How do Consultancys work ? Why everyone want to open a Consultancy ?

In Work in US by KumarUpdated : 60 Comments

If there is free money in US with little one time effort or just with nice talk and networking,  it is just by having your own consultancy or working with a consultancy. The amount of money you make by having a consultancy is  UNBELIEVABLE. It is a CASH COW !!!

If you are in the consulting business, you might know this, but if you are not…read the article….

If you are not familiar with consultancy jargon like vendor, client, consultant refer to this post. Consultancy Jargon Who is Vendor, Client, Consultant ?

Here is the way it works : The client wants a project to be implemented and he needs skillful people. He will say, I am willing to pay $100 per hour to a qualified guy with the technical skill set. They send out an Ad or email to the prime vendors, the prime vendors then send out the same email ( taking of the rate and client info of course..! )  to other consultancies. What they say is, we have a position and  ( they do NOT mention the client name ) we are willing to pay $ 70 – 80 an hour for a qualified candidate. Also, they post Ads on Dice.com, CareerBuilder.com, Monster.com etc.  Big Consultancys now supply the technical skill set resumes to prime vendors and if they do not, they will send out an email to smaller consultancies saying, we have a position and we are willing to pay $ 50 – 55 per hour.

Average money distribution if the Consultant is paid $100 per hour by the client.  This is pretty close in reality.

Average
Money Paid in Dollars
Minimum Profit Margin
of the Original amount
Money per Year in dollars if the rate was $100 per hour
Client
Source of Money
Prime Vendor
100
20%
$ 40,000
Big Consultancy
80
20%
$40,000
Small Consultancy
60
15%
$30,000
Smaller Constancy
45
15 %
$30,000
Employee or Consultant
35 – 40
35 %
$70,000
Of the total $ 200,000 given by client in an year $120,000 (65 % of source money) dollars is taken away by various consulting companies as they act as Layers.

If you want to take some of that $120,000 dollars, all you have to do is OPEN A CONSULTANCY.

All consulting companies do is marketing, they send resumes and find people who have the skills. If you have been in industry for some time or if you know lot of people in Industry, you can get the right candidates. So, it is a very easy way to find someone. Once the deal is signed up, ALL YOU DO IS NOTHING. Just send Time sheets to Client or vendor and count the money. Give a part of money to Consultant or employee as salary. This is where your skill comes in, if you know all the above process and how much they eat, you better negotiate well with your employer. Here is the previous article I wrote on negotiating How to Negotiate Salary and Benefits as Consultant with Employer

Because of so much money paid by client, the vendors say if you find the right person, we will give you 5% on the total ( that is $10,000 per annum ), Similarly big consultancies do the same…so, even if you do not have a consultancy, if you have good connections, you can still make MONEY. So, just NETWORK !

Also, because of so much money involved and everyone is trying take some margin, it is good for consultant to be on the higher level to make more money. So, people keep jumping from one consultancy to other to get more money….

The amount you have seen above is only if the average billing rate per hour is $100.
Do you know how much big consulting companies like SAP, IBM, Oracle bill the client  ? It is ridiculous. SAP bills from $240 – $360 per hour, IBM $150 – $250 per hour , Oracle $160 – $260 per hour.  Just imagine, they do not even have any prime vendors, they only pay about $100,000 – $150,000 to their employees per year. So, their profit on an employee is like HUGE…around $200,000 – $350,000…It is UNBELIEVABLE how much BIG IT Consulting companies make…

After reading, Are you planning on starting one consultancy  ? Get some of that free money ?

   

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Comments ( 60 )

    1. administrator
      Kumar

      Valan, There are way too many consultancies already out there. With the recent changes to third party employment and USCIS rules, not sure, if it is the best idea…

      1. Angel007

        Hi Kumar!
        I need one ques answered from you .I am working as a contractor in Fox .I applied for h1b but less hope of getting picked up in the lottery.I am looking out for plan B. But need to check with you if this can be one option.So i will be on H4 status.Can i work in US through a indian consulting firm and get paid in INR.I am asking this because my husband is in H1b status so I can stay here but can I work on indian payroll throgh a indian consulting Firm ?

        1. administrator
          Kumar

          That is legally not allowed…Any work in US on H4 is not allowed, unless you have H4 EAD. While, some may say there is no one tracking and it can be managed, it is illegal…There are tax implications and violations that you would be doing, if you work without proper authorization.

  1. Rohit

    Hello All,

    I have started my Software Development Company in India. i don’t have much projects/clients yet. Can anyone guide me How I can find the direct clients or projects or any small software consultant firm from USA or any other country who can give us regualr work ?

    Thanks

      1. Eshant Garg

        Hi Nitin,

        Even I have a software development company and I face the same situation.
        You have any suggestions for how to find direct work in US?
        Right now I take work from freelancing websites.

        Regards
        Eshant

    1. Shreyansh Mohanty

      Greetings,

      Why are you looking for Consultants from abroad if you have consulting companies in India. We are a Business Consulting company based in New Delhi. Check out my website www.shreyanshmohanty.com . Drop me an Email if you want to patner with us.

  2. Smit

    Can anyone provide me consultancy for job in mechanical engineering sector in USA with sponsored visa.

    I am already defrauded by one consultancy.

    Kindly genuine consultancy contact me.

  3. raju yadav

    Hi Experts,
    As We Are Running Our Own Placement Consultant In Bangalore India SABJOB.COM And From Last Two Year We Served Free Services For Our Clients Till Date! But Now We Want To Go For Premium Services So How I Should Approach To Clients For Premium Services! And I Am Worried They Will Agree Or Not? Any Good Suggestion Please !
    Raju Yadav
    sabjob.com

    1. Yuvraj Singh

      Give them a free consultancy. Just charge some fixed percentage from the business which you gave to them. Always act as a bridge between both clients.

  4. vinodh

    @kamal kishore bhardwaj you use wordpress to rank your consultancy business to top of google. all using knowledge from free resources. you can do it yourself for free. I have done it many times for myself and my family biz using free resources like google seo guide. also post in wiki mapia as well

  5. Carlos

    Think logically, you cannot sponsor your H1B by yourself, you need a client that wants to hire you and you can’t find a client without an employer that could represent you. Now clients do not want to hire you for a full time role, because technology is evolving and they do not want to get stuck with someone from an older technology, also just think what would the requirement be for a Web developer after the client’s website has been done, do you think they will be paying for free after the work is done in anticipation of future needs, no way. If you join a client directly by yourself, who would take care of your paperwork or taxes, do you think the client will, one reason to hire contract employees is to avoid such hassles. As an individual, you will not be able to find suitable opportunities by yourself, continuously, if you work with a consultancy, they will do the work for you. There are also other hidden facets to this as well.

    1. john

      one thing about indians… they don’t want to read. come on guys!! spend 15 secs and and you will find the exactly same question. and then indians ask why nobody like them. dumbasses

      1. Kunal

        Does not matter for us if anybody likes us or not. We are here for ourselves and not for getting liked by di**heads. Got it?

    1. Ashoke Das Gupta

      I am a senior consultant with more than 35 years of consulting experience in INDIA , in infrastructure development , new township development , Theme Parks ,cold storage , from concept to commissioning . Want a client from US , UAE, Germany . Netherland for new venture , with export oriented projects which will be set up in INDIA with a buy back guarantee .

  6. R RAM KUMAR

    Hi frnds my name is ram.my bro is working as a sales manager in citibank and he has two years of experience as a sales manager.now he want to work in us.what is the procedure to have a job in us.

  7. Ammar Mohsin

    I wanna open a consultancy firm in india please suggest me how can I earn money from it .
    I am an expert in rosin rasin turpentine and many other chemicals can you tell me what should I do

  8. sabby

    hi mine consultancy fake my , age from 1989 they did 1979, now prime vendor wants to hire me, what should i do on this case ?????
    confused !!!! as this is long term project and its sucking me up

    1. vinodh

      your comments are confusing. what do you mean.
      if you believe you are fake then remain as a contractor.
      if you become employee then there is a possibility that they
      check from your first employer and educational credentials too.
      its not clear if you are currently employed in usa

  9. Bipin

    Hi,

    I have a valid H1B visa till 2016 March.But I left from the processed indian company. They didn’t use this visa for an year.Now I am with another Indian company,they told they will not transfer visa , but they can apply for new one under cap-exception and they just offered, they can do it in future. but i heard that other companies can transfer visa.Is it possible to transfer visa to another company even before using that visa first time from the processed company.If I can’t use that visa I would like to try for some other countries rather than waiting for processing again. Please share available information about this?
    Thanks
    Bipin

    1. chetan

      Hi Bipin,
      For Visa transfer, you need to provide last 3 salary slips from your US Employer and like you said you never been to US then you can’t show that hence you are not able to transfer your visa.
      There is one another case that you can file case against company that you are not getting paid then case go in your favour and law suit give permission to you for visa transfer BUT this can only be happen when you are in US and working for your agency(h1b petitioner).

      Thanks.

      1. Smit

        Hi Mannu and Bipin Can you please suggest me genuine consultancy that works to provide sponsored visa with work in USA in mechanical engineering sector.

  10. jawahar

    Can anyone suggest me some job consultancies .I am studying 4th year b.s mechanical engineering in new york . Please suggest me some mechanical engineering job consultancies.

  11. zea

    so I graduated about 6 years ago but never tried to get a job til recently, with no experience it’s kinda hard to land a job, but i contacted 2 agencies and they are willing to train for Java and job placement one agency said they pay 55k to 60k, i’m a citizen what do you think the amount i should ask for a salary and how long do i have to be with the same agency after the training is done and also do they pay for the training ?
    thank you

  12. madhav

    Hi all,
    I am in desperate need of new contacts for submitting profiles of our consultants. As I am not getting enough support from the existing vendors, I am in search of new prime vendors & clients for building new network / making submissions. Please guide me with the information. If possible please help me with Tier-I, Tier-II, Prime vendors, Clients who can support my consultants.

  13. Dinakar

    Hi !! I have 2plus year of experience in SAP-ABAP.. i like to work in abroad ,
    Can any one please suggest me a good consultancy .. am ready to pay …
    but need genuine consultancy..

    please help.,,,

  14. H1

    Hi Saurabh,

    If I change my employer and introduce my client to my new employer so that i can keep working for the same client.
    1. Will there be any legal issues with my current employer?
    2. Can I expect 80%-20% from my new employer?

    1. administrator
      Saurabh

      H1,
      1. Yes, there can be depending upon what kind of agreement you or client has signed w/ them. Do you know about the documents?
      2. This is something you will have to negotiate w/ new employer. When discussing just don’t look at the % cut. Also discuss about other benefits like health insurance, holidays, 401k etc which may alter the in-hand salary.

  15. vinod kumar.c

    i am also working through consultancy… i am 28yrs aged guys..not yet married… i finished my backlogs of graduation simultaneity working in a bpo.. now i thought of getting a good job and money… but i am trapped in the hands of constancy.. working on a contract base in a big IT company… i dont have facilities that of a stuff in the company… also i am sacred,… when theyll through me out of company as i am contract staff… so i dont like these consultancy-client activities… i dont know how much they are eating my sweat…

    1. Harrish

      *Hi vinod… i am also backlogs student i am running a small level consultancy can v dicuss directly. Let me gave ur contact detail like email or number to contact….

      * if any student with backolgs did they get job ?

      *thanks soon reply

  16. Victor

    I am Recruiter, Who hires h1b’s. The above table explanation on Consultancy profits is just 10% truth… Might have been few Greed companies back then… It’s Never that Easy.
    For All Latest News: NO -Vendors /Prime vendors/Consultancy/Implementers/Refer-ales- Keep a margin more than $10-$20 per hour now!
    Don’t get carried away with false messages… 1st know the consultancy and talk to them….

    ” One Candidate screws! the company lost a million dollar”

  17. D

    To Remove all these layers, all H1B and temporary workers unite and help each other for job. if one working on some project and project need more resource he should refer to all H1b or temp workers. That is one way to remove these suckers.

  18. Rajesh

    Considering the Big companies,Small companies,consultancies etc.. in this case, It seems very good and beneficial for Clients (who hire at least more than 5 H1B Consultants)having a separate Department to overlook all the Visa, Health care, other related matters so that they can reduce these unnecessary layers. Its beneficial for Clients as well to Employees. Atleast having one layer seems okay.

    This is how I have seen in many countries who hire Foreign labor, Unfortunately in US, hiring foreign talent has been through many vendors through bigger,smaller consultancies.

  19. administrator
    Kumar

    Well, the reality is, big companies have many rules and compliance requirements…they require insurance and other paperwork, which small companies and individuals cannot provide. Also, big companies do not want to deal with too many small companies or individuals as it too much of hassle and paperwork. Clients typically screen and have a preferred vendors list and they like to recruit people through them as they have the contract with them and they are liable for any mishappenings.

    1. mcwintek

      Hmm… seems that consultancies have really made big bucks exploiting the situation. Looking into this consultancies do seem to be sweat shops (or chop shops :)). And now US is slowly realizing the situation and starting crackdown in form of strict Visa rules & chasing fraud consultancies. It would be interesting to see how desi consultancies get around the situation.

  20. mcwintek

    I have a question on this. If companies knows of such difference in what is paid by them to vendors ($150-350) and what gets actually paid to employee ($50-150), then why don’t they hire people directly. I know it is cumbersome but wouldn’t be worth savings. Isn’t it?

    1. Aman

      When a company hires a full-time employee that is shown as a liability on their balance sheet vs a contract employee is considered a capital expense. Hiring less full-time employees keep their balance sheets looking healthy by keeping their liabilities low. Secondly, if and when they let a contractor go they don’t have to think about any severance package or other expenses that a company incur when a full-time employee is let go. In addition to that they are also shielded from any potential law suits that employee may file against them.
      Businesses do not think in per case basis, they think in net gain and net loss terms. It may seem that contractors are more expensive and company is actually loosing money but in the bigger picture it will be a net gain for the company going the contractor route.

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