The phrase ?business plan? probably calls to mind a lengthy formal document full of analysis and fine details. At the same time, it suggests the structured thinking process that should lead to such a document.
Unfortunately, it is way too easy to put too much effort into creating the former, at the expense of the latter.
Frankly, too many consultants start with the document and let it drive the planning. They use commonly available formats and ?fill in the blanks,? which is different than ?answering key questions.?
The wide availability of model business plans leads consultants to waste a lot of effort, so let?s look at the ?templates problem? before we get into the core elements of a good business plan.
Browse, Then Toss
Search for ?business plans? and you will quickly find raft after raft of ?business plan templates.? If the free templates are not enough, you can invest in software to help you put together a brilliant looking document.
Creating a business plan is a valuable practice, one you should perform at least annually. But there are several problems with the fancy, exquisitely detailed approach of most templates:
- You may not need a lengthy, detailed document at all. If you never share your business plan with anyone else, do not put hours into making it beautiful and answering questions that don?t apply to you.
- They are rarely focused on one-person businesses, especially consulting. Do you really need to write up your Management Team? Organization Chart? Discuss Equipment, Facilities, and Labor Requirements?
- They use excessive formatting and structure to create the illusion of great thinking. For example, many require a separate Vision Statement, Mission Statement, and Statement of Objectives. Overkill.
- They are just too long. It is not unusual for a template that is just headings, with a sentence telling you what to fill in under each one, to run 15-20 pages. You will quickly end up with a 40-page document that few people are going slog through.
- You certainly don?t need a huge, formal document to run your business well, and many freelance consultants will have little call to share such a document with anyone else.
My recommendation: get it out of your system! Search for business plans on the web, browse through templates, get an idea of the standard formats and common topics. (Two of the more reasonable sources for the basics of business planning are the Small Business Administration and SCORE.)
And then put them aside until you absolutely need that level of formality ? which may never happen.
The Three Business Plans
Consider three possible documents:
- The Captured Plan: documentation of your planning process, the questions you asked yourself and the answers you came up with.
- The Portable Plan: a one-page summary of your Captured Plan. This one fits in your head, so you can carry it around with you to guide your daily business decisions.
- The Presentable Plan: what the templates produce, lengthy, detailed (and boring!). Don?t bother to create one of these unless an external need arises.
Create the plans in that order. Do the thinking needed to run a successful freelance consulting business first, and then capture that thinking in a document.
As for The Presentable Plan, the most likely need for that kind of document is looking for financing. Whether you go to a bank or credit union or find an infusion of cash from other sources, external parties may demand a formal business plan. Then you dig out the templates and go to work.
But relatively few freelance consultants find themselves going that route. And I?ll share a little secret: although many bankers request a formal business plan, and may even look at a few sections, they do so mostly to cover their own butts.
I?ve heard more than one business banker say that if the small business owner cannot easily talk about the key issues their business faces (The Portable Plan) quickly and confidently, no amount of verbiage in a pretty document will make any difference.
Elements to Capture
Looking at common elements found in?effective business plans, I recommend carefully examining the following issues:
- What are you selling?
- Whom are you selling to?
- How you are going to get in front of that market?
- How you are going to run your business?
- Budget/Financial Issues
- Projections
- Risks, Obstacles and Responses
What are you selling?
What services and products will clients pay you for?
The most common problem here is talking in generalities (?provide executive coaching?). Go deeper to list specific actions or products that you can charge for.
Will you offer on-site seminars? One-on-one coaching sessions? E-books? Webinars? Diagnostic tools? Safety assessments? Will you spend time doing research and generating reports and recommendations? Propose marketing/legal/operational strategy?
Be as specific as possible. Don?t hide behind the ?every project is unique? excuse. Identify common elements in your work, or list typical projects.
Whom are you selling to?
This is one of the most valuable, and most neglected, elements of business plans, namely, your ideal client, your target market.
What needs, what problems, will lead clients to turn to you for help?
Having identified underlying needs, describe ideal clients in detail. What industries, or what types of individuals, have those needs? If we?re talking about companies, how big are they, how many are there, where are they?
Go for tight definitions. If you consult to businesses, don?t delude yourself into thinking every business is a potential client. It is unlikely your services are equally appealing to giant corporations and local small businesses.
If you consult to individuals, again, get beyond thinking ?everybody needs me.? Look at age groups, income levels, lifestyle, location, and any other factors that can help you focus on the people who are most likely to need what you offer.
How you are going to get in front of that market?
Think of this topic as an extension of your target market.
Where do they hang out? Do they read certain journals, newspapers, blogs? Is your target market more likely to exchange ideas on LinkedIn than Facebook? Do they live on social media, or do they think that?s fine for personal/fun activities, but not for serious business?
What sources do they all see and hear? Where would articles reach them? Advertisements? Do they attend conferences or conventions?
If you cannot come up with anyplace your target prospects intersect, either physically or virtually, maybe the need you are addressing is not urgent enough to support a business!
If you cannot come up with anyplace your target prospects intersect, either physically or virtually, maybe the need you are addressing is not urgent enough to support a business!
Look at how others are trying to reach this market. If no one else is serving your target market, you may face significant challenges (and expense) in getting their attention. If there are just scads of rivals providing services like yours, you?ll have to work harder to distinguish yourself from the pack.
The easiest path runs through a market where some communication channels, some ?watering holes?, ?are already in place. But it is not so flooded with providers that low price is the only decision factor for potential clients.
A good understanding of your target market and their ?gathering behavior? is the starting point for specific marketing strategies, whether that?s publishing articles, a strong online presence, advertising, or other methods. Often marketing strategies are weak precisely because the consultant has avoided the sometimes difficult research into where their target market lives, thinks, and acts.
How you are going to run your business?
Even without?a management team and an org chart there are many practical decisions to be made about running your business. All too often they are made haphazardly.
Will you hire helpers, subcontractors like administrative help, web designers, writers, technical support?
What supporting services are essential to your business? What level of equipment/technology do you need? Will you travel frequently? Will you meet with clients on your turf, or theirs, or in a virtual environment? Do you need an office, or a conference room, or at least occasional access to them?
Budget/Financial Issues
Ah, the money. Business plan templates will ask you for an Income Statement and a Balance Sheet, hardly practical for most one-person consulting businesses.
Still, freelancers who never do formal budgeting often encounter ugly surprises when clients are few (and also miss opportunities they haven?t prepared for).
Estimate gross sales (before expenses and taxes) for the coming year. Be realistic: this is not about goals, it is about what you can depend on. Be conservative.
Many consultants experience seasonal cycles. Break your anticipated annual sales down into monthly figures that reflect those patterns.
Still, freelancers who never do formal budgeting often encounter ugly surprises when clients are few (and also miss opportunities they haven?t prepared for).
Nail down your fixed costs. You pay for Internet, office supplies, phones and more. You may pay for online services (online meetings, surveys and diagnostics, e-mail list management). Clearly record what you?ll pay out, month after month, whether or not any money is coming in.
Make sure you have a rule-of-thumb estimate of your tax rate.
Build in some long-term costs for things like replacing equipment. How often do you plan to get a new laptop? Do you hope to bring in helpers, or upgrade online services, in the next year or two? Assemble anticipated cash outlays for the next few years.
And don?t overlook cash flow demands due to the lag between invoicing and payment. For example, many consultants travel quite a bit. You may pay for your plane ticket when you book it, getting reimbursed by the client much later. How much cash must you have on hand to carry project-related expenses while you are waiting for payment?
Put all of this together in a monthly budget for the coming year. Then prepare annual budgets for the following couple of years.
Finally, look at your emergency resources. If you hit a bad dry spell, or your computer melts down and needs to be replaced off schedule, where would you find the cash to survive? Savings? Credit? Relatives?
Review your budget for action points: Do you need to raise rates? Cut costs? Save more? Book more clients?
Projections
Here?s where you plot out your future. What is your expected growth in sales for each of the next few years?
Why do you believe sales will increase? Don?t just take last year?s number and increase it by some amount. Think about how many new clients you will need, what new products and services you might offer. Describe changes in your target market that you can leverage into growth (e.g., new legislation changes, such as changes in: privacy rules, safety requirements, or reporting requirements that are important to your clients).
Also describe plans that will affect costs. Perhaps you will move into an external office in the next couple of years. Factor that into your projected expenses so you can see what kind of sales growth is needed to support the move. Remember that seizing opportunities can incur expenses and impact your ultimate profit.
Look beyond sales and costs to include other factors that are important to you. For example, perhaps you are more interested in efficiency than growth. You want the same level of sales, but from fewer clients, or more from products and less from personally delivered services. Your goal is to boost personal time and reduce stress, not to boost income.
Doing a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can be a big help in this element, and the next one. See this post for the basics of SWOT analysis for freelance consultants.
Risks, Obstacles and Responses
What stands between you and that projected future you just described? What could knock you off track, even threaten your livelihood? (Again, SWOT analysis can be very helpful.)
?Obstacles? are longer term, more chronic challenges to your success, while ?risks? refer to individual events or changes that hurt your business. Take competition as an example.
For each obstacle and risk you identify in your business plan, identify first steps to counter any negative impact on your business.
If you consult on developing effective web sites, say, you have a lot of competition. Besides full-service consultants like yourself, there are basic web designers. And don?t forget the ?build your own web site in minutes!? platforms that just about every web host offers. The plethora of simpler, lower-cost options is one obstacle challenging your ability to get the attention of prospects and convince them to choose a more complete consulting approach.
On the other hand, for a tax consultant, certainly there are chronic obstacles in the form of cheap tax-preparation software. But what about the risk of one of the national tax preparation chains opening an office next door to you?
Remember, it is hard to react quickly if you have not thought about your responses in advance. For each obstacle and risk you identify in your business plan, identify first steps to counter any negative impact on your business.
The Portable Plan
Once you have completed ? and recorded! ? your detailed business plan, distill it into something you can carry around inside your head.
I strongly recommend you limit yourself to one printed page for your Portable Plan. (And if you end up creating a Presentation Plan at some point to share with another party, your Portable Plan will provide most of the ?Executive Summary? that typical templates put at the front of the document.)
- Describe your business in a paragraph that captures what you sell, your target market, and any salient points about how you plan to run your business.
- Devote another paragraph, or even two, to marketing, to your strategies for getting in front of your target market.
- Summarize the future as you see it: projected sales, opportunities, risks, obstacles, and so on.
- Highlight the key financial issues you want to tackle: cash flow, emergency resources, funds to invest in opportunities, training, equipment, etc..
If you know those things ? what you sell, who your target is, how you reach them, what you expect, and a few practical guidelines to running and financing your business ? you will make much better decisions each month, each week, and each day.
The Final Test
Ask yourself one last important question: Is this a living plan?
Or will it lie in a file gathering dust (or e-dust) between annual reviews?
The better the job you have done of crafting a solid business plan, the more likely you are to refer to it now and then. Changing conditions, new opportunities, newly perceived risks will drive you to pull out your plan and read a particular section.
Even better, as you see how your plan is working during the year, pop into your file and update the relevant sections. Use the document as a thinking tool, not as part of the fossil record of dead thoughts.
A living, evolving business plan, with a clear structure to make sure you do not overlook key elements, can show you the path to more success with less frustration and stress. Learn to create, review, and revise your business plan on a timely basis, and you?ll be well ahead of your competition.
Source: http://freelanceswitch.com/the-business-of-freelancing/freelance-consultant-business-plans/
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