Sold project hours must fund more than the time spent in client meetings. In this fictional management consultancy, three salaried consultants share one delivery calendar; paid owner management and operations support sit beside it. At the selected mix, the practice reaches positive monthly EBITDA after ramp, but the first operating year still records a net loss.
Check the whole paid roster and the invoice cycle before committing to a fixed consulting team. A strong hourly fee does not make unsold work or a late invoice free.
Which work belongs inside the paid calendar?
The case is a small independent management consulting practice in a moderate-cost US metro, working with national business clients from a hybrid office. Its forecast runs from January 2027 through December 2029. Strategy, operations, business financial planning, research and change work divide the same consultant pool; they are service allocations rather than separate teams.
Three consultants at 160 available hours each supply 480 hours per month. The selected 60% utilization sells 288 hours after the ramp, leaving 192 consultant hours outside sold work. Preparation, proposals, internal review and learning must fit there. The owner has three-quarter-time management coverage and operations support has half-time coverage; neither budget adds another consultant to the sold pool.
What does the retained team cost before a project is sold?
Payroll continues while the firm scopes proposals or waits for client records. The following monthly budgets include the scenario’s employer allowance and preserve the owner’s compensation. Fractional management and support are already prorated in the underlying pay budgets.
Project research and outside specialists are separate direct purchases. Travel, client acquisition and collections allowances are sales-linked expenses. A proposal therefore needs enough contribution after these purchases to support the entire retained practice, rather than only the consultant assigned to the engagement.
| Paid role | Monthly cost | Relationship to sold work |
|---|---|---|
| Three delivery consultants | $30,187.50 | One shared consulting-hour pool |
| Owner principal | $10,781.25 | Three-quarter-time management; no added delivery hours |
| Operations support | $2,635.42 | Half-time support; no added delivery hours |
| Total paid roster | $43,604.17 | Paid even when hours remain unsold |
Does the selected work mix pay for the practice?
At the first full ramp month, the service mix earns $59,760.00. Direct project purchases of $2,091.60 and operating expenses of $52,135.57 leave EBITDA of $5,532.83. EBITDA is the operating result before depreciation, interest and income tax; it is not an amount available for immediate owner withdrawal.
Across the first operating year, EBITDA is $13,356.96 but net income is -$2,579.48. Depreciation and the saved month-by-month tax provision explain why those measures differ. Removing the owner’s salary to create a better headline would change the economic question being tested.
Why can profitable delivery still consume cash?
The scenario allows 30 collection days and no supplier payment delay. In March, earned fees of $59,760.00 coexist with collections of $39,840.00. Operating cash flow is -$15,457.48, even though that month’s EBITDA is positive. The firm pays its people and suppliers while part of its work remains in receivables.
The $243,212.17 equity input is proposed and uncommitted; no debt is modeled. Startup uses of $35,500.00 do not consume the whole contribution because the remainder is opening liquidity. The reserve can fund a timing gap, but it cannot demonstrate that clients will accept the rates, scope or invoice dates.
What should the next engagement prove?
Use a paid diagnostic with a named sponsor and a bounded decision. Record all consultant preparation and revision time, owner scope review, purchased research, travel and the date cash arrives. Compare that complete effort with the sold-hour allocation before accepting a longer engagement.
If the team needs extra unpaid partner delivery or repeated free revisions to deliver the diagnostic, the current staffing and scope assumption has failed. Narrow the deliverable, change its agreed price or resource it explicitly, then test the revised plan without treating a new proposal as collected cash.
Make the next decision with your own evidence
Complete one paid diagnostic through collection and reconcile sold hours, all paid nonbillable effort, purchased inputs and invoice age before retaining a larger fixed team.
Explore published business plan examples ↗CedarSpan Advisory is a fictional prelaunch scenario prepared with AI assistance. Inputs are illustrative; forecast results come from the matching saved financial model. Funding is proposed. The diagrams explain the case and do not depict actual premises, established demand or promised earnings. Replace the assumptions with evidence before committing.
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