SET Case: Your own Management Consultancy

• Financial KPIs:
  At the beginning of a business, it is essential to have an overview of the cash flow, in order to avoid running into insolvency at the early stages of the company y (e.g., when and who do we have to pay vs. when do we expect inward cash flow?). As such, the payment terms and the KPI “Days Sales Outstanding (DSO)” is vital.
• Customer-focused KPIs:
  Customer satisfaction must always be kept in mind, in order to achieve continued business from customers with future projects. A project success rate shows if processes need to be improved. The rate also gives information about the quality of the current service.
• Employee-focused KPIs:
  Employee productivity and utilization should be monitored. This gives information about if the existing capacities (e.g., consultants) are utilized enough.

For your calculation, you have the following assumptions in your business plan:

Salary

• 10 consultants in total (including yourself)
• Average yearly salary per consultant: 100.000 € (fixed)
• Expected employer’s contribution to base pay salary: 20 %
• Average hourly rate as minimum pricing point that clients are willing to pay: 250 €

Costs

• Founding costs (e.g., legal fees, etc.): 20.000 € (in January)
• Website + SEO: 40.000 € (in March)
• High-end IT equipment per consultant as investment: 4.800 € (useful life: 2 years)
• No office in the start-up phase

Funding

• Financing requirement: 300.000 €
• Expected interest rate: 3% p.a.

The assumed utilization for the start-up phase can be taken from the assumption illustration (see exhibits)

The break-even point is the point in time at which neither profit nor loss is generated.

In this case, the break-even can be analyzed from two perspectives:

• Monthly break-even
• Cumulative year-to-date break-even

Since the company incurs losses during the ramp-up phase, the relevant question for investors and banks is when cumulative losses are fully offset.

In the early stages of a start-up, it is common to take on multiple roles and responsibilities. This often results in one person being in charge of several teams or departments simultaneously.

• Management
  The management must set a clear vision and strategy, ensure resources are available, provide motivational leadership, monitor the progress, adjust as needed, and manage risks.
• Delivery teams
  The delivery teams within the consulting start-up have the responsibility of consulting/helping the clients by executing the projects. They play a critical role in the success, as they create the value-add for the company. They must be highly motivated, innovative, and customer-focused.
• Marketing & Sales
  In the early stages, the marketing and sales team must focus on acquiring new, potential customers with a clear brand identity.
• HR & Recruiting
  The HR and Recruiting team is responsible for processes in recruiting, interviewing, and onboarding new employees. It also develops and executes a strategy for employee development and career advancement.
• IT
  The IT team focuses on building technical infrastructure, the cybersecurity, and selecting and implementing tools and hardware for consultants (e.g., laptops).
• Finance & Reporting
  The finance team reports on all financials and business growth, while at the same time implementing accounting practices and doing the bookkeeping.
• Administration & Organization
  General administrative and organizational activities need to be taken care of, as well. This includes, for example, coordinating and scheduling appointments, meetings, and other events.