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

This article was last updated on 2 May 2025.

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

Over the past years, we have worked with a few 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 constant 'pivot' mode, launching new services without the patience or resources to mature a single one (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 result in campaigns launched sporadically without a long-term plan and inconsistent returns.

Most of these consulting firms aren’t designed for performance. They always seem adrift; that's the feeling I always get.

They start by selling 'what they do': "We do strategy, research, org design, digital roadmaps, workshops, process redesign" (to name a few). It's all capability talk.

"We do X" (instead of "We solve X").

At some point, the firm becomes a machine that sells more and more of that capability, regardless of whether clients need it.

The result? Broad targeting. Bloated proposals. Custom everything. An operations nightmare. Profit erodes while headcount balloons.

This is the default mode of running a consulting firm, and it almost always guarantees underperformance—at least, that's what we have experienced. 

The alternative is what we call 'intentional performance design'.

The real difference is this:

• Default-mode firms focus on selling capabilities. Their marketing emphasises "We do" and "We offer," presenting proposals like menus. Their profitability relies on selling more hours, leaving clients to discern the usefulness of those capabilities.

• Intentionally designed firms focus on delivering transformative results. They clearly identify the problem and outline the potential outcomes of a successful transformation. They develop a structured approach to achieve these outcomes and inspire potential clients by educating them on the value and impact of these transformations. Instead of merely offering their capabilities, they emphasise the solutions they can provide to address specific challenges.

And that changes everything, from how you price to scale to how clients perceive your transformative value.

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 of consulting firms growing on the back of headcount growth yet experiencing 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 attracts the right clients, allows them to command premium pricing, and builds 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

A short example of a change from "We do X" to "We solve X"

I always get questions when talking or 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.

This example is just a glimpse into an extensive refinement process we've undertaken. Beyond redefining the overarching value proposition, we also redesigned the underlying service offering architecture, the client success journey, the signature methodology, the thought leadership pillars, and the new business development approach (to name the principal components of their transformation). 

Each change will contribute to a more intentional and high-performing consulting firm.

The ultimate comparison: default vs intentional business approaches 

This table provides a comprehensive overview of the key dimensions that differentiate these two approaches.

By examining these characteristics, we can better understand how intentional design leads to superior performance and sustainable growth, while default practices often result in inefficiencies and underperformance.

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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