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Advice on future sales projection for boutique consultancy

 
#1 Advice on future sales projection for boutique consultancy
27/01/2014 23:01

anon.consult

Hey there everyone!

My name is David and I am setting up a small management consultancy business and am in the process of drawing up my sales projections for the next 3 or so years.

My target market is small businesses in the UK, therefore I understand that money is tight for those guys to spend on professional services (particularly in strategic management which is what I will be advising).

One method I have to establish a reliable sales projection is to base forecasts on the following framework:

1. Take the average turnover figure of small businesses in the UK currently (£500k approx.)

2. Out of that average figure, suppose a reasonable budget for those businesses of 2% of turnover to invest in business development such as research and professional services (10k approx.)

3. Project my sales based on a low-to-high percentage fee of that 'available investment kitty' from 10-33%. This will provide me with an average figure of between 1k and 3.3k per client.

Would this model be sufficient enough to base my sales projections on, or shall I just stick the more conventional, rate per hour based frameworks?

Any advice on this would be great guys.

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#2 RE: Advice on future sales projection for boutique consultancy
28/01/2014 10:09

Bushy Eyebrow Partner to anon.consult (#1)

Let me ask you this, if you make 1K to 3.3K per client, how much time do you think that client will demand of you?

Consider your initial meeting, any meetings with staff, research, report, meeting to discuss, questions and edits following their feedback - how much time is that likely to come to? Plus add in all the general phone calls, emails and other time-wasting.

That's surely going to be a lot of work for a very small fee?

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#3 RE: Advice on future sales projection for boutique consultancy
28/01/2014 10:49

anon.consult to Bushy Eyebrow Partner (#2)

Hi and thanks for your reply,

I know this is a small fee for traditional consulting work but my business model is to be catered around small businesses in the first few years of start-up, mainly just focusing on start-up advice and simply introducing strategic management services once those young, small businesses grow larger. What's more I plan to engage with clients initially on a very remote basis via my website.

The thought process on this is pitching a fee level where small businesses can actually afford more of long-term relationship with their professional service providers. Also, I'm going alone with this venture in the first few years as I still plan on holding my full day job so don't want to commit to offering a full and comprehensive service immediately.

In my initial 'traditional' daily rate setting projections, the yearly fees were actually less (taking into consideration overheads and utilisation rate etc.).

I do appreciate what you're saying though and will take all of your guidance on board when drafting the nitty-gritty.

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#4 RE: Advice on future sales projection for boutique consultancy
28/01/2014 10:54

Bushy Eyebrow Partner to anon.consult (#3)

It sounds like it could be hard work for low fees...

Also, when some of these start-ups fail, how will you ensure that they don't come after you (Claiming "bad advice" and all that)?

Also, I'd forget the "jam tomorrow" model. People have short memories. When they become big companies, they're unlikely to "thank" you for your help and give you some lucrative contracts. Instead, they're likely to run you into the ground as they set up their company, and once they're established, will likely forget about you or otherwise be unappreciative.

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#5 RE: Advice on future sales projection for boutique consultancy
28/01/2014 10:59

anon.consult to Bushy Eyebrow Partner (#4)

In the broadest terms I will offering advise on all aspects of strategic management to small businesses in the UK, aiming to establish relationships with younger operations with the aim of nurturing that relationship in the long term.

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#6 RE: Advice on future sales projection for boutique consultancy
28/01/2014 11:08

anon.consult to Bushy Eyebrow Partner (#4)

I did initially plan to target already expansive operations (on the verge of growing larger already) and fine tuning their strategy - naturally giving me more opportunity to demand higher fees.

Perhaps this is the better way to go?

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#7 RE: Advice on future sales projection for boutique consultancy
28/01/2014 12:04

consultking to anon.consult (#6)

I think perhaps you're calculations are far too negative given the current economic outlook and expected investment levels of small businesses currently.

Let's take that average turnover you mentioned, which is actually more like 550K mean figure these days.

Recent figures from the FSB suggest that the average small business are intending around 23.1% on capital investment in the next 12 months. This gives you a investment figure of approximately 121k. to shoot at.

Then take your low-to-high markups of 10-33% and you get 12k to 39k per client.

Quite a difference?

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#8 RE: Advice on future sales projection for boutique consultancy
28/01/2014 23:06

Mr Cool to anon.consult (#1)

Hi David (shouldn't that be semi-anon.consult?)

Before you put a huge amount of effort into this, can I ask WHY you are estimating three years sales projections?

I assume its not for the benefit of a bank loan?

So why do you actually need it?

There is very little chance you're going to be accurate, so in either estimating the true market size, or your ability to sell.

Better that you estimate your selling time v's billing time ratio and work out how much you need to bill per hour to earn an acceptable wage. If this is below what you feel the market will support then, hooray, you have a viable proposition - charge what you think that market rate is.

Next, divide your savings by your monthly costs and work out how many months you can self-fund without earning.

As you start to earn, check your actual billing ratio against your estimate and adjust the two values ("hourly billing rate to survive" and "cash left before I starve")

If both are going up, you're doing well.

I know lots of people that have tried this and the absolute killer issue is how much time do you bill versus how much time are you prospecting (and not billing).

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#9 RE: Advice on future sales projection for boutique consultancy
29/01/2014 00:38

anon.consult to Mr Cool (#8)

Thanks for your reply,

Basically I am wanting to complete the business plan to get something down on paper that is at least sensible in order to shore-up support with future partnerships and perhaps to gain funding for the 3k+ required to get this thing up and running.

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#10 RE: Advice on future sales projection for boutique consultancy
29/01/2014 12:15

Mr Cool to anon.consult (#9)

I honestly wouldn't bother.

Any partner willing to participate in a pre-revenue business isn't worth having, or will want too much on return.

Instead, focus all energy on selling your first few bits of business, deliver them, bill the client, then sell again. When you look like you have a pipeline that you couldn't deliver on your own - that's the time and position from which to choose a partner.

As for funding - consultancy businesses should be self finding. No one in their right mind will give you funds to start a pre-revenue prof services firm that is essentially a one-man band.

I presume you already have a phone, access to the web, a roof over you head (even if rented?). Other than your own salary, you should have no other costs.

Spend no more than 5 days producing some basic collateral, then get out and sell, sell, sell.

Nothing else matters....

What would you spend the 3k on?

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#11 RE: Advice on future sales projection for boutique consultancy
30/01/2014 10:59

Charliefleabag to Mr Cool (#10)

I can't see how this business model would work. I am head of sales for a small boutique consultancy and the amount of effort required to win even small pieces of advisory work can be huge and the timescales very long (typically 6-12 months). It has taken me 6 months, countless meetings, umpteen proposals to win 20 days of work recently. I only did this because of the potential for much bigger projects. The effort required to win work will outweigh any revenue gained but I am happy to be proved wrong.

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#12 RE: Advice on future sales projection for boutique consultancy
30/01/2014 11:11

Independent to anon.consult (#5)

Hi David,

There is a lot more to do to run a small consultancy than just dream up spreadsheets of imaginary numbers.

Why would any small businesses use a company like yours? You're still working on a day job and your niche is very large and undefined.

How are these businesses going to find out about you, and trust you to deliver? Any charlatan can through up a website these days. You can't even meet potential customers during the day. Just having a website won't sell business for you.

For me, success has come from becoming well known in my chosen niche, giving lots of tips, running virtual conferences, writing books published by leading publishers. There will be others in your (wide) niche who already do these things and whom people already trust. They will be ahead of you and your website in terms of winning business.

Good luck!

Founder of an independent consultancy

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#13 RE: Advice on future sales projection for boutique consultancy
30/01/2014 15:38

consultking to Independent (#12)

Hi, thanks very much for your honest and helpful comments.

That is one of the things I do have to work on is narrowing my niche. I suppose I have been far too focused on narrowing my target market success factors as apposed to the services I offer.

Combining a narrow market and narrowing my niche is perhaps the way to go forward?

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#14 RE: Advice on future sales projection for boutique consultancy
30/01/2014 15:43

marsday to consultking (#13)

Defined niche which has a wider market. You'll need to funnel potential customer prospects, as conversion will effectively be a low ratio of that - so you will need to identify and contact far more than you can actually pitch then that will reduce again etc etc.

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#15 RE: Advice on future sales projection for boutique consultancy
30/01/2014 19:27

Mr Cool to consultking (#13)

Slightly awkward question time:

Do you think you're the right person to advise small businesses on their market strategy??

You seem to be struggling with your own...

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#16 RE: Advice on future sales projection for boutique consultancy
31/01/2014 10:01

Happy to Mr Cool (#15)

Another question - who is the op here?

Is it anon.consult, who asked the original question and replied to the first advice?

Or is is consultking, who initially gave advice but who now seems to have taken over from anon.consult as the op?

This is such a strange thread I can't help wondering if it is some sort of attempt at trolling. But if so, where's the humour??

David - if you actually are real, as per the above advice, I would stop messing around with pointless numbers and get out there and do some selling. But don't give up the day job...

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#17 RE: Advice on future sales projection for boutique consultancy
31/01/2014 13:09

Bushy Eyebrow Partner to Happy (#16)

Hi Happy, In answer to your question, I have heard rumours that the op is Dancin' Danny D from the D-Mob although for a few moments I did suspect it was actually Snoop Lion but my bets are now on it being Dancin' Danny D again.

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#18 RE: Advice on future sales projection for boutique consultancy
31/01/2014 13:37

Bushy Eyebrow Partner to Bushy Eyebrow Partner (#17)

Update/Correction: I've just been informed that the op is in fact Voodoo Ray. A guy called Gerald told me.

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