BCG financials not adding up
Something about BCG’s recent stated performance and behavior in the market is simply not adding up.
We’re hearing that BCG is only slightly behind McK on revenue and revenue per consultant. I’m also seeing BCG completely undercut McK, Bain (and even T2s) in the market, often offering to do months of work for free / significantly reduced prices.
Simultaneously we’re seeing BCGers being paid more than McK and Bain consultants (until Partner/ MDP at least), with more generous expense policies.
If things are too good to be true, they often are. Anyone have further detail on how BCG’s revenue accounting works / what cash flow is actually comprised of?
I have all of those further details
Also interested - can confirm that they’ve always been known for giving away free work but it seems to have accelerated recently
I was a BCG partner and then a PwC partner. As a PwC partner I lost to McK on price more than once. Pricing for consulting work is entirely fictional.
You give away free or cheap work all day long if there’s a possibility of getting something big on the other end. All the firms do it.
You’re reading far too much into anecdotal evidence around things like expense policies (which simply don’t matter — even big changes in expense policies drive relatively small savings). Accounting choices don’t matter. Minor differences in comp don’t matter — all of MBB pay the same. I know that’s not literally true, but that’s my point — that BCG pays consulting staff slightly more is a small number. It's a rounding error. It doesn't matter on the scale of BCG's financials.
This is one of those things that’s about the big numbers, and the big numbers are driven by large transformation programs on the revenue side and what you pay / how you retain junior partners (the fat part of the comp curve) on the cost side.
(The other thing that does hit cost in a big way, because it's direct from bottom line dollars, is fines and criminal penalties... and McK has paid $1B+ just on the opiod stuff alone, not even counting the FCPA stuff)
Out of curiosity, why make the switch from BCG to PWC?
PwC offered me a lot more money to do a job that sounded like fun
Consulting business model doesn't work in a rising rate, low growth, inflationary world.
Well clearly from their financials it does- project focus just shifts away from M&A and growth strategy and towards more cost-saving related work
All three of MBB had their most rapid growth in the 1970s, which if you’ll recall is the decade that spawned the term stagflation.
Businesses are taking on susbstantial costs not controllable by consulting. Why would they then incur additional costs in the service of... cutting costs...?
The market didn't know it was snake oil at that point, now they do
Does BCG really pay more? By how much
I see some of my comments represented here. This post has an incomplete understanding of the MBB operating model. These firms are not monoliths, where their behavior and competitive dynamics with each other is the same across all industries and geographies. Instead, you need to think of them as comprised of thousands of individual franchises, each led by a handful of partners who leverage their firm's brand to build practices in specific industries (e.g., PE, tech, consumer etc.), functions (marketing, operations, etc.), and/or geographies. These franchises will range in size and profitability; some might be newer / less well-known that aims to use discounts to make up for their relative lack of experience and to grab market share. Others are much more established, maybe led by a rainmaker senior partner who has deep connections in a handful of big F100 clients who is able to produce 10s of millions of dollars of high margin work per year. In that way, the life of an MBB partner is actually entrepreneurial, in a sense - it is completely up to you to leverage the platform given to you to be commercially successful.
Newly elected partners are considered bets for the firm's future. To survive, they must meet stringent revenue targets (profitability also important, but top line matters most).
So to your anecdotal evidence of BCG undercutting the market - each MBB does quite literally thousands of projects a year. BCG may be undercutting in the projects you see, but I can guarantee you that McK and Bain do the same in other projects you don't get to see. And yes, MBB will sometimes even price lower than T2 or B4 (for whatever reason - maybe to defend market share, maybe to establish a foothold - whatever reason a business might price lower than their competitors in any other industry)
Now, to my comment in the other thread - when I say that BCG has revenue/employee similar to McK, it's a reflection of the fact that all of the competitive dynamics I laid out above average out to be roughly the same (some markets BCG price lower, others higher). And that's why they deserve to be in the same tier of firm (along with Bain) - because of their "general ability" to price projects higher than most other consulting firms across all types of work that they do, even if that's not specifically true for every single project they do.
Thanks for the response. I guess the point that I don’t really see reflected is that all of these firms have internal triggers to review (or reject) projects that don’t pencil out to a high margin. Some of the project prices that I’ve seen BCG put out in the market would simply not be approved for margin relief at my firm, regardless of the individual partner dynamics at play.
So I’ve always assumed they are more lenient on the spectrum of letting partners grow their top line (vs. protecting bottom line) than some of their competitor firms.
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