What’s holding you back?
To all managers and above, what’s holding you back from just starting your own shop?
Start with DD, valuations, and build out additional capabilities from there.
Why chase the partner route at MBB and make them rich when you could do that for yourself?
By this level of “manager” and above, you likely have strong client facing skills as well the back end analytical skills. As you are probably aware, you’re in a race for partnership eventually. Have you ever considered creating your own shop and taking some of your industry contacts with you? What’s holding you back?
First and most importantly, I think you misunderstand how consulting partnerships work -- you're not "making them rich while you could do that for yourself" -- the partnership is the firm, i.e. it's not like profits are going to some external shareholders. Sure you're sharing that margin with others which can lower your overall comp in a good year, but you're also not going bankrupt in a bad year
Second, building a book of business is a lot harder than you might think - especially at the manager level, which is a more junior level than you may think it is. Also brand equity goes a long way here
Third, working at an existing firm takes out so much headache -- the backend of a business doesn't just happen. It can take a ton of effort, costs can get out of control, and lots of costs are kept much lower when you have scale. This also means the supposed margin recapture you'd get by working for yourself (assuming you didn't have to compete by offering a lower price, which you probably would) can be eroded by higher expenses
Fourth, there's so much more to consulting than DD and valuations, and lots of work requires a solid base of existing IC and access to different internal firm experts
It's certainly possible for running your own firm to be a good idea for somebody, especially if they have a unique offering, but it is not an obvious solution for most of the types of consulting performed at major MC firms and entails much higher risk
100%! Have a brother who did just that, left a boutique firm to start his own, had some success, and is now back with a firm. Bottom line, starting (anything) from scratch is HARD! He is quite skilled at Business Dev, solution creation, and implementation. The problem is, it's hard to be effective at all simultaneously. In his case, he signed a significant client for a mid 6 figure fee. Great! Then he had to do the work for a yr. Was very hard to work on signing other clients as the client wanted him personally involved in the work. So, easy to say, just hire a bunch of people yada yada yada (which he eventually did), but then you're back to working for a firm (just one that you own - which you did as a Partner prior).
Not saying it makes no sense. I've done this in the financial services industry myself and have operated my own firm for 30 yrs. Lot of plates spinning. Most will find it's just easier to do the actual work you enjoy while many others help spin the plates.
The same reason that mid-level bankers don't typically start their own investment banks.
Like many industries, scale is important in consulting. There is a market for niche shops which have specific expertise and capabilities, but that's a hard market to find, and even if you do, it's ultimately a tough industry for smaller players.
On the high end, you are going up against firms that spend an enormous amount of time and resources in building relationships and influence, have brand equity built over decades, and can generally attract much better talent than you. On the low end, you are up against body shops that you can't really compete with on price.
Finding the proper niche in the middle is easier said than done, especially when you're not senior enough to have the type of clout that can help build a robust book of business very quickly.
Exactly right! This applies to basically every industry by the way. Walmart (transactional) and XYZ Boutique (relationship, customer experience driven) both do well. Everyone in the middle is in "no man's land" and dies a fiery death. They get totally commoditized out of business. You have to choose your camp. Make sure you know which one you want to be and resource accordingly.
I've lived in that world (no man's land) and had to make some hard decisions about growth, resources, overhead, opportunities. I'm much better building/running a boutique. I've had to learn not to compare myself with X or Y as I'm not really in their business. Same industry, but X and Y have scaled and I'm in the client experience business. Very different model. Other things to consider include the value of the business. If you're too close to the magic, very hard to value your business as anything without you spinning the plates. Still need to put in systems and processes that live beyond your involvement.
Two points to add to the reasons above:
-I can't even begin to fathom the cost of replicating all of the support functions at a big shop. Database subscriptions, powerpoint and excel plug-in suites, design support from India, etc. Obviously these would have to be pruned back big time if you were to start your own company, but there's a certain level that's somewhat necessary to put out quality work at a competitive level of efficiency.
-If I left to start a business, I would rather spend my time building something that is easier to scale/aggregate and then sell to a buyer down the road. A knowledge-work type business like a lower market consulting firms seems like it would be difficult to monetize down the road, especially if I'm doing a considerable amount of the work.
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