Toolkit for Consultants: Business Planning

By C. Thomas Tyler, Chief Technology Officer of The Go To Group, Inc.

With the New Year just begun, it's a good time to start thinking about how you're actually going to live up to those Resolutions you made not very long ago. Good Luck with that!

It's also as good a time as any to make and figure out how to follow through on Resolutions for your business. When was the last time you took time to do some Deep Thinking to figure out why you're in business, where you want the business to go, and how you want it to grow?

Formal Business Plans

A formal business plan is a valuable asset. It can help you acquire an SBA loan or otherwise encourage external investment to help bring your business dream to fruition. But more importantly, it is about capturing your vision for the future of your business - and in the case of an independent consultant, this is largely connected to your professional future. You can muddle through without ever having a plan, and many do so successfully. But it's worth it to take time occasionally and really think about different aspects of your business, what's working, what opportunities you might be missing out on, and what can be done better.

Collateral Benefits of Planning

But perhaps more valuable than the plan itself is the planning. The structured thought and planning process that goes into producing a plan have lots of collateral benefit. Taking the time to think objectively about your business with an "outside looking in" view, often leads to other thoughts about how to make things better. For example, putting to paper (or word processor, or spreadsheet) sales projections for the plan might help you realize that you have no clue how to make a sales projection. Many independent consultants don't have MBAs, but going through the process of developing a business plan is a cheap way to get at least some exposure to the traditional basics of successful businesses.

Common Hang Ups

I'm Small, I Don't Really Need A Business Plan

Many consultants have successfully operated their businesses for years, without ever having a business plan. They always knew they should probably have one, but figured that if they didn't need a loan or external investment, they didn't need a business plan. That's true - you don't need one!

But is having one worth the trouble of creating it? Yes - and Yes even if it takes months or even years to get a completed plan. That's because the benefits of the planning and "rethinking your business" processes are realized along the way.

The Numbers Need To Be Perfect

The feeling that the sales projections or other numeric estimates in a business plan must be perfect (or nearly so) is a common inhibitor to progress on business plans. A business plan is all about creating a vision of the future. It is a common practice for that vision to contain a forward-looking view of the world. Of course the numbers must have some basis in reality, and should be based on fairly thorough and realistic calculations that take into account various factors, like billing rates, expanding (or reducing) market for your products and services, gaining or losing key clients, etc. etc. etc. But they don't have to be limited to the past reality of your business. And they don't need to be guarantees - you should believe the numbers in the plan reflect a possible future (if things go according to plan), but the plan is neither a contract nor a guarantee. There are a great many factors that affect whether your business will be successful. The objective of a plan is to get you to think through for yourself, and then communicate to others, that you have thought through many of those factors. The goal is not to come up with a perfect set of numbers that you are certain will be achieved. The goal is to come up with prose and a set of numbers that communicate where you want things to go, and to make sure you think through the aspects that can help assure you'll make those numbers become reality.

Doesn't it take six months of work?

It is not uncommon for a business plan to evolve over a period of several months. Business plans for large ventures may take even longer. However, if your consulting business is small and straightforward, your business plan will be, too. The combination of structured thought processes and creative thinking that go into business planning will take quite a few hours, but it's not six months of work if your business is indeed simple.

Simple Business Planning for Independent Consultants

There are many reasons to develop a formal business plan, and if you have started down that path, follow through with it! But if you can't see that you'll ever need a formal plan, you can achieve some of the collateral benefit by thinking through the most key ingredients for independent consultants:

At the very least, think through the following:

• The Marketing Plan. Start by listing your offerings. A marketing plan should describe each of the products and services you offer. It should identify your target market, the profile of the ideal prospective client that you intend to pitch to. For service descriptions, "I'll do whatever a client wants" probably isn't a good place to start. Do you have any brochures describing your offerings? You can do better than word of mouth to communicate what your business offers.
• Identify Keys to Success - What are your keys to success? You probably have a few on the top of your head, and others that might occur to you if you think about it. Capture those in your plan. For example, if you have expertise in a commodity skill set, that's probably not a key to success. But if you have a reputation for delivering solutions in a particular industry, and have experience in the entire software development life cycle, those are more likely to be keys to success (even though those may be achieved by developing using commodity skills).
• Sales Forecasting - If your idea of sales projections is, "Well, I better keep my only client happy," you probably have more work to do. You need to be thinking about how you'll approach new prospects, even if you're busy at the moment. Producing a business plan will force you to describe how you'll present your offerings to clients, and how much revenue you expect to generate. Remember, it's not an accounting of your current operations; it's a vision for growing your business in the future.
• The Financial Plan - One of the most essential things to think through for the survival of small independent consulting firms is cash. Just as it's a good idea to setup personal finances to survive at least a few months of unemployment, it's a good idea to setup a financial plan for your consulting business so it can survive and sustain operations should you need to go for a spell without revenue.
• Cash is King - Money is the lifeblood of any business, and businesses operate on cash and cash flow. Recognizing the importance of cash flow, for example, might cause a consultant whose primary billing model is hourly billing to consider using a retainer model. Getting prepaid for some percentage of work defined in an SOW can help alleviate cash flow problems if clients delay start of work. That way, if clients delay start of work for some reason (like setting up VPN access, vacations for their key staff, etc.) it won't unduly impact your own cash flow.

Growing Your Business

There are many ways to grow your business - growing revenue, adding to your offerings (perhaps by productizing your services), enhancing your value proposition (perhaps by instilling polish into your business), hiring people, etc. Some independent consultants prefer to work alone, operating as chief cook and bottle washer. In that case, growth means growing revenue rather than hiring. In any case, you want to plan for growth. Understanding your business past is helpful in planning for the future, but the plan can't be about the past - it's all about looking forward and growing your business.

Good Luck growing your business in 2007, and Good Luck achieving your personal New Year's Resolutions, too!

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By C. Thomas Tyler is the Chief Technology Officer of The Go To Group, Inc. and the Former President of the ICCA Greater Boston Chapter. He can be reached at Tom.Tyler@Go2Group.com or you may view his website at www.Go2Group.com