Consulting businesses come in many shapes and sizes, from one-person operations to large, multi-level firms. The structure of a consulting business is determined by the size and scope of the organization, as well as the goals and objectives of the company. Large consulting firms, such as MBB firms or the four large consulting divisions, typically use a hierarchical structure in the form of a highly top-down pyramid. At each level, the power decreases, with those at the top having the most authority and the last word in decisions.
For those who want to run a consulting business that requires minimal maintenance, a one-person company is likely the best option. However, this comes with personal responsibility for all aspects of the business. Most consulting firms are revenue-generating companies, so financial goals play an important role in their organizational structure. Additionally, some major companies that are not classified as consulting organizations have consulting divisions.
For example, a consultant may start their career at a generalist firm like Booz Allen Hamilton before leaving to found a boutique company or taking up a position in an in-house consulting division of a Fortune 500 company. When deciding between different business entities, it's important to consider whether you want or need to become a consultant. No matter what type of legal entity your consulting business is, it will have an internal organizational structure. When starting a new consulting business, staffing is an important factor to consider.
Consultants from other units can be trained to take on the responsibilities of new business units and move laterally within the organizational structure. The four main types of business structures that may apply to consultants are sole proprietorships, partnerships, limited liability companies (LLCs), and corporations. Trusts and non-profit structures are also available but are not commonly used by consultants. The structure of a consulting firm is usually designed to allow each business unit to operate independently without affecting other areas of the organization.
In-house consultants tend to work shorter hours and travel less frequently than outside consultants. It's possible to start your consulting business using one of the simplest forms of business and change the structure later on.
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