Pre Start-Up Potential Sales + Financials

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September 25, 2013 at 4:07 pm #782


1. I am deep into the heart of my Business Plan but it has come leap and bounds with this guide I have to admit. Another point which I hope Dom can respond to is regarding who he first sold his services to. I am not interested in who but how – was this a previous or existing client or brand new through canvassing? As my own PSB destiny steadily approaches commencement, the more nervous I am about everything. I am currently in employment and this has impeded me directly approaching certain potential clients. Is there a good way to go about this before day 1?

2. Financials – I have managed to get as far as P&L account but i have guessed some numbers in getting there (literally finger in the sky). Is this something I could go back and revisit now or just use it as a guide and develop as more information is available?

September 26, 2013 at 10:10 pm #783

Key Master

Sanjay asks some excellent questions here. Taking them in turn:

1. In my specific instance, I also penned my business plan whilst in full-time employment. As I describe in Guide 01, I was working for Deloitte Consulting at the time when I booked a week’s leave in December 2003 to work up the detail of this plan. The act of doing so convinced me – through rational exploration of multiple aspects – that the timing to ‘start out on my own’ was about as good as it was going to get. When I returned to work, I had decided to serve my three-month notice. To get to this point of determination, part of this plan enquiry answered positively the ‘how do I find the first client?’ and ‘what are the chances of landing this first role quickly?’ questions.

Again, as my Guide 01 touches on … for many, the latter question is an acute matter of time … in extremis, ‘how long can I last before my savings run out and I need to find another job’!? With a small family and a mortgage at the time, I personally put this down to 3-6 months maximum … without the need to call on business loans which I was very reluctant to do. As an aside, I would strongly counsel against raising debt to extend such a period; if you can’t sell yourself, there is a very small chance you will able to sell others!

With that parameter set, the two question were best addressed by writing down all the previous professional acquaintances (past/current clients and colleagues) I had made … and for each I assigned a %probability value of the chances of winning a piece of work from them within this start-up period. To start from a completely ‘cold start’ i.e. not having any such pre-existing relationships but ‘hunting’ for the first client from first introductions is a large risk to take. Not impossible, but of a different order of challenge to ‘farming’ your own network initially. If you have a reasonable professional track and network, you will hopefully find there are 3-6 names at the top of this list where material opportunity exists. That was the case for me and when I added up the %probability, it told me there was an overall 80% chance of landing one of them. Clearly, this was all judgement-based, and a coarse science at best, but it gave me the confidence to set the train in motion.

Being more specific, a few of these names were previous clients, one a contact at my current client organisation and one a previous respected colleague who had since moved onto a new role (where I knew she was seeking consulting support). Clearly, the category of past/current clients brings a number of related legal concerns and you need to look carefully at the restrictive covenants of your employment contract in this regard. In my instance, the opportunity at the top of my list was the contact at the organisation where I was working at the time with Deloitte … not my direct client but, clearly, a relationship secured as a result of me working at this organisation. I grappled with this issue for some while … the ‘do I seek permission and risk refusal – or – just accept the risk of retribution if/when I win such work?’ question. In so much as the specific opportunity that flouted this contractual clause was c. 60% favourable, I opted for the former … to flush out whether it was really tenable (and also because I was determined to leave Deloitte with my professional reputation in tact – the world is far too small to do any different). To my former employer’s credit, the involved partner was extremely reasonable and gave me permission, when asked, to come out of the restrictive covenant. I guess this is unusual; their logic was ‘better to have an alumni friend in the camp’ than another ‘bigger firm’ competitor. I am certain they would not make the same decision again – as my company’s growth into that organisation/account surpassed even my expectations … but that was my story.

In terms of the ‘how?’, it really was just a case of (carefully) ramping up the communications with such networked relationships (clearly requesting their trust/confidences) explaining the nature of my ambitions and seeking to understand whether they had relevant, imminent support requirements. Don’t wait for incorporation and marketing bumph to do this … as you will have lost valuable time tracking towards day one … just start to ‘put your feelers out’ as when you have made the mental decision to go for it. With the contact who eventually became my first client, I invested a lot of time preparing some materials/thoughts addressing his area of concern and sharing these with him. This really helped him scope out the support requirement he had and built a valuable relationship … that ultimately led to my first commission.

In summary, it is totally normal to be nervous. It, clearly, is a path with risk attached to it … but you can significantly reduce this ‘stagnant start’ risk by careful exploration of your own networks. If your technical competence is well respected (always my assumption within this series) then you will be surprised how positively people will respond to such an approach. Even if they do not have a direct need, as professional  acquaintances they will typically be very supportive of your entrepreneurial ambition and make further, careful, referral on your behalf.

2. This question is a little more difficult to answer. All P&L forecasts are estimates … but the extent to which this is reasoned estimate cf. ‘finger in air’ guess is difficult to ascertain without seeing the specifics. All I would say here is that you want to be very conservative in the early stages (first year specifically). For example, in year one, maybe your revenues are just a function of yourself being sold at modest levels of utilisation/fee. In terms of costs, always err on the worst case assessment of individual items … and certainly include a contingency (say 20%) for the unknown and unknowable. Thereafter, you want to get into a discipline of leaving the plan alone (and focusing on variance tracking/management) cf. constant readjustment of the baseline to meet your ever-shifting reality. With the client companies I currently advise to, I recommend the discipline of an annual business plan refresh (full firm collaboration) that looks at their world afresh and systematically. Thereafter, we extend the opportunity to adjust the plan baseline quarterly … if and only if their world has gone through some seismic/unforeseen event (i.e. this rarely happens). Hopefully, with this tempered first year approach, you will see a positive ‘actuals cf. plan/budget’ picture emerge … that will fuel the confidence you need to build/recruit and adjust upwards the year two plan.

Good luck Sanjay!

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