There are advertisements for some kind of consulting business model on every street corner. Some suggest that you should close sales through high ticket offers, others recommend focusing on passive income, and some encourage you to keep investing in self-education, doing more webinars, courses, and so on.
But how do you know which of the suggested models is right for your consulting business? This is the answer to find out. In this article, we will only walk you through existing consulting business models as well as their advantages and distinctions so you can decide which of them is the most suitable for you. Let’s dive in for the details!
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Determine the Right Consulting Business Model
The first step to take before choosing any particular model is to assess the potential size of your firm. Here you may want to ask yourself the following questions:
- Are you planning to work alone or in a team?
- If in a team, how many employees do you think you will want to have – 3, 5, 10, or maybe 50, or even 100?
- Do you have experience in managing a team?
- If not, are you not afraid to take crash courses to learn the system and processes?
By answering these questions, you will better understand the nature of your firm and the type of business model that best suits its specific needs and goals.
In addition, you should take your time to set revenue goals.
- What’s the plan? Have you already imagined what kind of income you want to achieve?
- Is your goal to reach the mark of one million dollars by the end of the year?
- Or maybe you envision something bigger and are ready to wait a bit longer until your consulting firm scales up?
With the end goal in mind, it will be easier to determine the right tactics and strategy to approach your business.
Finally, what about the business itself? Will it have a simple concept or involve a certain amount of complexity? How do you see yourself in it – taking part in crafting products or working directly with clients?
3 Types of Consulting Business Models
Once you have an understanding of the type of business that you want to build, choose the right
model. In general, despite the many flashy names that you might have come across when making your search, they all boil down to the main three:
- A firm,
- Solo or independent,
- Productized.
Let’s go over each of them in more detail.
A Firm Business Model
The majority of large consulting businesses are based on this model. The main appeal of this model is that it’s suitable for small businesses that do not have a large crew. Most often, owners cover many roles during the first few months of operation. However, as the business grows, it evolves into a full-fledged system that requires a team of employees to support its operations.
These firms make money on margin. This means that their profit depends on the number of clients and employees, and growth is directly related to these numbers.
Advantages of a Firm Business Model:
- Ease of scalability,
- No need for direct communication with clients,
- Business can run without you,
- Compared to other firms, this one has a higher value, making it more marketable and easier to sell.
Disadvantages:
- People management skills are necessary to run the team,
- Team is often dependent on you, making it impossible to keep the business going without your participation,
- A profit margin is relatively low,
- Some equipment may be needed for daily work.
If you decide to opt for this type of business model, here are a few numbers you may find interesting.
- Out of all consultants, 63% work without a team,
- 23% have a team consisting of no more than 9 employees,
- 11% of consultants have an assistant to help them stay on track with their project,
- Only 3% of consultant business owners have ten or more employees working for them.
Solo Business Model (Or Independent)
As the name suggests, this type of model assumes that the consulting business is run by the owner who is in charge of everything – from dealing with clients to offering products or services. Sometimes, they may hire one or two assistants to help with routine tasks.
What sets this type of consulting business model apart is that their owners have a personalized approach to each client’s case. Naturally, since they spend more time and effort, they often mark their service prices up, making them accessible to fewer yet higher-value customers.
Advantages of a Solo Business Model:
- Highly profitable;
- Easy to customize to your own lifestyle;
- Can be easily adapted.
Disadvantages:
- If you don’t work, the business won’t run, and the revenue will stop coming;
- Selling it can be quite difficult because people often start associating business owners with the brand itself.
Productized Model
This type of model basically comes from one of the two we mentioned above. A business consultant identifies a client’s problem and works on it to develop a customized solution by approaching it from different angles. As a result of this all-around approach, they often reach a high level of skill in solving specific types of problems.
Advantages of Productized Model
- You’re producing a product that has a high potential to be sold;
- Since a lot of the repetitive processes can be delegated, you don’t have to be actively engaged in the daily work;
- It can be scaled very quickly.
Disadvantages:
- Some may find it difficult to commit to doing the same tasks over and over;
- While you may not need an in-house team, you will still need to hire people to help with certain tasks;
- Consequently, some training and people management will be required;
- The number of clients to handle can be really big.
Hybrid Model
Although we’ve mentioned that there are only three consulting business models, there’s actually a fourth one as well – the hybrid model. Generally, any model that doesn’t quite fit in the descriptions above and combines characteristics of one or two of these models would be referred to as a hybrid.
How Do You Want to Impact Your Clients?
Once you have made up your mind about the model of consulting business that meets your needs best, you also need to consider the level of engagement that you’re willing to invest in day-to-day. Are you ready to interact with people directly or would you rather rely on your colleagues to do the job? Or, maybe you’d rather turn to using chatbots?
You’re free to choose any model that best resonates with you, but if you want to make a greater impact, interaction with clients is important. In addition, working with clients can provide you with much more insights than any seminar, allowing you to refine your product or service and gain a competitive edge over your rivals.
Which Consulting Firm Model Is Best for You
It might sound disappointing, but there’s no such thing as the best consulting business model. Each of them has its pros and cons, plus there are different factors to consider, such as the nature of the business, its size, your budget, and specific goals.
For some organizations, the goal may be to sell $500,000 projects, while others would be happy to sell projects for $25,000 or even less. So, the choice of the right consulting firm model depends entirely on the unique requirements of the business.
Conclusion
To sum up, there is no right or wrong when it comes to choosing a consulting business model, just like there is no one surefire solution that can accommodate all business needs. So, the next time you come across a flashy ad offering a fail-safe solution, don’t let yourself be fooled by marketing tricks.
Every business is unique, with different goals, challenges, and opportunities. Therefore, it’s important to tailor a business model to fit your specific business needs, rather than mindlessly following someone else’s approaches.
Hopefully, our overview of the existing business models will help make things a lot easier for you.