Consulting Business Model
It is very important to have a right consulting business model because it will support you in expansion and profitability. Consulting business firm can help any business in achieving heights of success or show the way to disaster.
There is nothing like one-size-fits-all, business consulting model will be different for different firms. Your business model should depend upon you skill, knowledge, expertise, systems, solutions and support.
Choosing the right business model for your business is very important. If you are seeking a consulting business model and find it difficult to assess. This article will help you in choosing right consulting business model.
Consulting Business Model
There are four consulting business models you can adopt,
1. The Firm Business Model
The firm business model is the most standard and simple business model for consulting business. Consider it as a large consulting company or firm. These firms have a team of employees that handles some or all of the work.
These consulting firms hire like a normal company. They hire, consultants, seniors, associates, juniors and other. These firms hire people to work on their behalf, and help in achieving business goals and objectives.
The pros of firm business model are;
- The business can operate and function without you
- Firm is considered as a valuable asset and can be sold at a higher price
- This model allows firms to expand and offer more and more consulting services
- Lets you take rest and sit behind from handling and dealing with clients on daily basis
- Firms can up-scale their business, hire more employees and consultants to handle tasks
The cons of firm business model are;
- This type of businesses are required to manage people
- This type of businesses are required to have more infrastructure to operate
- This type of businesses have usually low-profit margins after providing services
- This type of businesses usually have to manage payrolls and that’s why people are dependent on the firm
- This type of businesses have to make sure that they are profitable after meeting all their obligations
It can be a challenging job to run this type of business. If you want avoid those challenges that can be of managing others, having infrastructure to operate, managing payrolls and people. Then this might not be the right business model for you.
2. The Independent / Solo Business Model
The independent / solo business model allows you to enjoy a certain limits of freedom and flexibility in work. This business model is only you, along with some contractors, assistants or freelancers.
In this model, you are all in all and doing every operations from client services to marketing to finance.
This business model allows you to;
- set your own charges
- set your own pace of work
- choose the client to work for
- choose the project to work on
The pros of independent / solo business model are;
- It is more lean and profitable operation to run
- It is more flexible model and you can easily adapt to necessary changes
- You can easily customize, adapt or change your business according to your desired lifestyle
The cons of independent / solo business model are;
- The business doesn’t turn into an asset and it becomes hard to sell it as an asset
- You are the face of business, if you will become unable to work, the whole business will start collapsing
It can be a challenging job to run this type of business. It may give you more control over your business. But to carry out all the operations by yourself, will be very difficult job to do.
3. The Productized Business Model
The productized business model has the roots in one of the above mentioned models. This model has operations repetitiveness and probability to predict. You perform specific task for a pre-determined charges and agreeing upon deliverables.
In this model, you focus on providing solutions to specific clients against a core problem, by developing systems and operations. You will frequently repeat many things again and again. This repetitiveness of operations benefits you by becoming efficient in solving the problem.
When service operations and profits are consistent, this will give you more confidence in taking risks for business growth. You will be providing 80% same service to each client and 20% being customized according to their requirements and task.
The pros of productized business model are;
- You are building a valuable and a saleable asset
- Developed repetitiveness across many operations
- Build huge potential and reoccurring revenues and profits
- There is a high chance to grow and scale your business rapidly
- You can work remotely or exclude yourself from daily operations
The cons of productized business model are;
- You are required to train, manage, and pay your employees
- You are bound to hire employees to conduct business operations
- Repetitiveness of task might not be exciting for some individuals
- You are required develop operational skills to carry out workflow
- You are required to manage and provide the best services to the clients
4. The Hybrid Business Model
In hybrid business model, you pick components from more than one of above mentioned models to create your own consulting business model. Hybrid model carries ideas and benefits of different models.
How To Identify The Correct Business Model?
You must choose a consulting business model that fits you and your business.
Firstly, consider answering the following questions regarding;
Size of the business you want to build?
In this section, you will answer about the size of your business. Like you want your business to be independent / solo consulting business?
Do you want to have small number of employees like four, five, and six? Or a large number of employees like ten, twenty, thirty or more?
Are you willing to manage multiple teams, employees, clients, systems and operations?
Your answers to these questions will help you in determining your consulting business model.
Your goals regarding revenues?
In this section, you will answer about the income level you want to accomplish. How much revenues you want to see within a certain period of time? What you value the most, profitability or growth of your business?
Your answer to these questions will help you in determining your business model, and strategies and tactics you are going to use to achieve it.
The Bottom Line
Take time to think and create a consulting business model that has a greater influence on your clients. For that you must work closely with your clients, engage and satisfy them and create an influence on their business.
There are pros and cons of each consulting business model. One business model might fit for you other may not fit. One business model might be rewarding and profitable for you other may not be.
Spare time to think about your business, circumstances, and goals. Then you can take the right decision regarding consulting business model.
Consulting Business Model FAQ
1. What is the business model for consulting?
The consulting business model is based upon ideas;
- Hire the right people
- Charging fee from clients against the skills, knowledge and expertise of these people
2. What are three types of consulting?
The three main types of consulting business model are;
- The Firm Business Model
- The Independent / Solo Business Model
- The Productized Business Model
- The Hybrid Business Model
3. What is best structure for a consulting business?
LLC is the best structure for a consulting business. LLC offers flexibility and protection to your assets.