Posted by Hello everyone! Today, let’s talk about a very popular business model in Belgium – consulting.
Apart from management consulting such as McKinsey and Boston Consulting Group, most of the consulting companies in Belgium are quite down to earth, covering a variety of industries, including engineering, software development, testing, media, and more. they are well within the reach of you and me.
I have spent most of my ten-year career in consulting companies, so today I would like to share with you some of my insights and personal experience with consulting companies, hoping to help you in your job search.
1. The operation model of a consulting company
The consulting company mainly serves large enterprises and is with a business-to-business (B2B) model. It uses mental work to provide customers with professional manpower or project teams to solve various problems of customers.
The products of a consulting company
The products of traditional companies are evident, Toyota produces cars, Daikin produces air conditioners, and even Internet companies (Google, Microsoft, etc.) have their software products. The main business of consulting companies does not have products, they sell services, field expertise, manpower, etc.
The staff of a consulting company
The human resources of a consulting company are three large pieces. The biggest one is the person who does the work – consultants.
The second is sales or business managers, their task is to engage customers, find projects, and arrange people.
Finally, a company needs some positions to support its operations, such as human resources department, IT support, finance, fleet, and so on.
The cost of a consulting company
For a traditional company, there may be costs for factories, raw materials, R&D, developing new projects, etc.
The cost of consulting companies is very low, that is, the wages of employees, and at most a very luxurious office.
2. The business relationship of a consulting company
Then we look at business relationships.
Consultant
A consulting company employs the consultants with a permanent contract. The salary is also within the normal salary range, and the benefits will be a little better because those companies are good at optimizing the personal tax.
However, 99% of the content and location of a consultant’s work are with clients. The work content of most consultants is for execution or implementation (not real consulting or advising), and in many cases, they are direct members of the client team.
If you are in a product company, there are probably some people in your company whose email addresses are xxx. external, .contractor.., then they are mostly employed by a consulting firm and then dispatched to customers here.
Client
The client generally pays the consulting company service fees according to the working hours of the consultant (there are also some special cases where the firm charges the clients for the project delivery). A consultant works with a client for a day (8 hours), and he earns for the consulting company ranging from 500-1000+ euros.
Each consultant will have a daily rate while working with the client, which reflects the value of the consultant for the firm as well as the negotiation skill of the sales, but it is not directly related to the consultant’s salary.
Consulting firm
In the business relationship, the consulting firm plays an intermediary role. The consulting firm bills the client every month and regularly asks the client whether they are satisfied with the current consultant, whether there will be new business opportunities, and so on.
A few interesting questions
After looking at business relationships, you may wonder:
Consulting companies are in such a good position, they can have high incomes without doing anything
Why don’t the consultants ask the client for 600 euros by themselves but come through the consulting company?
The clients pay very high daily rate. Do they have too much money?
“What is reasonable is real”
As an intermediary, consulting companies can indeed earn relatively high returns at a low cost, but at the same time, they also bear risks:
- Because there is no product, the output cannot be replicated at a low cost, and it must rely on the daily time of consultants.
- Once the consultant falls ill or there is no project for the consultant (not billable), the company not only needs to pay the employees normal wages but the lack of income these days can only be borne by the company itself.
It is also beneficial for consultants to work with clients through intermediary companies. Some senior consultants do eventually pass the consulting firm and become self-employed. In this way, their income will increase severalfold, and they can play with tax deductions in quite some ways. We’ll talk about self-employment later.
3. Reasons for clients to hire consultants
Why would a client be willing to join such a business relationship to be “take advantage”? No one is a fool, everyone gets their benefits – what is reasonable is real.
- Project time requirements
Large companies may need a lot of extra manpower to start a large project in a short period. If recruiting these people through normal channels, the process will take several months or even years. By finding a consulting company and hiring consultants, the time will be more flexible.
Firing employees in Belgium can also be a big headache, so if it’s just for a temporary project, companies usually recruit them through consulting firms rather than formal recruitment.
- Funding
A company’s expenses are generally divided into two categories: capital expenditures (Capex) and operating expenditures (Opex).
Capital expenditures are generally used for investment, which will bring direct benefits to the company while operating expenditures are the company’s daily expenses and belong to the company’s operating costs.
A healthy operating company pays great attention to reducing the company’s operating costs, which means that when budgeting at the beginning of the year, most of the funds will be allocated to capital expenditures rather than operating expenditures.
Recruiting a permanent employee is an operating expense that requires approval from the top and bottom of the company while recruiting consultants through project funding is a capital expenditure, and the funding approval process is much easier.
That’s why you’ll see people in companies doing the same thing as permanent positions, but always being consultants.
- To pave the way for recruiting
The trial period for hiring regular employees in Belgium has been abolished since 2014. Once the contract is signed, it is permanent hiring. This is very risky for businesses.
Therefore, when companies open a position, they will recruit a consultant from a consulting company to test the waters. If they feel that they are a match, they may recruit him as a regular employee in a few months.
This kind of operation is very common, but it is also very delicate. Some consulting companies will issue stricter terms to protect their employees, and some consulting companies are very flexible.
- Technical requirements
In theory, the value that consultants bring to clients is not only time but technology that clients lack. When a company realizes that they lack a certain new technical expertise (such as the metaverse, cryptocurrencies, etc.), they will consider turning to consulting firms for help, which results in generally high-paying short-term projects.
Today we talked about how the consulting company operates, the business relationship between the various members, and the reason for its existence. I hope you learned something! In the next article, I will talk about the pros and cons of being a consultant if you are interested in joining a consulting firm, as well as my own work experience.
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Picture from:
Photo by RODNAE Productions: https://www.pexels.com/photo/happy-workers-in-a-meeting-7889209/
Photo by Alexander Suhorucov: https://www.pexels.com/photo/cheerful-multiethnic-colleagues-discussing-contract-in-office-6457520/
Photo by Sora Shimazaki: https://www.pexels.com/photo/crop-businessman-reading-documents-on-clipboard-in-office-5668849/
As for the risk, In belgium the employees are paid 13.92 months however the client only pays for roughly 10 full months – avg 210 -220 days ( after excluding 32 paid leaves for employees) . At times the client can enforce mandatory work off during certain times of the year like christmas and summer holiday months .
If you include the costs of the sales rep and recruiters etc .. the cost to company for a consultancy company goes quite up for a resource. The avg margin per resource is less , However most companies try to play with the numbers of resources. That makes them reduce the risk, as a resource on bench gets compensated by a working resource.