Are you considering bringing in an outside expert to help with your business plan? The idea is appealing to some because planning is daunting and there are experts out there--if you can afford them. However, it's not nearly as simple as you'd like. During my 30-year career in this (and I don't do it any more, so I'm not selling my services) I've seen some good, some bad, and some really ugly results of hiring business-plan consultants. Here's my advice.
My first business-planning engagement was disastrous because my clients--the would-be founders of a new company, not the investors--ignored the plan and the process of developing the plan. They thought that because I was developing a business plan they didn't have to worry about it. The task was done. Then when they met with investors, they fell apart. I looked smart because I'd developed the plan, and they looked dumb because they didn't know what was in it. The investors wanted no part of that.
Critical fact: your business plan isn't a stand-alone document; it's you, your business and your promise. You have to know every date, every deadline, every last word, and every number in your plan. Investors invest in people, not plans. They buy the jockey more than the horse. Expert help can't change this fundamental principle. It must be your plan, yours down to your bones, and it must not be the consultant's plan.
How Outsiders Can Help: The Good
If you work within the framework that the business plan is yours, then there are some things that outside help can do for your plan and your planning process. If you have the money to spend, and you find the right person or resource, here the benefits of hiring outside help:
- A professional plan review. Does your plan cover the most obvious points? Does it have any obvious logical holes? Is it easy to read and is it easy to find the most important information? Ask an expert to review it.
- Help with the financials. You don't have to be an MBA or accountant to plan your business, but some of the underlying math and financial principles can be daunting. The ideal is doing it yourself with an expert looking on and coaching.
- General planning coaching. An outside expert can facilitate your thinking and planning by guiding discussion towards key issues, drawing out definitions, highlighting and focusing on important points.
- Industry-specific coaching. Don't reinvent wheels when you can leverage off of an expert's experience.
- Contacts and introductions. Be careful with this one, however, because you're swimming in shark-infested waters here (and I'm referring to the consultants as sharks, not just the investors). There are good consultants who deliver on promises, but there are far more bad consultants who make promises. A consultant can get you an investor no matter how good the plan, because the investor wants (or doesn't want) you, not your plan.
Problems to Avoid: The Bad
Please be sure to avoid the common problems with outside planning consulting. Some of these come up far too often:
- Misunderstanding the deliverables. Don't pay for vague promises. Business-plan review, coaching and help with the financials are credible deliverables, but getting your plan financed isn't credible because that depends on you, not your plan.
- Wanting a turnkey business plan. That just won't work. If a consultant wants to go away without you and come back with a plan, you go away first.
- Not checking references. Always ask for references of previous clients and talk to those people.
- Paying in advance. Some consultants need to ask a fair payment up front, but not the whole thing.
The Worst: The Ugly
The worst element of outside consulting is the consultants who let you think that paying their fees will get you investment, when in fact they're just going to give you advice. This happens too frequently and it's the clients' fault too, not just the consultants. You should immediately mistrust somebody who promises open doors and contacts as part of the job. The promise isn't credible unless the consultants very carefully filter their prospective clients and take only those whose background, track record, team and business proposition are likely to succeed. Otherwise, they're making false promises because the investors invest in the people, not the plan.
I've dealt with one specific consultant who actually delivered on contacts and investors for his clients. He charged tens-of-thousands of dollars per client and I saw him work through at least half a dozen that made it with investment and successful launch. However, he carefully filtered clients to reject all but the most likely to succeed; and he's no longer available as a consultant. He's now managing finance for one of his former clients. I mention him not because he's the only one, but because his existence means there is at least one.
How Much Should it Cost?
Unfortunately, there are no rules and no guidelines. I've seen people who happily paid thousands and even tens-of-thousands of dollars for outside business-plan help, and I know some business-plan coaches who give very valuable help for $50 or so an hour. I know of people who've paid $3,000 on the promise of getting investment who ended up with nothing but empty promises and a poor business plan. Check references and specify deliverables exactly before you start. If you get into a running project, make sure you get billed at regular intervals, so your obligations don't mount up too fast.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.