Harvard Business Students Have Made a Model that Could Make Traditional Business Consultants Nervous

This is the kind of disruption to business that even the largest consulting firms could get nervous about over time.
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Small businesses make up half of the GDP of the U.S. However, the country's confidence is at historic lows. Adding new hires is risky, regulations are burdensome, and few want to make substantial financial commitments to growth that may never materialize. Across the country, smaller companies have begun to rely increasingly on outsourced labor -- not only for the mundane call center and computer programming functions, but also for higher level strategic guidance. The Boston-based HourlyNerd is one such company that is exploiting this trend.

This group of young entrepreneurs are overflowing with confidence and their assessment of the company and its future abounds with optimism.

Founded in February of 2013 for a class project by a team of Harvard Business School students, HourlyNerd pairs top-quality MBAs with small businesses to provide, what they describe as "low-priced, flexible consulting, financial and accounting advice by the hour." Since starting earlier this year they have "seen more than 300 businesses register for their site and have signed up more than 875 MBAs," according to a statement. Example projects have included (among others) market entry analysis, business plan creations, and financial modeling; the Nerds also say they are on the verge of launching a co-marketing agreement with a top global technology firm. "We delight our customers because we offer them exceptional value. Our 'Nerds' cost about $35-50/hour. It's very difficult to find freelancers for under $100-150, and honestly, the quality cannot compare. And McKinsey and Bain & Co. are obviously way too expensive for these businesses." says founder and co-CEO Rob Biederman, age 26.

What kind of projects have Nerds done for these businesses? "Honestly, they run the gamut," says founder and COO Joe Miller, 27. "We've helped an Australian manufacturing firm size various Southeast Asian markets for entry, aided a South African wine importer optimize its capital structure, and even closer to home, led two projects for Outward Bound." Michael Parrington of Comtec IPE in Australia was enthusiastic with his "Nerd" saying: "We were extremely happy with the quality and professionalism of the Nerd selected to complete the project and the quality of insight and data contained in the report. We are already using this report as a tool for our business development and will use the HourlyNerd again in the future."

But, what do the Nerds get out of it? Surely business school is a busy time in their lives. Abe Azar, an NYU Stern MBA, says, "I love HourlyNerd. I still can't believe no one thought of this sooner. Earning some extra cash while consulting for interesting small businesses who are growing our economy has been really exciting and is providing me with invaluable experience and networks." But for certain MBAs, the site means more to them than money. Marta Mussacaleca, currently an MBA student at Harvard, loves that the site allows her to explore potential new roles. "Through the exciting and diverse projects HourlyNerd posts, I experiment with new industries and roles, strengthen my interviewing skills, and gain a practical outlet for the knowledge I learn in class," the Boston Consulting Group Alumna adds. The Nerds have even found that for projects with "sexier titles," such as work for private equity firms, bidding tends to get heated - really heated. "We have had bids of $0 - e.g., free - for certain task definitions. Even if we don't make money off those, we love them because they help our Consultants craft more compelling resumes and this ultimately builds loyalty to our site," notes founder and CFO Peter Maglathlin, 28.

Where is HourlyNerd going? "It's our goal to become the premier source for top-notch freelance talent, across the full spectrum of business needs. We get inbound requests from satisfied customers for IT help, graphic design, precision engineering ... we know we can fulfill these, it's just a matter of building up the supplier base," says co-founder and co-CEO Pat Petitti, age 29. The site is seeing several new projects posted each day, and has hired a professional development firm to build a new website that will be launching at the end of August, just as MBAs return to campus. Biederman pointed out that the current site, as it is, "has many weaknesses. It is difficult to negotiate and is not particularly attractive." Like many new businesses that get ramped up in a hurry, getting a site done quick and cheap played a bigger role that aesthetics and functionality. Just months after its initial launch, they now have the time and resources to make the site comparable to "or even exceed the expectations of any firm in the consulting field," according to Biederman.

The Nerds are also in the process of finalizing venture financing. To date, they have received more than $1 million in investor demand, but are likely going to cut the round off below that. "We are already generating positive free cash flow each month from the site, and the founders are working for free. We really just need money to pay the IT firm and then we see this as a self-sustaining business," notes Biederman. The Nerds' ultimate goal is to sell the business to a company in the recruiting or outsourced labor space such as LinkedIn, Monster.com or Odesk, and they've already begun such conversations. "We are never going to lose that top-quality focus, though," adds Petitti. "If that means we stay independent and one day IPO, that's perfectly fine with us."

This is the kind of disruption to business that even the largest consulting firms could get nervous about over time. The firm limits its "nerds" to the top 20 MBA programs. With that, it is only a matter of time before some of the largest companies are going to want the same value as the smaller organizations are enjoying through the site.

Another goal that they have is to create a paradigm shift in the career of most MBAs. Traditionally, MBAs graduate from college and try to get a job commensurate with their skill and degree with a large company. They work for many years in order to build experience and credibility, and then make the transition to consulting. With HourlyNerd, many young MBAs will miss the corporate experience and go straight into consulting mode. Only time will tell if this will lead to a revolution in MBA education and whether it will actually be a good thing for the businesses that use such a firm. It is difficult to discount the experience one can only get from working with a large company.

The one take away after an examination of a firm such as this, is the need for caution. There is a concern of growing too fast and quality suffering as a result of it. There is no doubt that these young entrepreneurs are mature beyond their years. It will be interesting to see if that, and their Ivy League education, will take them to the heights of success for which they clearly aspire.

Kevin Price is publisher and editor in chief of US Daily Review and Host of the Price of Business on 1110 AM KTEK in Houston, Texas. He is the author of Empowerment to the People and has twice received the George Washington Honor Medal in Communications from the Freedom Foundation at Valley Forge. His column is nationally syndicated and he is a frequent guest on major media around the country, being found on Fox News, Fox Business, and other networks. For more see KevinPriceCentral.com.

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