no codified professional standards. In fact, anyone can hang a sign and start flogging deals. Here are some items to consider as you interview your would-be consultants:
- A good match.First, ascertain whether the consultant helps finance your kind of business. "Most consultants will tell you upfront if there's not a match--but not all," says Glazer. "Avoid the one who wants to learn how to raise capital for your kind of business and is going to go to school on your deal."
- Good references.The most important criterium is the consultant's success with previous engagements, says Glazer. "If the consultant can't [give you] three clients he or she raised money for in the past year who can talk about the value the consultant brought to the table, you don't want to hire this person."
In addition, ask for references from assignments where the consultant did not succeed. "Anyone who has been in the business awhile has had assignments that didn't result in a closing," Glazer says. "You have to figure out why."
Did the consultant lead the entrepreneur to investors and a proposed investment that the entrepreneur turned down? Entrepreneurs are frequently unrealistic about the value of their businesses and the terms and conditions investors want, resulting in unrequited deals. These aren't as much of a concern as if your would-be consultant is reportedly difficult to work with, unfocused or slow to get off the dime.
- Flexibility. "Let's face it, every company is different and needs a different solution for financing," says Glazer. If consultants propose strategies before they fully understand your situation, there's a good chance the relationship will fail.
- Good chemistry.Raising money is the most sensitive of business transactions and requires a lot of patience and understanding from investors, business owners and the middlemen bringing the two together. For the effort to succeed, there needs to be chemistry between the consultant and the entrepreneur.
Finally, three quickies to keep in mind. "First," says Glazer, "no pinky rings or diamond cuff links that could choke a horse [ha]; second, run the proposal by your accountant or attorney to see if it passes the reality test; and finally, visit the consultant's place of business." A consultant operating from a home office might give you better service than a white-shoe Wall Street investment bank, but you need to understand the consultant's working environment so you can see their limitations and advantages.