How to Make Decisions When You Lose Consulting Business Because of the Coronavirus Pandemic

Don’t Panic. Do the Math!


I’ve heard from so many consultants that they lost business because of the coronavirus pandemic. Some consultants lost a few consulting gigs. Some lost all or darn near all of their work, particularly consultants who primarily did in-person work like training and facilitation. There are many possible reasons. Clients are swamped responding to the crisis and all other priorities have fallen away. Clients are losing money and not spending anything more than they have to. All the people you were going to work with are sheltering in place, quarantined, or got laid off.

You may be frightened about the virus itself and what it means for you, your loved ones, your clients, and your community. As a consultant, you also need to have revenue coming in the door. In the face of this, it can be easy to let generalized fear take over and either feel paralyzed and unable to make decisions or make rash decisions because you feel panicked.

I know. That’s how I felt.

But it doesn’t help you, anyone else, or your business to stay in that fearful place. You need to be able to make clear-eyed decisions based on the reality of your situation rather than what you fear may happen. So what can you do?

Assess Your Financial Reality: Focus on Facts Over Fears

One way to cure fear is to get the facts in front of you. Assess what is actually real rather than what feels real. In this case, the first thing to do is the math! If you lost consulting business or expect that you might, assess what your financial reality is so you can make decisions based on facts rather than fears. If you are not a financial whiz, don’t worry. Get the basics down so that you have enough information to make the best decisions possible.

How do you assess your financial reality? I’m not a financial or a financial software expert, but I will share what I did and found tremendously helpful. You should also consult your financial advisor if you need to.

For the assessment, use your financial software or an Excel spreadsheet to do the math for your assets, revenue, and expenses each month and then for the entire timeframe you are assessing. I’m sharing the Excel spreadsheet I developed to assess my financial reality. You can access it here.

I did my estimates through March 2021. Do I think the crisis will last that long? No. But I wanted to see what it would take me to get past the December holidays and a bit into next year. And I wanted to look at various best-case to worst-case scenarios.

Doing this exercise will give your financial projections based on different scenarios. You can then use the projections as a tool for making decisions.

How Much Money Do You Have Today?

I suggest starting with how much money you have access to today. Include what you have in your checking or savings accounts. Those are liquid assets that you could immediately turn into cash.

Also include the income of your significant other, if you have one, and any other guaranteed income you have ready access. If you are worried about your significant other losing their income, don’t include it.

Include any funds you have in reserve. These are funds you may have saved for unexpected expenses or dips in your business revenue. You may not have any. Don’t beat yourself up if you don’t. That’s not a “today worry.” Just commit to developing a plan for that when this crisis is over.

If you are eligible for any of the dollars coming out of the recent federal stimulus/relief package, you can include those as well.

I would not count retirement savings because tapping into those should be the last resort, not something to do first, especially now with all the market volatility. If it ever comes to that, consult with your financial advisor so you can mitigate losses. But, or now, I would not include that.

What Are Your Expenses Today?

Then calculate what your monthly expenses are and any additional expenses you are already committed to. I would not make up an estimate based on your gut. This is where precision is more helpful. If you don’t already track it, look at what you have spent over the last 6 to 12 months and get an average. Then add any more expenses you are committed to. Then add at least 15%. Why? Because you never know what unexpected expenses may pop up. You may need money for surprise car repairs, home repairs, medical expenses, vet bills, etc. All this goes in your spreadsheet.

How Long Will the Money You Have Today Last?

Then take a deep breath and calculate how long you can last with the money you have access to today and your current expenses (plus the 15% cushion). Know that this will not be the final calculation because you will also project future revenue. But it is important to know where you stand today. This calculation will tell you what revenue gap you need to fill.

How Much Revenue Do Clients Owe You?

Then calculate how much you have already invoiced clients for that they are committed to pay. That could be for work you have already completed or contractual obligations for upfront payments.

Then calculate how much clients owe you that has not yet been invoiced but that they are still committed to pay. This may be for work that has been completed but not yet invoiced or upfront payments they are contractually committed to paying you.

In my spreadsheet, I made assumptions about when I would get paid and added a bit more time than usual because the crisis could result in clients taking longer to pay, especially if they are hurting financially.

It is possible that you won’t be paid what you are owed if a client goes out of business or just doesn't pay you. I have only had that happen once in 10 years, but, these are unusual times. So if you want to play it safe, assume that you will only recover a percentage of what you are owed. I did 80%.

How Long Can You Last with Owed Revenue?

Once you add in that revenue, calculate how long you can last given your expenses. Your financial reality should have gotten better with this step.

How Much Revenue Could Come In?

These next steps are more speculative but will still help you make choices. You’re going to estimate how much revenue you could get from contracts you already have or could get and then stratify that those contracts by probability of that work happening and you getting paid.

Start with the contracts you already have for work that have been delayed but not canceled. Then make assumptions about when you will be paid and add that to your spreadsheet for each revenue source. I added a couple months to that assumption just because of how much uncertainty still exists about the timeframe for the crisis.

Then make assumptions about other contracts that are already in some stage of development and when you estimate you will be paid. Of course, I know I’m not going to get all of those contracts. That’s where the probability assumptions come in.

For each source of revenue, estimate the probability that it will happen. To keep it simple, I estimated probability as high, medium, and low. Then calculate how long your money would last if you:

  • Got all of that revenue—high, medium, and low probability revenue

  • Only got the high probability revenue

  • Got the high and medium probability revenue

Assess Your Scenarios and Make Decisions

Now you have financial projections based on various scenarios. That gives you the information you need to make decisions and develop your plan. Assess what the financial outcomes are for each scenario and look for gaps that you need to address. Strategies for addressing the gaps could include seeking new revenue opportunities, changing the delivery of your services to be able to continue working, and/or reducing expenses.

When I did this exercise, I was calmed by seeing a better financial situation than my fact-free fear suggested. I also was able to develop a plan with greater precision than before I did the math.

For your plan, consider answering these questions:

  • How much more revenue do I need to make it through March 2021

  • When do I need additional revenue?

  • What are my options for additional revenue?

  • What do I need to do to pursue those options?

  • Who can I ask for help and what am I asking them to help me with?

  • How can I reduce my expenses?

  • What can I do if I don’t secure additional revenue when I need it?

  • What else do I need to do?

Keep Refining Your Assessment and Making New Decisions

Ultimately, this is your tool for making decisions now and as this crisis continues to unfold. With so much uncertainty, expect things to change—likely more than once. So as new information comes in, update it to see how your financial reality changes. Then make new decisions. Whatever decisions you make, at least they will be based on facts and thoughtful assumptions and not fear.


Use my Financial Reality Assessment tool for free. Get access to it here.

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