Creating a business plan is essential for any business, but it can be especially helpful for consultants who want to establish their credibility and get ahead in the industry.
A well-crafted business plan not only outlines your vision for the company but also provides a step-by-step process of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.
This article will provide an overview of the key elements that every consultant should include in their business plan.
What is a Consulting Business Plan?
A consulting business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons why you will be profitable, how you can succeed in your market, what will set your product or service apart from others, and includes information about your team members, if applicable, to convince investors and lenders (if needed) that you have what it takes to make your venture successful.
Why Write a Consulting Business Plan?
A consulting business plan is required for banks and loan companies, and it is often requested by investors. This document is a clear and concise guide of your business idea and the steps you will take to make it profitable.
Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.
Writing an Effective Consulting Business Plan
The following are the key components of a successful consulting business plan:
The executive summary of a consulting business plan is a one to two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.
- Start with a one-line description of your consulting firm
- Provide a short summary of the key points of each section of your business plan.
- Organize your thoughts in a logical sequence that is easy for the reader to follow.
- Include information about your company’s management team, industry analysis, competitive analysis, and financial forecast.
This section should include a brief history of your company. Include a short description of how it all started, and provide a timeline of milestones the company has achieved.
If you are just starting your consulting business, you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your consulting firm, mention this.
The industry or market analysis is an important component of a consulting business plan. Conduct thorough market research to determine industry trends, identify your potential customers, and the potential size of this market.
Questions to answer include:
- What part of the consulting industry are you targeting?
- Who are your competitors?
- How big is the market?
- What trends are happening in the industry right now?
You should also include information about your research methodology and sources of information, including company reports and expert opinions.
This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.
You can include information about how your customers make the decision to buy from you as well as what keeps them buying from you.
Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or consulting services with the right marketing.
The competitive analysis helps you determine how your product or service will be different from competitors, and what you are using as your unique selling proposition (USP) that will set you apart in this industry.
Complete a SWOT Analysis. Your SWOT analysis should include:
- Strengths: what are your strengths?
- Weaknesses: what are your weaknesses?
- Opportunities: how can you take advantage of competitive weaknesses and strike back at them with your strengths and possible new product or service offerings?
- Threats: what are the potential threats to your company? How can you prepare for them? What can you do to mitigate potential risks?
You will then use this information to develop your own competitive strategy. Determine your competitive advantage and how you will differentiate your business from these competitors.
This part of the business plan is where you determine how you are going to reach your target customer(s). Your marketing strategy should be clearly laid out, including the following 4 Ps.
- Product/Service: Make sure your service offering is clearly defined and differentiated from your competitors, including the benefits of using your service.
- Price: How do you determine the price for your service? You should also include a price strategy that takes into account what customers will be willing to pay and how much the competition within your market charges.
- Place: Where will your customers find you? What channels of distribution will you use to reach them?
- Promotion: How will you reach your target market? You can use social media or write a blog, create an email marketing campaign, post flyers, pay for advertising, launch a direct mail campaign, etc.
You should also include information about your paid advertising budget, including an estimate of expenses and sales projections.
This part of your consulting business plan should include the following information:
- How will you deliver your service to customers? For example, will you do it in person or over the phone only?
- What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?
The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.
Include a list of team members including names and titles, as well as their expertise and experience relevant to your specific consulting industry. Include brief biography sketches for each team member.
Now include a complete and detailed financial plan. This is where you will need to break down your expenses and revenue projections for the first 5 years of operation. This includes the following financial statements:
Your income statement should include:
- Revenue: how will you generate revenue?
- Cost of Goods Sold: These are your direct costs associated with generating revenue. This includes labor costs, as well as the cost of any equipment and supplies used to deliver the service offering.
- Net Income (or loss): once expenses and revenue are totaled and deducted from each other, what is the net income or loss?
Sample Income Statement for a Startup Consulting Firm
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Revenues||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Total Revenue||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|Total Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|GROSS PROFIT||$ 268,880||$ 360,750||$ 484,000||$ 649,390||$ 871,280|
|Salaries||$ 96,000||$ 99,840||$ 105,371||$ 110,639||$ 116,171|
|Marketing Expenses||$ 61,200||$ 64,400||$ 67,600||$ 71,000||$ 74,600|
|Rent/Utility Expenses||$ 36,400||$ 37,500||$ 38,700||$ 39,800||$ 41,000|
|Other Expenses||$ 9,200||$ 9,200||$ 9,200||$ 9,400||$ 9,500|
|Total Other Expenses||$ 202,800||$ 210,940||$ 220,871||$ 230,839||$ 241,271|
|EBITDA||$ 66,080||$ 149,810||$ 263,129||$ 418,551||$ 630,009|
|Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|EBIT||$ 60,880||$ 144,610||$ 257,929||$ 413,351||$ 625,809|
|Interest Expense||$ 7,600||$ 7,600||$ 7,600||$ 7,600||$ 7,600|
|PRETAX INCOME||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Taxable Income||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Income Tax Expense||$ 18,700||$ 47,900||$ 87,600||$ 142,000||$ 216,400|
|NET INCOME||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Net Profit Margin (%)||10%||20%||27%||32%||37%|
Include a balance sheet that shows what you have in terms of assets, liabilities, and equity. Your balance sheet should include:
- Assets: All of the things you own (including cash).
- Liabilities: This is what you owe against your company’s assets, such as accounts payable or loans.
- Equity: The worth of your business after all liabilities and assets are totaled and deducted from each other.
Sample Balance Sheet for a Startup Consulting Firm
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Cash||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
|Other Current Assets||$ 41,600||$ 55,800||$ 74,800||$ 90,200||$ 121,000|
|Total Current Assets||$ 146,942||$ 244,052||$ 415,681||$ 687,631||$ 990,278|
|Fixed Assets||$ 25,000||$ 25,000||$ 25,000||$ 25,000||$ 25,000|
|Accum Depreciation||$ 5,200||$ 10,400||$ 15,600||$ 20,800||$ 25,000|
|Net fixed assets||$ 19,800||$ 14,600||$ 9,400||$ 4,200||$ 0|
|TOTAL ASSETS||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
|LIABILITIES & EQUITY|
|Current Liabilities||$ 23,300||$ 26,100||$ 29,800||$ 32,800||$ 38,300|
|Debt outstanding||$ 108,862||$ 108,862||$ 108,862||$ 108,862||$ 0|
|Total Liabilities||$ 132,162||$ 134,962||$ 138,662||$ 141,662||$ 38,300|
|Share Capital||$ 0||$ 0||$ 0||$ 0||$ 0|
|Retained earnings||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|Total Equity||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|TOTAL LIABILITIES & EQUITY||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
Cash Flow Statement
Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:
- Income: all of the revenue coming in from clients.
- Expenses: all of your monthly bills and expenses. Include operating, marketing and capital expenditures.
- Net Cash Flow: the difference between income and expenses for each month after they are totaled and deducted from each other. This number is the net cash flow for each month.
Using your total income and expenses, you can project an annual cash flow statement. Below is a sample of a projected cash flow statement for a startup consulting business.
Sample Cash Flow Statement for a Startup Consulting Firm
|Year 1||Year 2||Year 3||Year 4||Year 5|
|CASH FLOW FROM OPERATIONS|
|Net Income (Loss)||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Change in Working Capital||$ (18,300)||$ (11,400)||$ (15,300)||$ (12,400)||$ (25,300)|
|Plus Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|Net Cash Flow from Operations||$ 21,480||$ 82,910||$ 152,629||$ 256,551||$ 380,709|
|CASH FLOW FROM INVESTMENTS|
|Fixed Assets||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|Net Cash Flow from Investments||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|CASH FLOW FROM FINANCING|
|Cash from Equity||$ 0||$ 0||$ 0||$ 0||$ 0|
|Cash from Debt financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow from Financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow||$ 105,342||$ 82,910||$ 152,629||$ 256,551||$ 271,847|
|Cash at Beginning of Period||$ 0||$ 105,342||$ 188,252||$ 340,881||$ 597,431|
|Cash at End of Period||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
You will also want to include an appendix section which may include:
- Your complete financial projections
- A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
- A list of your hard assets and equipment with purchase dates, prices paid and any other relevant information
- A list of your soft assets with purchase dates, prices paid and any other relevant information
- Biographies of the key employees listed in the executive summary section above.
- References to people you have done business with who are willing to confirm their positive business holdings with your company.
Writing a good business plan gives you the advantage of being fully prepared to launch and grow your consulting company. It not only outlines your business vision but also provides a step by step process of how you are going to accomplish it. Sometimes it may be difficult to get started, but once you get the hang of it, writing a business plan becomes easier and will give you a sense of direction and clarity about your consulting company.
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