When I started my own business-planning consulting firm a few years ago, I didn't "need" a business plan as much as most companies do: I didn't need investors, I had no employees, and I had a good idea of what I was doing. But I did develop a business plan before I started, and I worked with that plan, revising and updating it, afterwards. I did practice what I now preach. If you're in the similar situation of taking your expertise and applying it to your own consulting firm, you should know why I needed that plan, what was in it, and how having one can keep you on track.
If you're starting a business based on your expertise, you may be thinking you don't need a business plan because you don't need any outside help starting your business. If you're like me, you don't need a plan to explain your business to investors or lenders. I didn't need financing to develop a product or packaging. I also didn't need to invest in a physical location. I already had my expertise, my education and my computers.
I did, however, need a business plan, even though I didn't need capital or financing. At the time, I was a vice president of an established market research firm, with a good salary and a solid career path. I also had a family that depended on my income. I needed the plan to lay out the possible risks and returns so I could see them clearly and evaluate them--I needed it for peace of mind and reassurance. I needed it to sort through the unavoidable uncertainty of a range of possibilities that went from being happier with my work and making more money, on one end of the scale, to being unrealistic and irresponsible on the other.
What was in the plan? It covered all the big planning issues, including:
- Legal entity
- Business offering
- Main financial projections including break-even analysis, market analysis, sales forecast, personnel costs, profit and loss, balance sheet and, most important, cash flow
- Dates and events for tracking progress
I didn't include a chapter on management team because I didn't have one. I also didn't write complete, edited sentences everywhere for myself to read--I just used bullets as reminders.
The most important ingredient in my consulting business plan was the part of it that defined my focused business offering. I had to understand my core competencies, why and how I was different, and why my clients would want my services specifically. You'll want to do the same--you need to really understand why you're starting this business in the first place.
Another important element of this type of business plan is determining what you don't want. I went through the exercise of imagining myself declining a consulting engagement because it wasn't mapped into my business focus. I gained a great deal of insight by listing the kinds of engagements I didn't want. Success in consulting requires a strong focus on your specific area of expertise. Generalists have a tough time selling themselves.
And as much as I believe in planning, the most important thing when it comes to starting your consulting business--even more than your business plan--is clients. Every consulting business should start with at least one or more clients who are likely to want long-term, repeat consulting engagements. I wouldn't have had the courage to jump into my business without a few key clients I knew I could depend on, one of them being the company I was leaving. And I didn't settle for educated guessing in my sales forecast--I had some clients lined up before I launched.
Once you have a clear view of who your first few clients will be, you can create a specific sales forecast based on those clients. My plan broke down the need for clients into a list of targets and probabilities.
To create your sales forecast, think about where your business will fit in the market. My sales forecast involved a pricing strategy based on my specific situation: I didn't have the branding power, staff or overhead costs of the most expensive big-name consulting firms; however, I did have a high level of expertise. I wanted clients who valued quality much more than clients who always looked for the cheapest alternative, so I kept my pricing high to match my strategy.
From strategic focus to sales forecast--with pricing--I developed a cash flow forecast, and the rest of my plan fell into place. But I didn't bother to write an extensive plan that nobody would ever read. I stuck with the information that was most pertinent to me: main projections, strategy and a lot of specific milestones I could track.
Finally, why did my plan work for me? It didn't communicate my ideas to anybody but me. As reality rolled on and I left my job and went out on my own, the tracking was what made the business plan most useful. Like all business plans, it was wrong in most of its predictions and assumptions. It was vital, however, to my ongoing management of my own business. From that day on into the present, reviewing the difference between what I'd planned and what actually happened has been essential. The regular monthly reviews, even when I was working alone, kept me aimed at my long-term objectives--as they can for you in your business.
The author is an Entrepreneur contributor. The opinions expressed are those of the writer.