CONSULTING
BUSINESS
MODELS
2
SUPER GUIDE:
CONSULTING
BUSINESS
MODELS
BY DANIEL PEREIRA
3
© THE BUSINESS MODEL ANALYST
The Business Model Analyst is a website dedicated to
analyzing business model types, patterns, and innovation
using the business model canvas as its primary tool. The site
offers a wide variety of free and premium content, including
digital products such as PDF tools, presentations,
spreadsheets, ebooks & guides, and much more. Check it out
here.
Daniel Pereira
The Business Model Analyst
Ottawa, ON, Canada
businessmodelanalyst.com
4
TABLE OF CONTENTS
The Right Consulting Business Model 6
Scoring Elements Business Models 8
4 Proven Consulting Business Models 11
3 New Consulting Business Models 12
4 Innovation Shifts of Consulting Business Models 21
Conclusion 23
References 24
About the author 25
5
THE RIGHT CONSULTING
BUSINESS MODEL
What is the right consulting business model for you? First of all,
as with any other business model, there is always some kind
that seems to be hot at the moment, something that cannot go
wrong. But that is not true.
You need to choose a consulting business model that fits you,
your lifestyle, and your goals. For example, have you decided
on the ideal size firm?
● Do you want to be a solo consultant, and work by
yourself?
● How many employees would you like to have in your
firm?
● Do you prefer to manage teams and processes?
And what about the revenues? Have you thought about how
much you aim to reach?
● A firm of a million dollars a year?
● Or a-million-dollar-year personal income?
● Are you able to manage staff’s paycheck?
● Do you intend to scale the business?
6
Moreover, you must consider what you enjoy doing as a
consultant and how complex you’d like your business to be.
● Would you like to manage a great infrastructure, with
plenty of employees and systems?
● Would you rather have a simple business, which offers
one service or one product only?
● Or do you want to work directly with your clients?
There is no one right answer for all of these - and other -
questions that may conduct your choices. Therefore, there is no
one right consultant business for everyone. Each consultant
must analyze and decide based on personal decisions what
type of consulting business model will fit them.
7
SCORING ELEMENTS
BUSINESS MODELS
Sioo, a professional services firm, has launched an extensive
study into trends in the management consulting industry.In
collaboration with the Vrije Universiteit (VU), Amsterdam, the
research documents the trends the industry is experiencing.
The research shows that the traditional model of consulting,
with junior consultants, hourly fees, and selling advice, is still
the dominant model.
Nevertheless, the majority have introduced innovative elements
into their business model - only 15% of consultancies still work
in a one-sided approach.
Fast impact on clients, collaborations with other consultancies,
and specialization on service have become part of many
consulting businesses. The new consulting business models
may be, in short term, a result of these trending elements:
8
9
4 PROVEN CONSULTING
BUSINESS MODELS
There are four traditional, tried, and true consulting business
models. They are:
Firm Model
This is basically a typical consulting firm, with many consultants
and associates. Usually, when you begin the business, you will
do a bit of everything. But, as the company grows and moves
on, you will focus on hiring, training, management, strategy, and
business development. It is your team who will deal directly
with the clients.
Therefore, the revenues will be the difference between what
clients pay the company and what you pay the team. The more
clients, the bigger the revenue.
Advantages of the firm model:
● You can scale the business by adding more consultants,
but the staff does not have to grow at the same amount
of clients.
● You don’t need to do all the day-to-day client work.
● The company runs well without your presence.
10
● The company is a valuable asset, easy to sell.
Disadvantages of the firm model:
● The company demands a lot of people management.
● Profit margins can be low.
● The business requires infrastructure for running.
● Lots of human resources depend on you.
Solo / Independent Model
As the name states, the business is basically you - sometimes,
contractors or assistants as well. So, 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:
● It is a lean and profitable business.
● It is flexible and easily adaptable.
● You can customize your work according to your lifestyle.
Disadvantages of the solo model:
● You are the business, if you don’t work, you don’t get
paid.
● It is hard to sell, since you are the face of the company.
11
Productized Model
This model 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 (with about 20% of
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:
● You build a salable asset.
● You have recurring revenue.
● It is easier to scale.
● You can be out of day-to-day work.
Disadvantages of the productized model:
● Your work will be doing the same over and over.
● You need human resources to keep it running.
● You must invest in hiring and training.
● You may need to manage lots of clients simultaneously.
12
Hybrid Model
The hybrid model is the consulting business where you select
elements from more than one of the models above and create
your own, is a way that fits your necessity and expectation.
13
3 NEW CONSULTING
BUSINESS MODELS
Like many other contemporary industries, the consulting
business is undergoing several trends and disruptions. These
changes bring more specialized services, specific markets, and
faster client impact. As a result, three new consulting business
models have emerged:
Collaborative Consulting
As the name says, it is about multiple consultants working
together. It is a network of firms collaborating with expertise,
information technology, tools, and knowledge to meet client
needs. By connecting work, the consultants access a broader
knowledge while creating flexibility to deliver value to clients.
Consulting models like this reduce fixed costs because it allows
access to talent out of their payroll. However, that demands
attention to financial planning, since this can lead to high
variable costs also.
Different partners may enter or leave projects as needed, thus
teaming up for specific projects and providing specialized
insights and services. In general, there are two sub-models
within collaborative consulting:
● Closed networks: a fixed set of companies collaborating
repeatedly on client assignments. The long-term and
14
intensive relationships lead to more intensive knowledge
sharing, resulting in improved value propositions.
● 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
This model centers on data analytics and subscriptions to
deliver permanent solutions that clients can use every day, such
as benchmarking, diagnostics and analytics in pricing,
organizational structure, lean operations, corporate
performance and 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.
Also, these solutions deployed by continuous consultants
attract clients for repeated use, because they help navigate
regularly occurring problems. On the other hand, it is an easier
model for established brands and harder-to-sell for new firms.
Instant Consulting
As the name proposes, instant consulting 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.
15
A case example is when a client needs a financial expert to
help their business establish better accounting practices. The
consultant can get to work and apply their knowledge and
experience kind of immediately, without a long-term project.
This model benefits environments where agility is key to
keeping pace with competitors, allowing clients to gain ground
on their rivals (or maintain their lead). And companies can
measure results from day one.
These new business models are on the rise, but not yet having
a major impact on the consulting industry. However, the trends
driving them can bring some significant shifts to the industry,
and consultants might have to adapt the way they do business
to remain competitive, which means we may see a greater
impact by these new models in the years ahead.
16
4 INNOVATION SHIFTS OF
CONSULTING BUSINESS
MODELS
The typical consulting business model is based on two main
ideas: hiring talents and charging clients for gaining access to
these talents. It’s basically about selling sophisticated expertise.
Nevertheless, despite most of the industry works that way, new
business models have risen in recent years, creating value both
for clients and the consulting industry:
From hiring a team to offering
flexible access to top talent
The traditional model utilizes consultants as much as possible
and puts as many consultants on the teams as possible. The
problem here is the client hardly ever gets to choose the
consultant they want to work with.
The European-based management consultancy EdenMcCallum
decided to make it differently. They have a wide network of
highly experienced, independent consultants whose expertise
is offered to the clients.
Clients, thus, can choose the consultants they would like to
work with. Experienced clients usually know best what they
need and can make better buying decisions, while
17
EdenMcCallum also seeks to find the best match between
client and consultant.
EdenMcCallum partners are responsible for selling the projects
but do not manage them. The consultants, on the other hand,
are not pressured to sell new projects, can focus on delivering
successful ones, and enjoy the flexibility to decide how much
they would like to work.
So, Eden McCallum has succeeded in creating a new business
model that takes advantage of a freelancing trend and the
desire of many professionals to work independently, having
more control of their careers, as well as the trend of clients who
also want to have more control and value in the consulting
process.
18
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, the New York based trend research consultancy
PSFK sells reports on various industries and areas, with
customized research services that provide strategic advice for
the clients. This consulting company has a global network of
experts, who put their reports together.
19
From consulting to solutions
Consultancy can also be sold in the form of repeatable and
standardized solutions. McKinsey Solutions has created
software and technology tools based on their 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 timeframe than
the traditional consulting process.
And, for the consulting business, there is a steady revenue
stream, which also fosters longer customer relationships.
20
From fixed fees to aligning fees
with the client’s success
The shift may also occur in the way of charging the clients.
Unlike the typical sales of hours spent, the New York based
innovation consultancy Fahrenheit 212 charges clients for
objectives achieved.
2/3 of the company’s fee depends on the achievement of
pre-defined goals. So, the clients will only pay if the output of
the consultants’ work is successful, thus reducing their risk.
21
EXAMPLES OF BIG
CONSULTING FIRMS NEW
BUSINESS MODELS
Bloomberg’s Data-Based
Consulting Model
Bloomberg started in the consulting business by offering
marketing strategy, communications, and 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
data.
Accenture’s Expanded Value
Proposition
Accenture 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 return
from minimum effort, by putting design in every system and
process.
22
McKinsey’s Productized
Approach
As mentioned above, McKinsey has created some solutions
based on their clients’ problems. It was a way to get 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 McCallum, as shown before, is the 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.
This reduces costs, offers more freedom and control to
consultants, as well as more decision-power to clients.
23
GLG Introduces the As-A-Service
Model
The professional learning services company Gerson Lehrman
Group (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 as-a-service business model allows consultants to have
more long-term work, with smaller volume, rather than
large-scale projects for a fixed period.
Subscription pricing instead of billable hours is not very
common yet, but more and more niche firms are exploring this
possibility.
24
CONCLUSION
Like any other venture that a business person may attempt,
there is no RIGHT or BEST business model regarding
consultancy. Many factors, whether personal or from the market
and environment, may influence your choice.
You should not simply decide for one model because it is the
latest trend, or because it is being a successful enterprise in
someone else’s hands. There is no right answer for everyone
and anyone.
Consider your situation, your market, your experience, your
goals, and, only after analyzing everything carefully, make the
most accurate decision about the best consulting business
model for you.
25
REFERENCES
The following references were consulted to create this Super
Guide:
➔ https://www.consultingsuccess.com/consulting-business-
models
➔ https://innovationmanagement.se/2015/07/13/reinventing
-the-consulting-business-model/
➔ https://www.consultancy.uk/news/23120/three-new-busin
ess-models-in-the-consulting-industry
➔ https://www.graphite.com/blog/3-new-consulting-busines
s-models/
26
ABOUT THE AUTHOR
Daniel Pereira is a Brazilian-Canadian entrepreneur that has
been designing and analyzing business models for over 15
years. You can read more about his journey as a Business
Model Analyst here.
E-mail Daniel if you have any questions
at:
[email protected] You can connect with Daniel at Linkedin:
https://www.linkedin.com/in/dpereirabr/
27
