The 4 big firms: they are giant firms that have deep knowledge and skills, a global presence and charge accordingly. Why should you start a consulting business?. Preparing for interviews? Get RocketBlocks Now that we have a mental model for thinking about the industry and some of the trends that affect it, let's analyze the results of a consulting firm. Most often, the result is a series of data-based recommendations that focus on the problem at hand.
The delivery of this product consists mainly of a presentation or, in many cases, a series of presentations (p. ex. In addition, backup data and data assets (p. However, it's important to note that the key product is the recommendation itself, not the data assets.
Ultimately, data assets are just supporting arguments, essentially products of the work they did to arrive at the recommendation. There is a great variation here, since it depends both on the company itself and on the nature of the work. However, in most cases, consulting firms usually work at their customers' facilities for most of the week to be available to collect data, interview stakeholders, make presentations to stakeholders, and so on. Companies such as McKinsey and BCG typically staff teams at the customer's facility four days a week, usually Monday through Thursday, and then bring the teams to the head office on Fridays.
Bain is an exception and, in most cases, tries to keep consultants working outside its central office, unless it is necessary to travel to research about clients or to make a presentation for them. To help bring the above description to life, let's look at a specific hypothetical case example and examine what the unitary economy of the consulting firm is like. As in a case interview, you may find yourself analyzing the profitability of a company's product, let's analyze the revenue and cost structure of a consulting contract so that we can understand it at a deeper level. This is the same thing you would do in a case interview, except that, for example, instead of analyzing the profitability of a high-end furniture company, we will analyze the unit economy of a consulting firm.
Let's say that a large consumer electronics company hires McKinsey to help it assess whether it should enter the online advertising space through its presence on digital devices. Based on initial conversations with the client, the firm undertakes to address the case, assigns a period of 12 weeks and agrees on delivery and a flexible framework for the type of analysis and research that the firm will carry out throughout the case. For the type of sample participation described above, the revenue side is likely to be the simple part. Customers will agree in advance with the consulting company on the price of the contract and what the result will be (p.
This type of model is called a fixed rate, since, regardless of the result, the customer will pay the agreed rate for the work. While the fixed rate is a common pricing model used in consulting, it's worth noting that there are a few other alternative models that appear. If all the data mentioned above are put together, this is the approximate unit economy of a case. First of all, once a fixed rate or a milestone rate is agreed with the customer, the company has only one lever to boost its own profitability, and that is to reduce costs.
Since the vast majority of the cost is labor, this often comes down to reducing the labor involved. If you've ever wondered why consultants work so hard, you now have a fundamental structural key to solving the puzzle. Not only is work a challenge, but the schedule and economy can also be challenging. Partners are encouraged to generate revenues and benefits to the company, so once the price has been set, it makes sense to try to equip the teams in the smallest possible way and, at the same time, offer quality work.
This structural dynamic has many interesting second-order effects. For example, many partners like to equip their teams with truly experienced analysts. Why? Senior analysts are already trained (therefore, they are senior) and are significantly cheaper than an associate. For the partner, it's a win-win, as you get high-quality work at a discount.
In general, the real price of consulting contracts is a closely guarded secret. Even in the firms themselves, prices are managed by senior staff and younger associates and consultants are not aware of all the details. On the customer side, it's a similar situation. Usually, only top management, such as directors, vice-presidents, and C-level executives, know all the details and costs.
Below, you can see several workflows that McKinsey has planned, the number of consulting staff assigned to each one, the duration of the hiring, and the total cost. Where do you fit in? The next key question is where do you fit into this picture. Let's start by looking at the entry points into the consulting business, the salaries available to you, and what your career progression might look like. Examples of responses from former consultants from McKinsey, BCG and Bain.
In addition to high-quality technical descriptions and personalized expert advice. MBB consulting firms (McKinsey, BCG and Bain) are the three most prestigious firms in the management consulting industry. After spending more than 2 decades helping consultants increase their fees by 30 to 400% or more, we have the data on what works and what doesn't. Strategy projects are usually the most expensive because (the deliveries) contain long-term strategies to solve the identified root causes and (generally, they are the first projects in which client companies hire consultants such as McKinsey, BCG and Bain) (starting with the second project there are usually discounts).
You'll learn how consultants set their rates, how much consultants earn per project, how many consultants use preemptive and performance-based agreements, and much more. This simple and easy method is ideal for beginners who are working on their first consulting projects. I recently joined a specialized consultancy (a small team over 50 years old) that is part of an international consulting and advisory organization. In general, the more results a project requires (the greater the scope of the project's work), the greater the number of consultants involved.
That said, dedicating yourself to consulting requires going through 3 extremely challenging rounds: curriculum evaluation, skill tests such as the McKinsey PST, and case interviews. .