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Revenue Models for Consultancy Business

Being a Consultant is slightly different than having a consultancy business. When you are offering consultancy as a business, what are the revenue models you can come up with? We got few commonly used model which can help you to innovate and reach to a business model which will suit your business the best.

Just like Aeroplane/Jets require jet fuel, a special type of fuel which works better with their engines. Similarly, there will be a revenue model which will work better with your business than the others. The art lies in selecting the right model, to fuel your business to greater heights. Following is the list

Revenue models which you can use for your consultancy Businesses

  1. Intrapreneur Model

    In this model, a person/consultancy firm acts acts as an entrepreneur while working in an organization ( intrapreneur). The person/firm is responsible for the financial success of the segment they are leading in the organization and there exists a profit sharing model between the person/firm and the business owner.

  2. Partner Organization Model

    In this model, you as a firm can get into partnership with a organisation and be a ‘Rainmaker’ to their organization, offer your services that you are best at, say dealing with C-level client executives and fueling business development and hence, revenue generation. It can be further sub-divided into 2 models

    Divisional – In this model, revenue can be shared depending upon the division you are heading.

    Pooling of interest/ common Hotchpot – In this model, the profit is shared equally amongst all partners irrespective of the vertical they are heading in the organization.

  3. Profit-sharing Model

    In this model, you can charge your customer when they become profitable, according to a pre-defined agreement, but the catch is, deliver your services to the client even in their non-billable down-times.  The agreement is generally customized keeping in mind the client’s business in such cases.

  4. Cost-plus / Mark-up Pricing Model

    In this model, determine what is the cost involved and what is the rate of return you are looking for. Accordingly, price your services and hence achieve the target Rate of Return.

  5. Cost-plus Contract Model

    In this model, you can charge your client for all the expenses incurred by you to render the desired services. This model is useful when it is difficult to estimate the cost of products to be used. Thus, the client reimburses the cost and gives you your service fee.

  6. Time & Quality based Revenue Model

    In this model, the service can be charged depending upon the time and quality of work required i.e.

    -> Service to be delivered in stipulated time limit, quality of work not being an issue.-> Qualitative Service to be delivered, time not being an issue

    -> Qualitative Service to be delivered within stipulated time limit.

  7. MarketShare based Revenue Model

    In this revenue model, the services can be offered at a price lower than the competition to increase market share and after establishing a reputation for quality service, one can increase the price to drive home higher profit margins.

  8. Competition based Revenue Model

    In this model, the price of the services is determined by the price of the competition.

  9. Differential Pricing based Revenue Model

    In this model, same services are provided at different rates to different clients. E.g. movie theaters pricing tickets at different rates based on age group, like college students getting special discounts.

  10. Step Cost Revenue Model

    In this model, different prices are charged for services provided at different ranges e.g. In transport, there is a basic cost involved for some distance, and then price differs for the next range of distance.

One need not follow a specific model, but can surely go for multiple models or combination of them to determine which revenue model suits one’s business the Best!

Suggested Read for you

  1. 5-revenue-model-for-internet-startups
  2. 9-types-of-consultancy-businesses
  3. how-to-setup-hr-consultancy-firm-in-india-4-steps
  4. http://www.startupfreak.com/tag/revenue-model/

About Alisha

Business Analyst at Mu Sigma Inc.