Nearly half (49 per cent) of small businesses avoid hiring external consultants because of over inflated costs, with more than a third (36 per cent) citing scepticism about their level of expertise as a barrier.
The research, commissioned by Zeqr finds SMEs in the UK spend over 570 million hours researching and briefing externals specialists to help skill up staff.
An estimated one million (1,099,660) SMEs say external consultants weren’t value for money – potentially wasting a total of £12.6 billion on advice that doesn’t positively impact the business. Two in five small businesses find fixed fees to be inefficient and the main reason for feeling dissatisfied by the service they received.
Some SMEs analysed the level of expertise was disproportionate to their needs, with 22 per cent claiming the advice was too complicated. For example, a small business owner may only need to ask an HR specialist one or two questions, but will be forced to pay an expensive fixed or ongoing fee that does not provide value for money.
Accounting is the most sought after area for advice, with the top five sectors nationwide identified as:
Accountancy (£9.1 billion)
Insurance (£5.3 billion)
IT (£4.1 billion)
Payroll & Pensions (£3.3 billion)
Website building (£3.1 billion)
Lack of skills
The data also shows that 50 per cent of businesses are lacking essential digital skills required to grow their companies, such as SEO, social media, website build and software development expertise. These results echo the warning issued by MPs last year regarding the UK’s digital skills crisis amongst the working adult population.
The research identifies that the average small business owner in the UK spends £11,351 accessing expert consultation and three working weeks researching and briefing experts on their specific businesses needs each year.
With the number of registered UK businesses growing by 19 per cent more than the past five years, this equates to a total increase of an additional £10 billion spent during the last five years accessing expert consultation. The 19 per cent growth in SMEs can be related to heighten business confidence.
‘Confidence’ has improved in the UK from -2.9 in Q3 2016 to 8.5 in Q4 2016 and now stands at 20.0. This quarter has seen the largest annual increase in confidence since Q2 2014.
Business expert and author, Dr David Fraser, comments, ‘Smaller organisation should not be attempting to source all the expertise they need internally.
‘That’s not affordable – but nor is the kind of exorbitant fee larger consultancies typically want to charge, often for recycled material not really tailored to the true needs of the client.
‘There’s definitely a need for an efficient way for businesses to access diverse external expertise in an only-buy-what-you-need fashion and, of course, the best external experts will always put the client’s needs ahead of their own business goals. Buyers should look for quality and experts who truly understanding their issue.’
Who spends more?
Businesses in the North East spend over double (£29,900) on expert fees, compared to those in London (£12,600). With seven times more registered businesses in London compared to the North East4, this discrepancy can be attributed to the fact that London has a wider pool of experts in business related areas and subsequently more competitive fees.
This insight is reflected by the result that small business owners in the North East spend nearly triple the amount of time (28 working days) researching and briefing external experts each year compared to the South East (12) and London (ten).
The data also reveals that nearly half (43 per cent) of small business owners are not exposing themselves to the best talent when accessing specialist consultants, by relying on an existing pool of suppliers they have met through business networking. Additionally, more than half (56 per cent) tend to use people recommended by colleagues.
This reluctance to spend time finding new suppliers and limiting their talent pool is due to the fact that over a quarter (28 per cent) of business owners feel that this time could be better spent bringing in revenue and working on billable projects.
Daniel Hedlund, co-founder of Zeqr, says, ‘We launched Zeqr after struggling ourselves to access experts to advice on business queries. We, similar to the 40 per cent of the small business owners surveyed, found we were limited to flat rates and project fees which far exceeded the very specific and small pockets of advice and expertise we searched for.’
Hedlund explains, ‘We commissioned research as we wanted to understand exactly how much time and money small businesses spend sourcing experts in a range of key business areas. The results reveal that this investment is huge but with businesses often relying on an existing pool of suppliers, resulting in less than satisfactory outcomes that don’t help their bottom line.