How Consultants Overcharge your customers

Consultants' Profit Enhancer

If an organization, management or IT consultant hired supervisors must ensure that consultants deliver the results promised. In this article I summarize six techniques used by consulting firms to maximize their own profitability. Some of these are just savvy companies, some are dishonest, some are fraudulent - all are widely used in the consulting industry. As well known companies such practices, I hope they will be better equippedas they usually pay generously their advisers' fees and expenses.

1. Excess returns
Junior consultant will typically paid around £ 30,000 ($ 45,000) per year. This is with social and other costs, advice about pay £ 1,000 per week. But they will usually be charged at £ 7000 will go + ($ 10,000 +) per week in the private sector clients - major public sector projects for some consulting firms up to EUR 5,000 + ($ 7,500) per week. An experienced consultantCost of Service is £ 2.000 ($ 3.000) per week, but can be provided with £ 12,000 bill + ($ 15,000 +) per week. Thus, while many manufacturing companies are making gross margin of approximately 80% and retailers in more than 100% are consulting firms make it universally target gross margins in excess of 500% to 800% - a strange and enormous difference from the edges of our customers ever. Surprisingly, very few people have the simple math and ask why they should pay more than £ 300,000 ($ 450,000) oneYear for an inexperienced junior consultant, who will probably pay a little more than one tenth of it.

2. Maintain travel discounts
Last year, agreed to three debates, was a former customer about 100 million U.S. dollars compensation if they sued to pay "unjust enrichment at the expense of their customers in the complaint that for a decade, the three companies with external providers such as travel and airline companies will work agencies discounts of up to 40% on flight andOther costs that were not passed on to customers. "

It just works. The advice is directed into a contract with a travel agent, hotel chains and major airlines for an end of year discount. Advising the customer invoices for all travel and accommodation costs, sometimes even adding to an administrative fee. At the end of the consultation will receive a discount from the travel provider. None of these discounts is always back to the customer, who pays forAll travel and accommodation costs in the first place. The defendants claimed that they had "turned this practice," but this is contradicted by a recent email from a consultant by one company, "Here is how we do it every time. We state in our contract that we account for" actual 'costs. We then bill for your air travel costs. Then we get a setback on the ticket. But we do not give back to the client for the kick-back. "A British consultant estimated that itsEmployers had stolen more than £ 20m from just one client in this way.

3. The settlement does not work for the client
In the majority of consultants, partners or directors to divide their time among their various clients and have a number of days per month for every customer - even though this time not actually worked for the customer. In addition, you can often find common adviser is said issued to customers for the time on internal consulting for free. I quotea counselor from a 100,000 plus employee firm, "I was at an internal meeting with more than 100 other consultants. partners asked us to charge the day to the project so we could take them to the client account, as it was almost quarter-end and we needed to make our numbers. "Just that one seemingly innocuous decision will probably cost the customer more than £ 100,000 ($ 150,000).

4. Excessive fees for overhead --
In many consulting firms, clients pay for fictitious overhead costs. In alarge consulting firms an extra 10% has been automatically consulting fees allegedly to cover overhead. So, with each consultant cost £ 300,000 ($ 450,000) a year, would be made available for another customer £ 30,000 ($ 45,000) to pay the administrative burden into account. But the London office, for example, was about three hundred and fifty or administrative assistance - secretaries, receptionists, human resources, bean counters, marketing support, resource managers, coaches,Information researchers and production of documents. But with the 10% add-on, our customers were paying for the equivalent of about three hundred administrative staff - to ensure that salaries were up to two hundred and fifty support staff will not be issued as there are not just employees.

5. Relocation Staff
Many consulting firms are international, and move with their employees around the world at the expense of their customers. At £ 2.3 million ($ 4m) project, I helped sell in the UKto a regional health authority, the advisory does not have enough UK-based employees. As our CEO said in an internal memo, "The project took place at a time when we were still heavily supported by U.S. expats. Of course, we accommodated them and their families and some of these costs be borne by the customer."

How the NHS thousands of pounds of our customers had to pay an extra week for these imported consultants in what a later official inquiry described as "afinancial fiasco. "

6. Cheating on lump-sum cost
Frequently deliberations agreed with the customers that are spending, for example, 12% of the fees. Each week will be made available to the client for those 12% into account, then at the end of the project it will be paid a reconciliation between the 12% by the customer and the actual cost.

In a project for a leading manufacturer of military aircraft, missiles and satellites, we had agreed to 12%, butwere actually only running at around 7%. The account that Vice President informed the rest of the advice that he had room to fill up instead of spending both from other projects and from our headquarters to pay money back to the client.

In very rare cases, it would carry out the audit of our spending. If they found some real terror, we would only say that there had been an administrative error and the refund of the minimum necessary to satisfy the customers satisfied.

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