Public Policy Consulting Financial Model Example

Our Public Policy Consulting Financial Model Structure covers all the essential aspects you need to consider when starting or scaling a Public Policy Consulting business. By following this structure, you can better understand your revenue streams, costs, and assets, helping you optimize profitability and strategically plan for growth.

Financial planning constitutes a cornerstone of any successful business and a Public Policy Consulting firm is no exception. When you are starting or expanding a consulting business in this field, constructing a comprehensive public policy consulting financial model will guide you in managing potential revenues, understanding direct costs, drafting an employee structure and preparing for operating expenses. This financial model not only assists you in establishing a solid foundation for your business; however, it might also spark ideas for exploring new, profitable revenue streams.

The structure of the public policy consulting financial model involves comprehending various elements that are essential to the business. A well-structured model will encompass revenues, costs, personnel needs, operating expenses, assets and funding options.

Revenues

• Consulting Fees: Calculated based on billable hours or project rates, depending on client engagement.
• Retainer Arrangements: Monthly fees agreed with clients for ongoing advisory services, however, workshops and training generate revenue from hosting educational sessions and seminars.
• Research & Analysis Services: Provide income from detailed studies and reports for clients.
• Policy Development: Earns revenue from crafting policy frameworks and strategies for government agencies or NGOs.
• Conference Speaking Fees: Payments received for speaking engagements at conferences and industry events, this, although beneficial, can vary significantly depending on the audience size and event type.

Cost of goods sold

• Consultant Salaries: Encompass costs associated with wages for experts who provide consulting services.
• Materials and Supplies: Include expenses that are tied to necessary resources used in preparing reports and presentations.
• Travel Expenses: Although they represent costs incurred from client site visits, also cover attending conferences that are relevant to client work.

Employees

• Consultants: Expertise in policy analysis and development; they drive core business services.
• Research Analysts: Focus on data collection and analysis to support consulting projects.
• Administrative Staff: Handle office logistics, scheduling and document management.
• Business Development Manager: Responsible for client acquisition and relationship management.
• Project Managers: Ensure successful delivery of consulting projects on schedule and within budget.

Operating expenses

• Office Rent: Leasing office space for the firm’s operations incurs various costs.
• Utilities: Costs for electricity, heating, cooling and water are essential; however, they can fluctuate.
• Communications: Including phone, internet and other communication-related expenses are critical because they facilitate operations.
• Software Licenses: Costs for necessary software tools and platforms must be considered, although they can be significant.
• Marketing and Advertising: Expenses related to promoting the firm’s services are vital for growth; this is an area where investment is crucial.
• Professional Fees: Legal, accounting and other professional service fees cannot be overlooked.
• Insurance: Coverage for professional liability, office equipment, etc., provides necessary protection.
• Depreciation: The accounting method that represents the cost of using office assets over time, affecting financial statements.
• Training and Development: Investment in upskilling staff with additional training programs is key for maintaining a competitive edge.
• Miscellaneous Supplies: Additional minor expenses related to office supplies and other needs can accumulate silently, yet they impact the overall budget.

Assets

• Office Furniture and Equipment: Include desks, chairs, computers, and other necessary office items.
• Software and Technology: Essential software packages provide crucial support for consulting services. However, the integration of these elements collectively enhances productivity.

Funding options

• Bank Loans: Traditional borrowing to fund business operations or expansion.
• Angel Investors: Individuals providing capital for start-up growth in exchange for equity.
• Grants: Non-repayable funds from government or other organizations supporting policy research.

This driver-based public policy consulting financial model entails building a professional financial model that focuses on key operating KPIs (or “drivers”) influencing business operations. Although these drivers are critical, they are essential for accurately forecasting financial outcomes.

Examples of operating KPIs include:

• Client Retention Rate: The percentage of clients that continue their service engagement over a specific period.
• Utilization Rate: The ratio of billable hours to total available working hours for consultants.
• Average Project Duration: The typical time taken to complete a consulting project.
• Lead Conversion Rate: The percentage of prospective clients that turn into paying clients.
• Revenue per Consultant: Average revenue generated by each consultant.
• Operating Margin: A percentage representing operational efficiency and profitability.
• Cost of Client Acquisition: The cost involved in acquiring a new client.

Driver-based financial planning focuses on identifying and prioritizing these key activities with the highest impact on business outcomes; however, this allows for more robust financial projections and resources alignment. Because of this, staffing and budget allocations can be optimized. If you want to know more about driver-based financial planning and why it is the right way to plan, see the founder of Modeliks explaining it in the video below.

The ultimate aim of financial forecasting is to furnish insights concerning future performance, assuring stakeholders of a well-conceived, feasible plan. It also encompasses determining necessary investments for success and evaluating their potential returns. To achieve these goals, here is a one-page template illustrating how to effectively present your financial plan.

In addition to this concise summary, you will need to prepare three core projected financial statements:

• Profit and Loss: Highlights revenues, costs and profits over a specified period.
• Balance Sheet: Provides a snapshot of the firm’s assets, liabilities, and equity at a given point in time.
• Cash Flow Statement: Details cash inflows and outflows over a period, highlighting liquidity and operational viability.

A professional financial model tailored for a Public Policy Consulting firm acts as a strategic asset. It allows you to meticulously think through your business operations, identify the resources required to meet your objectives, define achievable goals and measure success. Such a model becomes invaluable when seeking external funding; however, it empowers you to make informed, confident decisions to effectively manage and expand your business. Although this can be challenging, because it requires diligence, the payoff is substantial.

If you need help with your financial plan, try Modeliks , a financial planning solution for SMEs and startups or contact us at contact@modeliks.com and we can help.

Author:
Blagoja Hamamdjiev , Founder and CEO of Modeliks , Entrepreneur, and business planning expert.

In the last 20 years, he helped everything from startups to multi-billion-dollar conglomerates plan, manage, fundraise, and grow.