Consulting Business Model

4 Proven Consulting Business Models

Firm Model

It is a typical consulting firm, with many consultants and associates. When you begin the business, you will do a bit of everything. But, as the company grows, you will focus on Hiring/Training/Management, Strategy, and business development. It is your team who will deal directly with the clients. The more clients, the bigger the revenue.

Advantages of the Firm Model:

1. You can scale the business by adding more consultants, but the staff does not have to grow at the same amount of clients.
2. You don’t need to do all the day-to-day client work.
3. The company runs well without your presence.
4. The company is a valuable asset, easy to sell.

Disadvantages of the Firm Model:

1. The company demands a lot of people management.
2. Profit margins can be low.
3. The business requires infrastructure to run.
4. Lots of human resources depend on you.

Solo/Independent Model

The business is basically you, contractors, or assistants as well. You will take part in everything, from face-to-face client work to marketing and administration. That’s why your profit will depend on a few valuable clients.

Advantages of the Solo Model

1. it’s a lean and profitable business.
2. It’s flexible and easily adaptable.
3. You can customize your work according to your lifestyle.

Disadvantages of the Solo Model

1. You’re the business, if you don’t work, you don’t get paid.
2. It’s hard to sell since you are the face of the company.

Productized Model

It is usually born inside one of the two models above. You identify some pain in your client and develop a solution to solve it. The product will be 80% of your business (20% customizations). All its systems and processes are targeted to solve a core problem for that specific kind of client – over and over again. And this repetition builds efficiency. With everything in place (delivery, service, sales, marketing, and staff), you can scale.

Advantages of the Productized Model:

1. You build a scalable asset.
2. You have recurring revenue.
3. It is easier to scale.
4. You can be out of day-to-day work.

Disadvantages of the Productized Model:

1. Your work will be doing the same over and over.
2. You need HR to keep it running.
3. You must invest in hiring and training.
4. You need to manage lots of clients simultaneously.

Hybrid Model

It is the consulting business where you select elements from more than one of the models above and create your own, in a way that fits your necessity and expectation.

3 New Consulting Business Models

Collaborative Consulting

It is about multiple consultants working together. It is a network of firms collaborating with expertise, IT, tools, and knowledge to meet client needs. By connecting work, the consultants access a broader knowledge while creating flexibility to deliver value to clients. This model reduces fixed costs because it allows access to talent out of their payroll. However, it demands attention to financial planning, since this can lead to high variable costs. There are two sub-models within collaborative consulting:

1. Closed Networks: a fixed set of companies collaborating repeatedly on client assignments. The long-term and intensive relationships lead to more intensive knowledge sharing, resulting in improved value propositions.
2. Open Networks: firms collaborate on projects in multiple constellations, possibly with different partners for different projects. During a project, partners may enter or leave. The firms must be capable of obtaining knowledge and agility to meet changes according to demand.

Continuous Consulting

It centers on data analytics and subscriptions to deliver permanent solutions that clients can use every day, such as benchmarking, diagnostics & analytics in pricing, organizational structure, lean operations, corporate performance & much more. The firm uses its expertise and strategic insights to provide tools and processes, migrating from a one-time income to an evergreen model, which creates ongoing value for clients and generates recurring revenues through subscription-based services.

Instant Consulting

It offers faster value and results. It is about projects that don’t require extensive research in advance, thus enabling advising, execution, and implementation in the shortest time possible. This model benefits environments where agility is key to keeping pace with competitors, allowing clients to gain ground on their rivals/maintain their lead. And companies can measure results from day one.

4 Innovative Shifts of Consulting Business Models

The typical consulting business model is based on 2 main ideas: hiring talents & charging clients for gaining access to these talents. It’s basically selling sophisticated expertise. Following are the new models that have risen in recent years:

From Hiring a Team to offering Flexible Access to Top Talent

The traditional model utilizes consultants as much as possible, the problem here is the client hardly ever gets to choose the consultant they want to work with. The Euro consultancy Eden decided to make it differently. They have a wide network of highly experienced, independent consultants whose expertise is offered to the clients.

So clients can choose the consultants they like to work with. Experienced clients usually know best what they need and can make better buying decisions, while Eden seeks to find the best match between clients and consultants.

Eden has succeeded in creating a new business model that takes advantage of a freelancing trend and the desire of many professionals to work independently and have more control of their careers, as well as the trend of clients who also want to have more control & value in the consulting process.

From Staffing Projects with people to Commercializing Expertise

Expertise can also be available through products and tools instead of personal consultation. This way of providing consultancy generates new revenue streams. For example, PSFK seels reports on various industries and areas, with customized research services that provide strategic advice for the clients. The consulting company has a global network of experts, who put their reports together.

From Consulting to Solutions

Consultancy can also be sold in the form of repeatable and standardized solutions. McKinsey Solutions has created software & technology tools based on clients’ problems. Now they offer solutions for data analytics and data-driven decision-making in several functions and industries.

The clients will pay for a product, usually through licensing agreements, and they will receive it in a shorter time frame than the traditional consulting process. There is a steady revenue stream of the consulting business, which also fosters longer customer relationships.

From Fixed Fees to Aligning Fees with Client’s Success

This shift occurs in the way of charging, it charges clients for objectives achieved. 2/3 of the company’s fee depends on the achievement of pre-defined goals. The clients will only pay if the output of the consultants’ work is successful, thus reducing their risk.

Examples of Consulting Firms New Business Model

Bloomberg’s Data-Based Consulting Model

B started in the consulting business by offering marketing strategy/communications/brand consulting advice. But now digitization has revolutionized its business. They have converged several business models, including media, ad spending, and consulting, all in one, grounded in the data.

Accenture’s Expanded Value Proposition

A expanded its value proposition by acquiring Fjord, a global design consultancy. The objective is to show the clients how design can improve their businesses, allowing great returns from minimum effort, by putting design in every system and process.

Mckinsey’s Produticized Approach

M has created some solutions based on their clients’ problems. It was a way to get the most out of their intellectual property, thus capitalizing its collective knowledge, by applying it in over 20 solutions that combine data, analytics, software, and advice.

Eden Mccallum’s Consulting Meets the Gig Economy

Eden is proof that freelancing can be interesting for both clients and consultants. The firm built a wide network of independent consultants that can match clients according to their necessity. While the consultants will only focus on executing the project, the firm’s partners will be responsible for selling projects and managing clients. It reduces costs and offers more freedom and control to consultants, as well as more decision-making power to clients.

GLG Introduces the As-A-Service Model

GLG offers on-demand services to clients from different industries, by providing a subscription business model that ensures access to its network of experts. The model allows consultants to have more long-term work, with smaller volumes, rather than large-scale projects for a fixed period. Subscription pricing instead of billable hours is not very common yet, but more niche firms are exploring the possibility.