Do you need a business plan? (part 2)
I’ve already talked about why I think traditional business plans are a waste of time for most consulting businesses, but after talking with a friend who has a consulting business idea, I want to talk a little bit more about why you probably don’t need to put time into a long-winded business plan.
My friend has what seems like a great idea for a consulting business. He works in a technical field, and has an idea for how he can save businesses potentially thousands of dollars. He’s thinking of charging a percentage of the potential cost savings to the client. After talking with him, I had a couple of other ideas for how he could price his services, turn clients into recurring customers, and possibly even automate some of his services.
So far, so good.
Bullet points are your friend
Next, my friend wants to write a formal business plan for his idea. Now, putting your thoughts to paper is great, since it gives you some clarity. However, unless you plan to seek outside funding or a loan, a formal business plan probably isn’t worth your time.
Even if you plan to go into partnership with someone else, a formal business plan isn’t necessary. (However, if you’re forming a partnership, you absolutely do need to have a formal, written agreement which spells out the particulars of the partnership).
In my friend’s case, I think he just needs to write up some initial bullet points to flesh out his idea, pricing options, potential clients, etc.
Test your idea
I also advised him to see if he could get a client or two for which he could test his idea to make sure it’s viable. For example, if he needs to spend 20 hours analyzing everything so that the client can save $500 a year, of which, he get’s 50%, then his idea is going to take him more time than it’s worth. Similarly, if no business is interested or businesses can’t or won’t use his service, then he’s out of luck too. Either way, he won’t have wasted weeks hammering away at a formal business plan only to find out later that his idea isn’t economically viable.
I’ve learned that business is a process of testing your ideas, and refining and optimizing to see what works best. And the less time and money you spend, the better.
So test it out. See what happens. Find out what clients are really interested in, and deliver it. After you’ve had some successes, you may want to write out how you’ll grow your consulting business over the next few months and years.
But for your initial idea, just test it out. You’ll get farther faster once you know if it makes money.