Research reveals that poor advice from consultants has cost the UK’s small businesses £6.4bn in a single year
It’s always frustrating to be on the receiving end of bad advice. But whilst it’s annoying when following a piece of ill-conceived guidance makes you unpopular amongst your friends or screws up your love life, it’s not going to end up depriving people of their livelihoods. Unfortunately, it seems some of the UK’s smallest businesses are falling victim to poorly thought-out guidance and this has cost the economy £6.4bn in the last 12 months alone.
According to new research published by Direct Line for Business and conducted by Consumer Intelligence, almost a sixth of Britain’s small and microbusinesses have lost money because of the recommendations of advisers or consultants. The survey revealed that inadequate professional consultancy cost small and microbusinesses an estimated average of £20,842 over the last year, with 19% claiming they have lost between £50,000 and £200,000.
It seems the worst offenders in terms of providing bad advice are IT consultancies, with 44% of businesses that have been on the receiving end of subpar guidance pointing the finger their way. The survey also identified that 34% had received bad management advice, 32% had been failed by marketing consultants and 23% felt they had been let down by a property consultancy. It seems that the least fallible advisors work in accountancy, advertising and legal, with just 9%, 8% and 6% of businesses respectively feeling they’d been given bad guidance in these areas.
And the bad advice provided by these firms has had severe ramifications for those involved. Almost half of affected companies said they were forced to lay off employees as a result, whilst 30% had to scale back expansion plans or put them on hold. Just over a third of businesses impacted were forced to take out credit to make ends meet and 16% felt bad advice cost them clients. Perhaps most worrying of all, 28% of small and microbusinesses felt that poor professional advice put their long-term survival in jeopardy.
Nick Breton, head of Direct Line for Business, feels this should be a wakeup call for consultancy and advisory firms. “Our research clearly highlights the devastating effect poor professional advice can have on small and microbusinesses,” he said. “However, the impact on an advisory firm that is facing litigation can be just as shattering. For those providing advisory services, it is important to recognise that issues can occur and clients could pursue them for compensation”.
So it’s worth bearing in mind that while nothing is given so freely as advice, sometimes following the wrong piece of guidance can come with a high price indeed.