Consulting Profitability and Talent Strategy: What Firms Must Do to Stay Competitive in a Changing World

This blog is written by Faheem Moosa, a former management consultant and founder of Consulting Leap, helping consulting firms build growth systems that consistently attract clients and create thriving businesses.

A client recently confided to me that his own client bluntly asked: Since you charge by the hour, and AI helps you get the work done faster, why should I pay you your regular fees?

Technology is reshaping the consulting industry. So are shifting client expectations, economic uncertainty, and a new generation of talent entering the workforce with very different career goals than the generation before them.

Consulting has always thrived on change, but the pace and nature of today’s evolution pose tough questions:

• What happens to consulting profitability when the old models stop working?
• How do firms attract and retain talent when loyalty looks different than how it did ten years ago?
• What does it take to build a firm that can win?

Since profitability and talent are tightly connected, let’s look at them together, and explore what it takes for consulting firms to thrive in this new scenario.

The Keys to Driving Consulting Profitability

For simplicity, let’s start by focusing on operating profit.

How to Calculate Operating Profit

Operating Profit = Net Sales – Direct Costs – General & Admin Costs

Let’s break profitability down into four fundamental levers:

1. Volume
2. Price
3. Direct costs
4. General and administrative costs

Of these, the most powerful levers are volume and price, because they can dramatically multiply profits while cost savings usually deliver only incremental gains.

1. Volume: Beyond New Business

It’s tempting to equate volume with “signing more clients.” But in consulting, volume has two equally important components:

• Retention and expansion: Fred Reichheld (creator of the Net Promoter Score system of management) and Bain & Company found that a 5% increase in customer retention can increase profitability by 25% to 95%. Loyal clients deliver steady revenue, lower selling costs, and expansion opportunities.
• Acquisition: A healthy pipeline ensures resilience, especially when projects end or a large client churns.

The firms that thrive balance both. They design systems not just to chase new work but to keep deepening and broadening the relationships they already have. From here, a firm’s utilization, leverage model (mix of senior/junior staff) and service mix can be designed to increase profitability further.

2. Price: Escaping the Time Trap

The biggest profit risk today isn’t cost. It’s the pricing models of consulting firms that no longer make sense.

Hourly billing is necessary in some cases. Many buyers are comfortable with the method, so there’s less friction in the sale, but it’s not always the answer. Automation and AI in consulting make work faster, but the value of the work doesn’t necessarily change. That’s why some forward-looking firms are moving toward:

• Outcome-based pricing: Aligning fees with measurable client results.
• Value-based pricing: Charging for the strategic importance of the problem solved, not the inputs used.
• Upmarket positioning: Moving to clients and markets where risk, scale, and credibility command higher fees.

Even established firms like McKinsey and Accenture are steadily shifting toward outcome-focused and value-based pricing models. For boutique consulting firms, adopting a pricing strategy that mirrors how buyers actually make decisions—and that strengthens margins—offers the clearest path to building an economically sound and defensible business.

Even on fixed-fee or retainer projects, you need to know how much effort is going into delivery. Time tracking is still an important tool to learn whether a project is truly profitable, or if the scope is creeping beyond what was priced.

3. Direct Costs & Admin: Necessary but Secondary

Yes, you should run lean. Optimize delivery models, automate admin tasks, and keep overhead in check. However, trimming costs will never be the foundation of sustainable profit.

The heavy lifting always comes back to volume and price.

Consulting Talent Strategy Comes First

Consulting profitability is ultimately a strategic issue, not a financial one. It’s a reflection of your position in the market and your ability to deeply understand your buyers’ business and key motivations.

• Which markets do you serve?
• What problems do you solve?
• How do you create value for your clients?
• How are you different?
• How does your value proposition land with buyers?

Without clarity here, no lever will deliver long-term profit.

Rethinking Talent

The other half of the equation is talent.

Consulting has always been a people business. Even with technology advancing, clients still buy judgment, perspective, and trust. But the way talent thinks about careers, growth, and firms is shifting.

Strategy Drives Talent

According to SPI’s 2025 Professional Services Benchmarks Report, firms with a well-understood career path have 23% lower attrition than those without one. This data is in line with the trend that great people want to work at firms that are:

• Clearly positioned
• Growing sustainably
• Offering meaningful experiences

Your business strategy is your talent strategy. If you don’t know who you are in the market, you won’t attract or keep the right people.

Changing Demographics: Loyalty Looks Different

A generation ago, consultants often stayed with firms for 5, 10, or even 15 years. Today’s workforce thinks differently. Ambitious professionals often want:

• Broad exposure in a short time.
• Career progression that’s faster than what traditional firms offer.
• The option to move between consulting and industry.

This isn’t disloyalty – it’s a demographic shift. Firms that cling to outdated expectations about tenure will struggle.

Instead, smart firms design themselves as stepping stones.

The Stepping-Stone Advantage

Many firms see consultants leaving after three to five years as a failure. It’s not. It can be a strength.

Consulting has long been a launchpad for senior roles in the industry. When alumni of your firm rise to leadership roles, they become potential clients, partners, and advocates. That reputation makes your firm more attractive to ambitious, high-performing talent.

The firms that win will embrace this model, creating value for the consultants who pass through and the firm itself.

Building the Employee Value Proposition

Just as you plan to land dream clients, you need to plan to land dream talent. A strong Employee Value Proposition (EVP) includes:

• Psychological safety: A culture where people can challenge, experiment, and grow.
• Learning and exposure: Opportunities to solve diverse problems and build transferable skills.
• Shared ownership: Especially in boutique firms, embedding business development into the culture so everyone contributes to a consulting firm’s growth.
• Financial upside participation: Give people the chance to share in the financial rewards, with incentives tied to client outcomes rather than simple utilization.

This combination makes your firm attractive to top performers – even if they don’t plan to stay forever.

Boosting Consulting Profitability & Talent: How Firms Win

The forces reshaping consulting – technology, demographics and client expectations – make it clear that profitability and talent are inseparable.

• Profitability grows when you position strategically, expand with clients and shift pricing models.
• Talent strategy succeeds when you acknowledge changing career expectations and create a culture people want to join.

Both are driven by clarity of positioning, differentiation and value proposition. The firms that win in this new environment won’t be the ones that resist newer, emerging models and ways of working. They’ll be the ones that embrace them – using retention, pricing power, and talent strategy as levers to build profitable, resilient, and future-ready businesses.