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Home / General / Management / Similarities & Differences Between Management Consulting & Start-ups (part 1)

Similarities & Differences Between Management Consulting & Start-ups (part 1)

management consulting vs. entrepreneurship

As I stated in my previous article, there is a mysterious relationship between management consulting career and start-up experience. In my opinion, the ideal thing would be tasting both of them separately, but first, I would like to introduce the similarities and the differences of the two tastes (Since there are many and I want to keep this article short, I have decided to divide this article into two parts):

SIMILARITIES:

1) Long working hours:

Yes, that is one of the major complaint of consultants. In fact, work-life balance is one of the key criteria of a successful/enjoyable consulting company. I have heard of consultants (thankfully it is not the case in my current company) who pull 100 hours a week. Work life balance not only depends on companies, but also depends on the different locations of offices, the clients or even the project managers.

On the other hand, entrepreneurs or people who work in start-ups have the same issue. The famous motto of well known successful entrepreneurs is “I worked soooo hard to make it”. I have even read that there is a saying in silicon valley, which is “Work-life balance is for losers, not for closers”. Working hard is the only way to create difference and be successful, especially if you are starting up a technology business. In fact, most of the start-up owners work 7 days a week, and there are some ventures where most of the employees work even on Saturdays.

2) Analytical perspective:

Consultants and entrepreneurs both need to master numbers and they both need to have strong analytical skills. Here is an example: Consultants are expected to be successful in figuring out complex cases of their clients, therefore they are faced with case studies very frequently in their job interviews. Most of the case studies include a “starting a venture” or “launching a product” type of tasks. In such cases, consultants are expected to consider these questions below: (non exhaustive)

  • Market sizing
  • Market trend / growth
  • Target consumers & eligible customers
  • Competitors & their market shares & substitutes & complements
  • Suppliers / producers
  • Barriers to entry / exit
  • Profitability
  • Technology

These questions need to be considered for entrepreneurs also. Before starting a business, entrepreneurs need to be aware if it worth entering into that business or not.

DIFFERENCES:

1) Making new vs. Making better

I guess this is one of the most clear separation between start up adventure and consulting career. In start-up path, you are trying to create value from scratch. The ultimate purpose of an entrepreneur is to create value and generate profit from scratch, and founding a company is the best way and probably the only way to realize this purpose. At the end of the day, companies are the entities where a bunch of people get together to achieve a value creation. Once a company is established, the next steps are to achieve, increase and sustain profitability. From the period where profits are increasing and onward, those organizations are not called as “start-ups” anymore, but rather “firms”. And those “firms” are the organizations which feed consulting business. A start-up hiring consultants is a “very rarely seen” case, because ideally start-ups are not supposed to allocate budget to hire high-paid consultants but rather they need to figure out themselves how to overcome the initial challenges. Once the creation is made and profitability is achieved, then consultants might be hired to make things better. 

It is also good to mention; in most of the Masters and MBAs, students are taught for making things better, instead of making things new, and that is the main reason why many people discuss if Masters or MBA degrees are really a must to start up a successful business

2) Uncertainty factor

In most of the client engagements, consultants tend to eliminate uncertainty factor and they implement whatever was implemented in best practices or in their earlier engagements with other relevant clients. Usually, they play according to their playbook, their methodologies & frameworks or mainstream industrial reports. (In this statement I’m excluding the ones that have implementation proejcts)

On the other hand, entrepreneurs tend to move with relatively more uncertainty, taking more risks. The ones who don’t avoid taking risks (measurable risks) are the ones who win. They have the luxury of the possibility of losing. What I believe is; the ideal condition of being an entrepreneur is having nothing to lose, meaning: either you need to be wealthy in terms of money and time so that you wouldn’t care the amount of your loss, or you need to be extremely the opposite so that the opportunity cost or your potential failure wouldn’t mean anything to you (in case you have nothing to lose)

On the other hand, if consultants lose their client, it is very hard to get the client back. I believe it is also true for the other types of professional services.

 

Also, no need to mention that in consulting you work for others whereas in start-up you work for yourself.

More similarities and differences will be coming in my next article.

 

Image source: Flickr

 

Orkun Basaran

One comment

  1. Hi Orkun,
    Extremely useful article full of great info here.you can also visit
    http://www.ascentaz.com
    A business and management consulting firm in India also Providing Brand Building Services, strategy consulting Services to a variety of international and domestic clients.

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