Business Consultant Botches Location Analysis - a real Damage Event

The choice of location is often a decisive factor in the success of a business, especially in the retail sector. Many entrepreneurs therefore commission competent consultants to carry out a comprehensive location analysis. But what happens if this assessment turns out to be inadequate and the client suddenly discovers that the planned new store is to be located right next to a competitor's? This is exactly the question a business consultant's client was faced with in the following damage event.

Location as a Success Factor

A well-chosen location is one of the most important success factors for a company, especially in the retail sector. There are a number of general criteria to consider when choosing a location, such as parking, transport links, general cleanliness and, of course, proximity to the competition. Once a location decision has been made, it can often only be reversed at great financial expense - if at all possible for contractual reasons. It was for precisely these reasons that a pharmacist commissioned a specialised business consultant to carry out a location analysis for the opening of a new pharmacy.

Inadequate Location Analysis

The business consultant set to work immediately and delivered a comprehensive site analysis to the client within the agreed timeframe. Unfortunately, he made the mistake of overlooking the fact that another pharmacy was about to open in the immediate vicinity of the proposed site. Unfortunately, the client did not realise this until after he had already invested in the suggested location and had entered into long-term contracts (including leases).

Naturally, the pharmacist did not want to open his new branch directly opposite the competitor. He reclaimed the costs of reversing the location decision from the business consultant, arguing that he would never have chosen the location if he had known about the competitor's plans. As a result, the consultant received a five-figure claim for damages.

Tip:

Mistakes in location analysis are not the only risks you face as a consultant. In this article, we have summarised the most important risks for consultants: Top 3 Business Risks Freelance Consultants Should Know About

Professional Indemnity Covers Damage

Fortunately, the consultant had taken out Professional Indemnity Insurance through exali. After he reported the claim to one of our insurance experts, who reviewed the details of the case and then forwarded it to the insurer. The insurer assessed the merits and amount of the claim and paid the verifiable damages.

It is not only in the field of consultancy that large claims are a risk that can jeopardise your entire business. There have already been a number of cases in practice - for example, a headhunter who placed a CFO with a criminal record, or allegedly erroneous advice on street lighting for a municipality. All these cases show that Professional Indemnity Insurance protects your business from expensive and potentially disastrous claims.