There Are Two Ways to Run a Consulting Firm. One Drains Profitability.

Most consulting firms don’t fail because of market conditions. They fail because they create their own underperformance – one improvisation at a time.

Over the last year, we have worked with at least a dozen such consulting firms. This improvisation comes in different forms:

• Consultancy owners and leaders are not aligned around the same vision for business growth, so everyone is doing what they think is best.
  
  
• A consultancy is in a constant “pivot” mode, launching new services without having the patience or resources to grow a single one to maturity – an exercise that takes, on average, around two years.
  
  
• Project execution does not have defined methodologies, which means a consultancy’s deliverables and processes vary widely depending on who leads the engagement.
  
  
• Ad-hoc marketing and business development efforts typically translate into campaigns that are launched sporadically without a long-term plan and result in inconsistent returns.

These consulting firms operate in, what we call, the ‘default’ mode. And while it is a very common occurrence in consulting firms, it is not growth- and profitability-conducive.

This is what I’d like to discuss in this article: the two ways to run a consulting firm. One leads to unpredictable pipelines and revenue-chasing. The other one is used by consultancies as an engine for high performance and profitability.

Why the default mode is a silent profit killer for consulting firms

In the default mode, a consulting firm sells capabilities instead of a sharp value proposition.

Sure, positioning a consultancy as "experts in [something]" seems logical, but without being specific and offering a laser-sharp value proposition (issue-led and outcome-focused), a consulting firm is forced to chase revenue in a broad target market, often attracts misaligned clients, and accepts a variety of projects.

This expands complexity, not profitability.

The more a consultancy grows this way, the more complex scaling becomes. Headcount increases, operational strain rises, and margins shrink. The firm is constantly running but never truly progressing.

This opportunism-driven strategy is a profit-eater in consulting firms:

• Broad targeting → chasing revenue: Without a sharp value proposition, firms take on whatever comes their way. There are no strong guardrails in place that determine which clients to take on and what projects to turn down. It also means that marketing and business development efforts are scattered and inconsistent, lacking a clear message that resonates with the everyday challenges of a specific audience. As a result, the consultancy struggles to build a strong market position, leading to price competition and lower margins.
  
  
• Constant variance → increasing complexity: When each project differs, a consultancy will fail to create proprietary methodologies. This lack of defined processes, systems, and approaches increases costs. Furthermore, without repeatable frameworks, consulting firms rely heavily on individual expertise, making scaling more difficult and resulting in lower efficiency.
  
  
• Growth tied to headcount → no scalability: More projects mean more people, often registering as revenue growth. However, this often negatively impacts profitability. I’ve seen numerous examples where consulting firms grew on the back of headcount growth yet experienced shrinking margins due to rising overhead costs and lower per-project profitability.
  
  
• Operational strain → lower margins: Complexity eats profits, and every inefficiency compounds over time. Without optimised processes, projects require more time, resources, and oversight. This comes at a substantial cost: weaker client attraction, lower win rates, unreliable revenue, constant price pressure, project-to-project improvisation, operational complexity, and margin erosion.

The default mode is challenging for a consulting firm and imposes a self-imposed ceiling on growth and profitability.

Recommended reading: Consulting Growth Is Stalling – How Can You Respond?

The alternative method: intentional design

The default mode is reactive. On the other hand, high-performing consulting firms design their performance with intention instead of reacting to opportunities with improvisation.

Here are just a few examples of the types of considerations that high-performing firms make when designing their business and subsequent success:

• They define a differentiated, outcome-specific value proposition. They solve a well-defined business issue with precision. They don’t sell capabilities; they sell value, outcomes, and transformational results. This approach not only attracts the right clients but also allows them to command premium pricing and build a reputation as the go-to consulting firm in their expertise domain.
  
  
• They narrow their targeting: It’s not about reaching as many prospects as possible—it’s about reaching the right ones. High-performing consultancies focus on attracting their ideal clients, allowing them to reduce complexity and increase efficiency.
  
  
• They standardise and refine processes: Developing proprietary methodologies and frameworks means setting up clearly defined processes, tech, and other resources. This increases efficiency, reduces delivery variability, and keeps clients happy, resulting in repeat business. Their repeatable processes allow them to lower costs and improve quality.
  
  
• They scale strategically: Growth in high-performing consulting firms is repeatable and efficient, and it’s not tied to headcount growth. New services are not launched out of desperation. Instead, they are launched to deepen the value offered to existing clients. Growth is not linear in such firms. It’s used to enhance profitability instead of simply stretching resources thin.

Instead of increasing complexity with every project, these consulting firms reduce it over time, making profitability predictable and scalable.

Recommended reading: Building a Winning Consulting Value Proposition

Example: Default vs intentional business approaches in consulting

I always get questions when talking/writing about 'capability selling'. What does it mean? Here's a real-life example of a consulting firm we worked with.

The old capability selling: “We are experts in change management.” (Shouting into the void: “Who needs change management?”)

The new, intentionally designed value proposition: “We help large enterprise companies (>500M) in [country name] reducing post-merger integration time by 40-50% while aligning leadership and culture.”

Change management ('the capability') is no longer mentioned. Instead, the business impact they can achieve for a specific audience in a well-defined context (post-merger challenges) is clearly defined.

The table below summarises how default and intentionally designed models differ across multiple dimensions:

Final thoughts: Underperformance is a choice!

In our experience, consulting firms often attribute their struggles to external pressures: market conditions, competition, changing client expectations, and so on. But the reality is different. More often than not, their biggest obstacle is internal: the reactive decision-making that keeps them locked in a cycle of underperformance.

• The 'default firm' tries to optimise chaos. The high-performing firm eliminates it. The reactive approach leads to consulting firms creating temporary fixes instead of addressing root causes, which increases inefficiencies and decreases revenue predictability.
  
  
• Incremental improvements to chaos still leave chaos. Without an intentionally designed strategy, every project and client add complexity rather than building efficiency.
  
  
• The only way forward is to break the cycle with intentional design, with a crystal-clear value proposition at its core. Very few consultancies stumble into success. They get there by designing their business with intent, making deliberate choices about their audience and offering, and creating repeatable methods and processes that allow them to deliver outstanding value to clients consistently.

There are two ways to run a consulting firm. One is improvisation. The other is intentional. Which path are you setting your consultancy on?

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