Are Boutique Financial Consultancy Firms a Better Fit For Startups? 3 Questions to Ask Before Hiring

Boutique financial consultancy firms are smaller firms that specialize in handling particular tasks and have the flexibility to act as an extension of their clients.

Every company comprises various departments turning like synchronous cogs in a complex machine to produce the best possible results. Everything from strategizing and executing a road map to keeping the books balanced needs to be handled with the utmost care and comprehension. In startups, these roles are usually taken over by the founders, who are required to wear multiple hats as they grow their business. But there is only so much responsibility that can be borne before an enthusiastic founder starts floundering for external support.

One such support that every company needs is understanding the problems and needs of the business, collecting the data, and figuring out solutions. This is where a Financial Consultancy Firm, or FCF, comes into play. Financial consultants are necessary for every business, especially since most first-time entrepreneurs are not adept at comprehending and managing the business’s financial needs. Consultants bring detailed, in-depth expertise about the overall industry and how a particular business fits into it.

There is a lot of finance- and operations-related tasks that are regularly outsourced to FCFs, like figuring out the market size and target demographic, creating the operational budgets, getting the relevant documents ready for fundraising, bookkeeping and even creating go-to-market strategies. Usually, the larger FCFs have the resources and the manpower to handle a multitude of such tasks for their clients but end up charging an arm and a leg. Simply said, early-stage startups are rarely able to afford top FCFs.

This is where boutique financial consultancy firms come in. These are smaller firms that specialize in handling particular tasks and have the flexibility to act as an extension of their clients. They are also able to provide personalized services depending on the exact needs of the startup they work with. Although their suite of services is limited and they do not have the well-established reputation a large FCF has, they are able to provide valuable insights into the local marketplace at a much lower fee. Think of boutique firms as “fractional CFOs” who can take on the full responsibility of specific tasks that a regular CFO might not have the time or knowledge to execute properly.

Boutique firms are generally influenced by the experience, network, and the personal brand of the founder. Due to their low operational costs and niche expertise, they can be an attractive service provider for entrepreneurs who are looking for consultancy support in specific markets or need help with outsourcing particular tasks the founder does not have expertise in. In fact, even government entities utilize the services of boutique firms that specialize in a field out of their reach.

Another benefit of hiring boutique firms is that they are more flexible with their pricing, strategies, and operating procedures—hence, they move faster. Larger firms tend to have established protocols that need to be followed throughout the project and, thus, are slow in adapting to new ideas. As the markets around us continue to grow and undergo digital transformation, new and innovative ideas will become the norm that larger firms might not be able to keep up with.

Since boutique firms keep their operational costs low, they tend to not hire a lot of juniors. This means that the majority of their staff is senior and can provide exceptional expertise to their clients. Such expertise can translate into efficiently completing projects as boutique firms do not have resources to waste on unnecessary experiments. Since there is less manpower to work on projects, such firms need to move fast in order to generate revenue from multiple clients—which makes them experienced in finishing tasks with quality service and under severe time constraints.

Finally, it’s important for founders to realize that founders of boutique firms are entrepreneurs themselves who probably left larger FCFs to fill a gap in the market. These entrepreneurs realize the amount of time, capital, and, most of all, courage that it takes to build a successful business and will always be respectful of their clients’ hustle.

Of course, that is not to say that boutique firms are better than larger enterprises at what they do. It depends on what the needs of the business are, what problems a founder wants to solve, and how quickly they need them to be solved. Considering all these factors, it just makes sense that boutique financial consultancy firms are a better fit for startups than larger enterprises.

3 Questions to Ask Before Hiring an FCF

To better understand how to select the right FCF for your business, here are some questions you can ask them:

“How much experience does your firm have with businesses operating in my industry?”

As the client, you need to do your due diligence when selecting the right firm. Larger enterprises have a wide array of departments handling clients across various industries, but if you’re looking at a boutique firm then it’s prudent to ask this question. They usually have specific industries they specialize in and can provide you with the kind of personalized service a larger firm might not be able to.

“What is the scope of services?”

Nothing is worse than being halfway into the project and finding out that the firm you’ve hired does not have the expertise to complete a particular task, or does not believe it to be a part of their KRAs. It is extremely important to understand just how far the firm is willing to go for you and how much of the legwork they are ready to do. As the client, it is your responsibility to get all of this information before you sign an engagement letter, otherwise, you risk a mismatch in synergies further into the project.

“What is your fee structure?”

Finally, it is important to understand the fee structure of the firm you are going to be working with. While larger firms will most likely have fixed rates, smaller firms would have more flexible pricing structures and they would also be more open to negotiating during a long-term engagement. The fee structure you select should depend on the length and complexity of your project. For example, if you have a simple, short-term project then an hourly fee structure would be more beneficial. But if your project is long-term and would require multiple meetings to conclude, then a flat rate would work better.

Michael Leshinsky is the founder and CEO of Leshinsky Finance, a boutique finance consulting firm. Michael’s entrepreneurial journey started as a Subway franchise owner while taking night classes for a master’s in Finance. Through his franchise meetings and interactions with small business owners, he understood that most successful engineers or real estate developers do not have the interest or acumen to optimize their finances and accounting structures. And from there, Leshinsky Finance was born.