In my post here yesterday I started to answer “what should I pay a consultant to develop a business plan for my company?” My first take was about the need for planning process and living with your plan over the long term. The key thought there was:
So my first answer to this question is this: don’t pay a consultant to develop a business plan. Do it yourself.
Still, if you’re busy, and you believe in division of labor, and you don’t want to do the plan yourself, this doesn’t really answer the question. So this is part 2 of my answer.
1. The one-time business plan document
Let’s assume for a moment that you want exactly what I say is the wrong thing: somebody to write a 10-20-page document you can call your business plan. There’s no concern about actually planning your business. You don’t want advice or guidance or second opinions, just a damn document. You don’t think anybody’s going to read it anyhow.
For that, find a good freelance business plan writer and good luck. Pay somewhere between $400 and $1,000. Figure the time involved is some listening to you, some shuffling your past papers around, and some writing. It’s a day or two of work.
I just checked average freelancer rates on freelanceswitch. It looks like writers get about $50 per hour, give or take. So $1,000 buys you about 20 hours for an average business writer. $500 buys you 10 hours.
And if you want spreadsheet knowledge double the price, and if you want financial knowledge and understanding, triple it.
Get very specific with the consultant: what services are you buying? Interviewing you? Reviewing your documents? Writing your document? Projecting your financials?
And remember this: that document will be useless a month later. At this point you can refer to my 10 questions to ask yourself before hiring a business plan writer.
2. Business plan help, coaching, and facilitation
The good news in this case is now we’re talking about real business planning to really help you manage your business. This kind of consultant will work with you as much as for you, and help you create your plan based on your goals and resources. Let’s hope you get somebody who will help you build a planning process that generates a living plan that can be reviewed and revised regularly.
This consultant won’t just write a document for you, because that doesn’t work; but he or she will help you do it in a way that will work. Experience in this field is valuable. Don’t reinvent wheels and learn everything the hard way. Get somebody to accelerate that learning.
But the bad news is that somebody with the knowledge of business planning, spreadsheets, and financial standards is worth a lot of money. In this earlier post I calculated at least $200 per hour, maybe more.
And how many hours do you want of that person? Are you going to do the heavy lifting yourself, and optimize the task with leveraged knowledge and expertise? Then you don’t need as many hours. Do you want the consultant to do it all? That’s 20, 50, 100 hours very quickly. And then you need the consultant to transition the changes in the plan, and work with the planning process. I think I’m talking about serious dollars now; I’m afraid to add it up. $10,000? $15,000?
And be very, very careful as you approach this job. These are shark infested waters. Check references of past clients very carefully. In my experience the ratio of real consultants offering real value to charlatans and quacks is about one to four. Remember this: although you can’t get an investment without a business plan, the business plan alone means nothing. Investors buy your team, your market, your product, and your future. The plan is just to show them what you’re planning.
3. My consultant will get me the money
With this one you get even more skeptical. The vast majority of people who sell business plan consulting services promising to get investors are just plain lying. Given that it’s not really the plan, but the team and product and market and such, that investors buy into, then what’s going on when somebody promises to write you a plan to get you the money?
If you do have a great team, market, and product, then a savvy consultant wants a piece of the action. They want to join the team.
Somebody who has the experience and contacts to bring to the party doesn’t just sell that knowledge to the highest bidder. That person can’t bring bad businesses to those contacts. There’s a whole set of worries about reputation. So either your business is really going to be interesting in that upper-echelon world, you have the team and market and product, or that person isn’t what they claim to be.
When somebody promises to get you in touch with movers and shakers, just for money alone, watch out. Keep your hand on your wallet pocket. Something is fishy there.
I knew a guy who did this kind of business for several years. He chose his clients carefully, making sure they had a real shot at getting investment. He charged $25,000 and up, usually along with a piece of the action, and that was 10 years ago. And he delivered on his promise. He used to use Business Plan Pro and the companies he consulted for account for more than a dozen of the successful companies, that got financed, in the bplans.com database of business plans.
But he doesn’t do that anymore. He ended up as CFO in one of his client companies.
If you’re thinking of going this way, check references very carefully. Always talk to past clients. Get a bunch of names and talk to all of them. Too many dishonest consultants can produce one or two names of past clients who are motivated (sometimes with mutual favors, sometimes with money) to speak well of them. Get 10 names and check with all of them.
(Image credit: Ruslan Grechka/Shutterstock)