What to Look For in a Business Plan Consultant
A well-conceived business plan, rigorously researched and shared among stakeholders, is a key asset for businesses at any stage in their lifecycle. Effective cash flow management, sustainable growth, and successful strategic exits happen not by chance but through careful adherence to a business plan that’s based on a thorough analysis of the existing business and deep industry expertise.
Of course, a business plan is only as good as its writer. While C-level executives and more senior employees need to provide input, it pays to have a third-party consultant assist in writing the initial plan or pressure test an existing plan. This business plan consultant will serve as a combined industry expert, financial analyst, and senior advisor, drawing on their expertise to collect and analyze data, review the business’ financial model and underlying assumptions, and help the CEO think strategically about the direction of their business over the next three to five years.
In this hiring guide, we will address how to identify the right candidate for the role and create the best environment for a successful engagement.
Why Hire a Business Plan Consultant?
Below are some of the most common reasons for retaining a business plan consultant, alongside case studies to provide insight into how they can help your business achieve its goals.
Explore Growth Initiatives
Business plan consultants are often brought on to help executives identify the optimal ways to grow their business in the near-term. This shouldn’t simply be a matter of increasing sales or cutting costs, but a discussion of how to best allocate resources according to strategic priority. A skilled business plan consultant will not just evaluate existing options, but draw on their experience to suggest additional pathways to growth.
Case study: Cutting It Close, a B2C startup focused on razor blades, needs help writing their business plan to map out the next five years of major growth initiatives. They have limited bandwidth, and can’t decide how to prioritize between a set of potential initiatives: expanding to new geographies or aggressively renegotiating contracts with key suppliers. How would an expert business plan consultant approach writing the business plan, keeping these growth initiatives in mind?
In this case, an expert business plan consultant should consider these initiatives in the broader context of the business and its goals over the given time horizon. While expanding to new geographies may seem like a good idea, it shouldn’t be done at the expense of the business’ ability to pursue growth opportunities with a higher ROI that are more in line with existing operations (i.e., more easily attainable) unless there is a strong strategic reason for doing so. Of course, growth isn’t the sole priority—these ambitions should be scaled down considerably if the solvency of the business is at stake.
A business plan consultant should be able to:
- Conduct a comprehensive competitor analysis to determine who major competitors are, which suppliers their competitors use, and which competitors are active in the new target markets.
- Conduct customer research to determine demand for their existing products in new target markets and informally survey suppliers (if appropriate) to estimate potential cost reductions.
- Think through a go-to-market strategy in the new geographies and suggest potential marketing channels (based on competitor and customer research as well as industry knowledge).
- Build a financial model that can toggle between different growth scenarios, providing you with the opportunity to see where your business will stand in three to five years if it expands to the new geographies (or if it does not) and if the business can realize a reduction in COGS from the renegotiated contracts (or not).
- Propose and assess other growth strategies, such as switching to a subscription model or offering a new product line.
The above types of analysis would benefit from a familiarity with the consumer packaged goods industry. Additionally, the right candidate will likely have an experience in conducting primary and secondary market research and in building dynamic financial models.
Challenge Your Assumptions
An expert business plan consultant will not only provide solutions to the problem at hand but will help management look past the problem itself and pressure test all major assumptions. There will be times when getting another set of eyes on the problem will change the problem into something else entirely. One example of this is when GE engaged famed business consultant Ram Charan to discuss their plastics division. Chaman identified that the Saudi public-private partnership SABIC was moving into the market and, given no strong competitive advantage in GE’s pocket, it was in GE’s best interests to sell the business entirely. While GE engaged a consultant with the goal of optimizing a division of their company, they ended up with a much different outcome.
Case Study: The Time Is Ripe, a startup that offers an app for determining when a given piece of fruit will achieve peak ripeness, as well as an online marketplace for the local sale and purchase of fruit, engages a business plan consultant to review their existing business plan. The business plan consultant quickly realizes that the company’s technology strategy is outdated and a serious liability to the company’s long-term prospects. What types of questions should a discerning business plan consultant focused on technology strategy bring to the conversation?
The types of questions that a skilled consultant should ask, divvied up by category, include:
- Who are emerging competitors?
- How is technology helping you win against traditional and new competitors?
- How can you use technology to enter new markets?
- Existing Capabilities
- Do you have the capabilities needed to drive full value from existing IT systems?
- What are the weakest links in your capabilities? Do you have tech-literate management?
- Tech-enabled Customer Experience
- How does your customer experience compare with that of leaders in other sectors?
- What will your customers expect in the future, and what will it take to give them an optimal experience?
- Do you have clear plans for how to meet or exceed customer expectations?
- Business Plan
- What’s the existing plan for upgrading capabilities?
- Does the business plan reflect the full potential of technology to enhance performance?
- Is the overarching technology strategy spread out over a multiyear horizon, rather than just part of the annual IT budget?
- Does the business plan reflect a portfolio of short-term P&L opportunities (e.g., upgrading digital channels), medium-term platform investments (e.g., customer database), and longer-term bets (e.g., a digitally enabled business model)?
Effective Cash Flow Management
Proper cash flow management is an enormous challenge for businesses of all sizes. Whether or not your business is profitable or poised for enormous growth quickly becomes irrelevant if the business becomes insolvent. The good news is that a recent HBR study showed that companies with formal business plans increase their chances of reaching positive cash flow by 16%. For more established businesses, good cash flow management is essential for reliably paying off debts and even in negotiating repayment terms, especially interest rates.
Case study: Builder Industrials, a U.S. company specializing in parts for heavy machinery used in the construction industry, is gearing up for a sale to private equity investors in the next 3 years. To prepare the business, management wants to rewrite their business plan to optimize for free cash flows going forward. What areas would you look into with this goal in mind?
In this instance, a business plan consultant could look at the following:
- Compare the business’ existing cash flows to internal and external benchmarks in the industry. How does Builder Industrials compare on the basis of DSO, DPO, and DIO to other industrials companies in construction? If Builder Industrials is coming up short, these are areas for further analysis.
- Review existing billing systems with an eye toward improving the cash conversion cycle. By speeding up billing and collection, the business will benefit from more timely and robust reporting, enabling the business to identify and close delinquent accounts as well as take advantage of supplier discounts.
- Assess inventory to identify slow-moving items that are tying up cash, and determine if it is worth continuing to produce these items.
A business plan consultant should be able to take the above analysis and, working in tandem with management, determine where to focus the company’s efforts in order to optimize for free cash flow. In a situation like this, it would be useful to engage a business plan consultant who has experience working in private equity investing, working for a private equity portfolio company, or working in operations at an industrials company.
Explore Strategic Exits
Preparing for the eventual exit of your business broadly depends on the business itself being in good health, finding the right buyer, and favorable market conditions. Business plan consultants are invaluable resources when exploring potential exits due to their ability to forecast the performance of the business under a variety of operating scenarios.
Case study: The founder of Healthy Holdings, a medical device manufacturer, is getting on in age and plans to exit her business within the next 5 years. She has been approached by a few buyers, but is not ready to sell just yet. Prior to bringing investment banks into the process, she engages a business plan consultant to draw up plans to explore different options.
In this case, a business plan consultant will analyze a variety of exit options, including (depending on the business’ size) an IPO, acquisition by major competitor, merger, and family succession. These options can help inform the direction of the business in the near-term. For example, if a major competitor has gone on an acquiring spree, Healthy Holdings could focus on activities that will increase its attractiveness to that competitor.
After talking over which exits are the most appropriate for the business, the business plan consultant could then draw up different roadmaps, showing the founder what it would take to get the business ready for each type of exit. The business plan itself can serve as a document during a fundraise or sale, highlighting the opportunity to incoming investors and increasing the chance of a successful exit to the current owner.
The most effective business plan consultant for this type of engagement would be a high-level strategic thinker with experience selling companies. Deep financial analysis isn’t as important in this case as the ability to think creatively about maximizing the value of the business in a relatively short timeframe.
Skills to Look Out For
Hard Skills to Look Out For
Given the wide variety of functions that a business plan consultant can serve, it’s important to consider what specific experience may be necessary for the job at hand. In many cases, it’s the inability to answer that question that is driving you to hire a business plan consultant in the first place (that is, you’re not sure what area of the business needs the most attention). In these cases, you should look for someone with a broad skill set in financial analysis, financial modeling, data collection, and data analysis. This will ensure that the business plan consultant can build and maintain dynamic financial models as well as dig deeply into areas that need further investigation.
Soft Skills Need Also Apply
The ideal candidate should have experience in running or advising businesses, complementing their analytical skill set with the broad vision of a CEO. In order to conduct customer research and competitor analysis, they should have experience in analyzing and synthesizing research reports as well as in conducting primary research.
Ensuring a Successful Engagement
Once you have found the ideal candidate, make sure to spend the time to adequately onboard the expert to increase the chances of a positive experience and a successful engagement.
Here are a few suggestions about how to make this transition go smoothly:
1. Consider an Introductory Consultation to Establish the Project’s Scope
Prior to digging in with any deep analysis, working with the business plan consultant to determine the scope of the project could unveil areas of opportunity that you hadn’t considered (e.g., exploring different growth initiatives, looking into how an acquisition of a smaller competitor could fit into your business’ five-year roadmap). The purpose of writing a business plan is to explore many different paths for your business, so don’t limit yourself prior to even starting.
2. Ensure the Business Plan Consultant has the Resources They Need
The onboarding process should involve meetings with key employees who may inform the business plan consultant’s work. The consultant may need access to corporate documentation, reports, and financial systems, as well as introductions to key advisors or relationships (e.g., suppliers, customers).
3. Jointly Determine Milestones and Ask for a Project Plan
An expert business plan consultant will provide you with a project plan for the first few weeks of the assignment. If they don’t, make sure to ask for one. This will ensure that you and the consultant have agreement on the deliverables and timing of the project.
Business plan consultants can provide enormous value in a relatively short amount of time, applying years of industry and financial expertise in order to benefit your business at critical inflection points. Given the impact that a carefully followed business plan will ultimately have on your business, make sure to do your diligence early and find the right consultant for your business. You should think of them as a numbers whiz and trusted advisor, someone who won’t be afraid to challenge your assumptions when needed, or roll up their sleeves and do the work that needs getting done.