Managing management consulting will be a rough one since it is a high-risk, high-reward kind of business. Some of these firms are not relying too much on funding for their overall capital and expenditures since they consider their savings as their initial capital for this kind of enterprise. However, some banks and other financial institutions may be taken into consideration if the firm tends to acquire a loan to tie up your initial investments and expenses, or until you have a regular cash flow. Other options that the firm may consider are to look for any grants and other forms of capital raising such as equity and debt financing, borrowing through bonds and banks, selling shares of stocks, etc.
Moreover, according to (Horton, 2021) one of the reasons why many businesses fail is the lack of funds or working capital. In most cases, many small-business owners are often fully aware of the daily costs of running their firm, such as employee’s salary, money used for paying the rent and utilities of the company, and making sure that suppliers are promptly paid. But this doesn’t mean that their company will not face financial struggles. These owners of failing companies are not fully aware of how much money is created through sales of products or services. This is one of the reasons why many businesses are at risk of going out of business relatively fast.
In accordance with Brilliant (n.d.) financial planning is very crucial to every business no matter how big or small the business is. If you want to succeed, you must establish a good financial plan. This serves as a map, guide, and an indication of what are the objectives of your business. It sets out your probable costs, and this helps you to find ways to manage them. If you do not have these, potential investors of your firm will not have the time to meet with you and won’t bother to set up a meeting.
As stated in Nationwide (n.d.) having a financial plan will help the organization to govern how to allocate their resources which will help them to achieve their financial obligations. This will also help them to attract new investors and give them assurance that there is a high possibility in achieving their long term objectives.
In addition, these are the following data and information that the starting consultancy firm should need to have for their business plan.
Analysis of the target market and sector
Business goals and unique selling proposition (unique selling proposition)
Initial beginning costs and assets, such as equipment
Fixed costs and overheads
Budget and marketing strategy
Funding requirements, collateral, and interest rate
Projections of pay rates, revenue, and cash flow
Sales projections are given in monthly increments.
Consistent costs
Projection of growth and strategy
Various certifications and education for establishing a strong credibility to our future clients.
On the other hand, they must achieve and establish a concrete and comprehensive financial plan for an efficient and effective management consulting firm. Based on an article entitled "How to write a business financial plan", there are six (6) essential ways to establish an exceptional financial plan. The first step is to determine what are the following set-up costs of the start-up firm such as registrations and licenses, utilities, equipment needed, and most especially the starting capital. Next, they must forecast or establish a profit or loss projection. The firm must estimate the sales and overall expenses on a monthly, quarterly, and yearly basis to identify which are the periods the company makes a profit or not and also to flourish various strategies and tactics to make it profitable.
Further, the third one will be working out the cash-flow projections. A certain business tends to have a profit but is still running out of cash. Having concrete cash-flow projections may help the firm to easily notice if the firm is still having available cash or is needed for funding. Also, it is vital to forecast the balance sheet as well. The firm must list all the expected assets and liabilities after the first year of its operation to picture out the financial status of the firm. The next one will be figuring out the break-even point. Classifying the break-even point or the number of sales needed to cover all the costs is essential for the firm. It can be useful for evaluating the sales, costs, and pricing for the services offered by the firm. Not only that, it may serve as our benchmark to determine if the business is feasible and profitable in the future. Lastly, the firm must seek any professional help for extra guidance and tips on how to assess the firm's overall financial data and information. (Commbank, n.d)
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