Сonsulting is one of the last industries to embrace digital transformation.
But the COVID-19 outbreak has definitely kicked off the process much more quickly than expected. According to Forbes, the world is going to embrace a new normal – namely shifting work, learning, and entertainment online.
The consulting industry amounts to $160 billion globally. However, the revenue is expected to reduce to $130 billion in 2020.
That means that simply offering consulting services is no longer the case for most consulting agencies. The shift from offline to online is now crucial, otherwise small- and mid-sized companies wouldn’t be able to stay the course.
But how to start an online consulting business and, most importantly, what tools to use?
1. Consulting Market Statistics
The consulting industry is one of the biggest service industries in the world. The USA is the leading country in the consulting industry. Its share reaches 44.5%, almost half of the consultancy market.
Europe, on the other hand, amounts to 29%. The Asia Pacific represents a small market share – 12%. The Middle East, Africa, and Latin America are the least attractive places for a consulting business.
Looking at the European consulting market, it was worth $45 billion in 2019. In the past year, the UK consulting market was worth around £8.6 billion.
5 countries could be named as the biggest sources of income:
- the UK
The last three have generated €12 billion in fees from their combined revenue.
Current Changes in the Consulting Market
Unfortunately, the consulting industry is now taking a hit from the coronavirus disruption. Despite optimistic promises of growth in 2020, the consulting market is going to experience a fall in revenue.
According to Consultancy.org, in the worst-case scenario, the consulting industry could lose around $30 billion in 2020. Europe is going to be affected the most – particularly the UK and Germany. By the end of 2020, the UK consulting revenue could decrease to £6.1 billion.
Coronavirus has impacted a lot of niches of consulting. Business Advisory, Healthcare, and Energy & Resources were affected the most. This means that these three consulting niches will have trouble getting back on their feet.
Financial Services, Pharma, Retail, Technology, Media, and Telecommunications, on the other hand, were affected the least. Thus, the most digitalized consulting niches will be the least negatively affected.
Forecasts for the Consulting Market
The original forecast for 2020, according to Beroe Inc., was that the consulting market will reach $295 billion. However, with the current situation, it is already predicted that the revenue will decrease to $130 billion in 2020.
Nevertheless, consulting in financial services is likely to be in demand after the crisis ends. Compared to the financial crisis of 2008, when banks sank hard, the current situation seems to be better for the financial sector. Banks now have a buffer. This will play an important part in helping to recover the economy. After the pandemic is over, they will be looking for consultants to support the deployment of initiatives.
2. Why Consulting Industry is Going Digital
According to Mintel, a global market research company, 33% of American consumers would prefer to interact with people online rather than face to face.
Moreover, according to Forrester, 63% of customers are satisfied with getting online consulting services from a chatbot, provided that they can communicate with a person when needed.
This means that consulting with people online is not as unusual as it used to be a few years ago.
It is true that, for some consulting companies, taking things online is not a request, but rather a demand. For example, according to Darren Taylor, a founder of the Big Marketer, an online marketing consultancy, online consultancy is expanding, and the reason for is an absence of geographical limits, and thus a bigger pool of knowledge and stronger working relationships.
Successful digital transformation in consulting isn’t only about solving the issue of communicating with clients and providing online consulting services. In a broad sense, a business has to change its business model while digitalizing its business.
The biggest challenge in moving any consulting business online is customer expectations. Online customers are not the same as your offline clients. They have bigger expectations and demands.
According to Harvard Business Review, online customers hold all companies to the same level of expectation. It is not enough to have only one of the two – either a user-friendly interface or a comprehensive functionality. These days, an online consulting business needs to offer both.
Benefits of Starting an Online Consulting Business
1. Competitive Edge
Since the consulting industry is one of the last ones to go digital, you may still have a chance to outrun your competitors. When most of your competitors are only just considering transforming their consulting business, you can actually be the pioneer in your niche. Surely that could provide a huge competitive advantage.
2. Security and Convenience
Security is what builds trust between consultants and clients. However, when consulting firms save and keep all sensitive data in spreadsheets or hard drives, this trust is called into question. This old way of storing private and valuable information is totally unsafe – not only for the consulting firm but also for the client.
To provide a safe environment for customers, a company has to have a secure place to keep all the sensitive data. Typically, it’s the database that is connected to the consulting website.
Such a database would not only reassure the clients but also make it handy to use all the saved information further.
With the evolution of cutting-edge solutions, clients expect a far greater speed from consultants. With the current level of competition, customers don’t want to pay a lot of money to consultants only to spend countless weeks waiting to be advised anymore.
Nowadays, clients expect to get value right away. With an online consulting platform, you will be able to quickly connect consultants with customers. Moreover, you’ll be reachable at any time.
4. Cutting Costs
As you probably know, consultations in person come with unreasonable costs, such as for the office, equipment, etc. By digitalizing their business, consulting companies are not only available worldwide, but also won’t have to waste chunks of money on unnecessary things.
5. New Sales Channels
Moving online provides consulting companies with new channels for finding clients. Geographical limitations are no longer an issue. Moreover, by starting an online consulting business, you’ll have a new kind of client who prefers getting their services online. And it’s worth noting that the number of such clients is increasing every year.
5. Customer Value
Beroe’s market study of the consulting industry indicates that customers expect to be provided with an even higher value despite no increase in billing. Consulting firms that decide to go digital bring additional value to their clients since they give their clients a new and more convenient way of tapping into their services. And, in these changing times, customers appreciate businesses that move online more than ever before.
Why Consulting Firms Do Not Digitize
Since a huge amount of the traditional consulting model counts on the relationships, expertise, and human thinking that consultants bring to a client, consulting firms are often hesitant about embracing technologies. They assume it will shift that focus.
Consulting business stagnancy
The consulting industry hasn’t changed a lot in the last century. That is why it is natural for the consulting market to be indifferent and immune to the digital disruption of other industries.
Too comfortable with offline
Many consulting firms have become comfortable working with spreadsheets and storing client data on hard drives. With the fast pace of the Internet, these working methods seem like they are from a different era. Nonetheless, many still use them.
It is easy to get stuck in ones’ comfort zone and be unwilling to accept new changes. However, those who adopt technologies will have a better chance of being in demand longer.
Consulting services are still in demand
Let’s face it – there is no need to adjust a business if the market is doing well.
Before the coronavirus outbreak, consulting services were always in demand, so there was no reason for them to change their ways. As long as there were clients who were willing to pay for a service that is offline, there would always be such companies.
But, as the COVID-19 hit, the demand for online consulting services has increased and decreased for offline services. That is why the situation is changing. More and more companies are starting to view digital transformation as an opportunity to grow and have more demand.
According to 9Lenses, respondents from different consulting firms pointed out that the biggest challenges to digitally transforming their consulting business are a lack of IT systems and a lack of quality data.
3. Business Models of Online Consulting Business
In addition to creating corporate websites of consulting firms, video integration, and automation within a single consulting company, there are a number of types of so-called expert networks.
An expert network is a type of consulting business that connects customers with experts, specialists, and consultants.
Within expert networks, consultants are usually hired for a one-time consultancy that would usually last about an hour. Companies that use this kind of model have big databases with experts that could be contacted when a consultation is needed.
The growth of expert networks started with just manual searches for experts via Google, LinkedIn, and other online platforms.
But the new era of expert networks started with the Gerson Lehrman Group. It’s one of the brightest companies in the industry.
GLG is a New York-based company that offers expert services. It used to operate as a publishing house. But soon it became clear that clients wanted to talk to consultants face to face casually. The company decided to offer this kind of expert services. Later, it became known as an expert network. Overall, GLG has raised $212M.
Even though GLG was extremely popular back then, at that time new online business expert models emerged. It became clear for consulting firms that it’s not enough to have a standard business model. It was time to move online.
Let’s look closer at the core types of online consulting business models.
Marketplace Consulting Business Model
An online consulting marketplace is a consulting platform that connects consultants with customers. Consultants can either be hired in which case the marketplace would be called managed, or a marketplace can be only a facilitator between freelance consultants and customers.
Usually, when a consulting firm decides to digitally transform its business, it goes for a marketplace-like model.
There are 2 kinds of online consulting marketplaces:
- General consulting marketplaces
- Niche consulting marketplaces
General Consulting Marketplaces
The most famous freelance consulting marketplace is probably Clarity.fm.
It is a consulting marketplace that was founded in San-Francisco in 2012. Clarity.fm connects consultants with customers via a video call. Initially, Clarity.fm fundraised $1.6M the same year it was founded. After the marketplace got enough traction, it raised money again.
No doubt, Clarity.fm is the most technically advanced consulting marketplace there is. It has many features that are core to any consulting marketplace. If you are planning to build a consulting market, then you should definitely check out our step-by-step guide to creating a Clarity-like marketplace.
Recommended: How to create a marketplace like Clarity.fm
Another consulting marketplace founded in 2013, is Expert360.
Expert360 is a Sydney-based freelance consulting marketplace that raised $24.9M in total. One of Expert360’s clients was Uber.
It is not a niche marketplace – it has many categories and subcategories from which you can choose. Their consultants work both on short- and long-term projects.
Niche Consulting Marketplaces
UpCounsel is a San Francisco-based online consulting marketplace for finding legal help.
Not only is UpCounsel a niche marketplace, but it is also a local marketplace, acting only in the USA. UpCounsel was founded in 2012 and raised $26M in funds overall. One of their famous clients was Airbnb.
Another niche marketplace, Paro is an online consulting marketplace for finding on-demand financial professionals. Founded in 2015, in just 6 years Paro has already raised $16.5M in funds.
Paro does not disclose its consultants directly on the platform. It uses a questionnaire to find out about your needs and asks you to fill out the form. All consultations happen 100% remotely.
Related: How to Build a Freelance Marketplace
Machine-Driven Expert Networks
Machine-driven expert networks is an online consulting business model that uses machine learning for matching experts with customers.
The pros of this model:
- Reduces time for searching
- Finds more relevant consultants
- Finds more consultants in general
Obviously, this model doesn’t solely work with the help of machine learning. After the most suitable consultants are picked, the company’s employees go through that list to pick the best candidate for the job.
Techspert is an AI-driven expert platform founded in 2016 in Cambridge, UK.
In total, Techspert has raised £5M. This company uses AI abilities not only to search their own expert databases, but also the whole Internet, to find the best consultant the fastest way possible.
CleverX is an online consulting marketplace that facilitates expert-customer one-on-one video calls by means of an AI searching system.
This company is a typical example of a technically upgraded online consulting marketplace. CleverX uses a pay-per-minute business model where the customer is charged after the call is finished. However, a customer does provide their card details beforehand.
Crowd-Funded Expert Calls
Crowd-funded expert calls is a consulting business model that offers shared expert experience. Companies that use this model can be both online and offline. This model isn’t suitable for every consulting company. The reason for it is that it only works with clients and consultants who are comfortable sharing their insights and information with others. This means that a client shares an expert call with other clients.
Usually, this model is used as a secondary source of income since the earned revenue can be not too low to recover the business costs. Nevertheless, there is an example that operates solely with this model.
- Slingshot Insights
Slingshot Insights is an online consulting platform that provides investors with expert calls and data. It was founded in 2013 in New York.
Slingshot Insights uses a subscription-based revenue model. The users can:
- get access to the relevant data
- view transcripts of the previous calls
- give an expert a call.
4. How to Start an Online Consulting Business
There are a few ways to create an online consulting business:
The first and the most basic way to bring consulting services online is pretty obvious. You’ll conduct consulting online by using video conferencing tools such as Skype, Zoom, or Google Hangouts.
The second option involves:
- changing the entire business model
- starting an online consulting business using ready-made solutions or custom development.
Custom development means creating online consulting software from scratch. For building an online consulting website, you can either hire an in-house team of developers or outsource.
Pros of Custom Development
Custom development of a business consulting software will give you the right to decide what functionality your website should have and what it is going to look like. It is all up to you and your development team.
With time, your online consulting business is likely to grow. So, website custom development will help it to cope with numerous customer requests on the website.
Custom development is great in terms of integration abilities. Whether you want to integrate a payment solution or cloud storage – it’s all at your disposal.
Cons of Custom Development
Obviously, starting an online consulting business from scratch is costly. It does require bigger investments. If you choose custom development, then starting with building a Minimum Viable Product (MVP) would be the smartest idea.
With digital transformation, time can be a major factor when deciding what method of digitalization to choose. Custom development takes time. Usually, it takes more than a month to build an MVP.
Obviously, the easiest and fastest way to provide online consulting services is to use Zoom. It is video telephony, and online chat service provided through a cloud-based peer-to-peer software platform.
There could be 2 ways to use Zoom:
- Use Zoom for video conferencing with the clients
- Integrate Zoom to the website
Nevertheless, there have been lately problems with Zoom’s security lately. In 2019, Zoom had a webcam hacking scandal and a bug that allowed nosy users to potentially connect to video meetings they hadn’t been invited to. Also, Zoom added features such as:
As you can see Zoom is not safe to use for business calls. It’s better to spend extra bucks and use your own video consulting software. This way, you’ll have the trust of your clients, and your expertise will speak for itself.
SaaS (Software as a Service) is a software distribution model in which a third-party provider hosts applications. Companies that offer SaaS solutions use a subscription-based monetization system.
How SaaS works
This type of consulting software solution is great for entrepreneurs who don’t have technical experience and want a quick and easy solution.
With SaaS, a consulting platform has a domain that is hosted on the company’s server. So, as long as you pay, you will have access to your online marketplace.
Pros and Cons of SaaS
The biggest pro of SaaS is that you don’t need to be technically equipped to build a consulting website.
The biggest con is that, if SaaS doesn’t offer you the features that you need, you will either have to pay a developer to build them or you wouldn’t even be able to develop them at all since the service wouldn’t allow it.
Furthermore, SaaS has another huge disadvantage: low flexibility in terms of functionality and UI.
Depending on the type of SaaS you’ll be using to get a turnkey solution for your online consulting business, you will have different features.
Yondo is one of the most popular SaaS solutions for consulting firms. Its features are:
- video solution
- payment solution
- calendar integration
- website templates in case you don’t have one.
A white-label solution is a product or service you can rebrand and resell as your own.
As consulting companies do not obtain their own license on this product, this solution comes at a much lower cost than custom development. While technically there may be no difference in functionality.
A white-label solution is a great way to save time and money on starting an online consulting business from scratch. At the same time, you will get the core functionality and the ability to add more features.
The only drawback: the company that sells you a white-label product will keep the rights to the code.
All in all, the consulting industry is one of the last few to embrace digital transformation. Even though digital disruption in consulting has been going on for some time, 2020 is definitely going to be the year when it shines the brightest given the current situation with the pandemic.
There are a lot of benefits to starting an online consulting business. However, there are a few understandable reasons why consulting firms don’t want to move online.
Overall, the idea of transforming your consulting business isn’t a newsflash. Many try to embrace a marketplace-like model for their consulting business.