Are you considering starting a consulting business? Are you 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 these data are put together, this is approximately what an individual economy looks like for a case.
First of all, once a fixed rate or milestone rate has been agreed with the customer, there is only one lever for increasing its own profitability: reducing costs. Since labor costs account for most of them, this usually comes down to reducing labor costs. If you've ever wondered why consultants work so hard now you have an essential structural key to solving this puzzle. Not only is work challenging but also schedules and economies can be challenging. Partners are encouraged to generate revenues and benefits for their company so once they have set their prices it makes sense to try to equip their teams as small as possible while still offering 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 partners it's win-win because they get high-quality work at discounted prices. In general, real prices for consulting contracts are closely guarded secrets.
Even within companies themselves prices are managed by senior staff and younger associates and consultants are not aware of all details. On customer side it's similar situation. Usually only top management such as directors vice-presidents and C-level executives know all details and costs. Below you can see several workflows planned by McKinsey number of consulting staff assigned to each one duration of hiring and 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 entry points into consulting business 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. Some clients will prefer paying consultants by hour while others will want paying per project or advance.
The slightly larger difference between their rates compared to those from technological players is explained by full set services they offer ranging from accounting taxes consulting corporate finance as well as price differentiation used for services SMEs. You're most likely transitioning into consulting career from previous job business or corporation It's also important hiring consulting firm aware labor management consulting trends. Now that you understand different methods setting your consulting rates and you've seen average fees several different industries it's time figure out how much you'll charge Cost based salary equivalent market-driven consultant overhead costs additional expenses identified during....