Advisory for small businesses

Business advisory for small businesses

How to define business advisory for small businesses

Business advisory for small businesses is a different task from advising large businesses, although in essence it is a conceptually similar matter executed differently, focusing more on the business managers and motivating them toward directions they prefer.
According to the definitions of the Small and Medium Business Agency at the Ministry of Economy:

1. A micro business employs up to 4 employees, with an annual sales turnover of up to one million NIS"
2. A small business employs between 5 and 20 employees with an annual sales turnover of up to 20 million NIS"ח
3. A medium business employs from 11 to 100 employees with an annual sales turnover of up to 100 million NIS
4. A large business - anything above the aforementioned

In a small business where the managers are also the employees, the advisory is usually personal from the very first stages and works toward a direct shift in mindset without intermediary organizational variables.
Larger businesses require operational examination and a comprehensive organizational scan, and are built layer upon layer with data integration (which undergoes analysis of the business's financial and operational reports), until finally reaching the decision-makers with conclusions about what exists and what can be done to achieve business objectives.
Let us take as an example a business with 2 employees operating online and raising investments for large businesses.
Let us assume their commission turnover is about 30 million NIS"per year. In addition, let us assume the profit rate is 90% of the turnover, or about 27 million NIS"How would we define the business? Micro, small or medium?
In the formal definition we are missing the quantitative measure or the business's sale and purchase transactions.
A business that brings in 30 million NIS"per year from 20 annual transactions has low activity and would be considered a small business but not a micro one, because of the scope of its revenue.

The conclusion is that there is no clear-cut definition for the size assumption, but when discussing the business's need for one type of advisory or another, the scope of activity and the size of the operational system matter, and the business is considered larger as the number of employees or service providers grows.

Who it suits and what type of advisory is needed

According to the example above, it is reasonable to assume that 2 employees generate high revenue from the business and probably do not need someone to teach them how to operate in the investment market, but they may require a different type of advisory, such as Strategic advisory for expanding business activity, such as entering adjacent fields including recruiting additional employees, positioning, reputation and the like.
In any case the advisory will be more personal, facing the business managers/employees, market analysis, and less at the existing operational level.
Let us take the opposite example of a business employing about 20 employees with an annual sales turnover of 30 million NIS"
Unlike the previous example, let us assume profits of about 2% of the annual turnover, or 600,000 NIS"per year.
A business advisor would need to diagnose why the profit is relatively low, whether it stems from deficient operations, a market that does not allow higher profits, being blocked from alternative markets and/or any other reason.
In other words, in the first example, the advisor needs to deal with the issue of leveraging the business and profits, whereas in the second example with business survival and increasing profit rates.

Business advisory for small businesses - how do we assess what the advisory contributes

When approaching the advisory work, we will need to determine our current situation (by conducting an initial diagnosis), what we are striving for (goals) and where we ultimately want to reach (objectives).
Here too we must remember that the advisor's work (whether business, strategic or financial) is mainly conceptual and works on the managers' perception of the business and of themselves.
A shift in mindset is the purpose of the advisory, and success will be determined by the advisor's ability to create beneficial change.
In addition, creating mental flexibility is fertile ground for expansive thinking and new ideas.
In other words, the outcome of the advisory is not always quantitative and immediate. Advisory deals with the element of awareness, even though results may occur several years down the line.
Therefore, the advisor and the decision-makers need to sense a process of a shift in mindset, even though results are assessed over a relatively long time frame.

The cost of business advisory for small businesses

Business advisory for small businesses can work on an hourly basis, on a global (flat-fee) basis, or according to results.
Determining the price of the advisory is a function of what is required of the advisor.
If operational improvement and/or cost reduction is required in the short term, and assuming the decision-makers fully cooperate, a results-based method can be considered, although this approach puts both the advisor and the business owners at risk, as they may end up paying a relatively high fee compared to an hourly or flat-fee arrangement.

There may be a situation in which the advisor conveys what needs fixing and it is not carried out for various reasons, and thus the advisor does not receive payment for their work and may cease their work before it is completed.
This obstacle is significant for both the advisor and the client, even though in certain cases the advisor's conclusions are implemented at a later stage.
Therefore it is sometimes preferable to work with advisors on the basis of a flat-fee project or work hours equivalent to their work as a function of what needs to be achieved.
Another matter is keeping the advisor objective and focused solely on the task of a shift in mindset, without being involved in the business domain and its outcomes.

In any case, in certain instances and if the advisor has considerable skill in a particular area, such as calculating municipal taxes or obtaining various types of permits, and assuming the cost savings do not require many work hours because the advisor has built-in expertise in the field, a fee can be set according to results, or in other words a percentage of the total savings.
In addition, every business advisor charges a different amount according to their assessment of their reputation and/or what is customary in the industry.
The amount can range from 200 NIS"per hour up to high amounts of about 1,000 NIS"per hour and even more.
In any case, advisory work means efficiency in the long term, even if in the coming months expenses are expected to rise.
The cost of those hours in the long term is planned and expected to be low relative to the results that will be achieved.

Hence, determining the advisor's fee is a combination of goals and objectives, the nature of the advisory, the advisor's reputation, and what is customary in the industry.

Envirogreen's advisory

The company's advisors know how to tailor the type of advisory and its price according to the business's characteristics and the objectives to be achieved.
The company employs top-tier advisors who know their craft well. In addition, we tailor the prices to the capabilities of the business and the decision-makers, as well as to the nature of the work.
Fairness is the name of the game for us for all parties, and as we have learned, this approach pays off in the long term.
Our capabilities range from understanding the commercial domain, meticulous economic planning, analysis of the markets in which the business operates, goals and objectives to be achieved, and securing the cooperation of the decision-makers.
Like everyone, we care about our reputation, and therefore it is important to us to succeed in every task we have committed to.

What business advisory for small businesses includes

Well, essentially everything required in the economic and business domain.
We invest in diagnosing the business, the industry, business financing, the decision-makers, cash flow management and based on this data, we determine together with the decision-makers what is required.
Diagnosis cannot be compromised on, because it is an essential matter that saves the parties unnecessary trouble, time and cost.

If we see that the short-term costs are higher than the business's ability to spend, we will make this clear and look for other ways to charge a fee for our efforts.
Like any successful business, we care about our company's reputation and want to operate in a way in which all parties are satisfied.