In consulting, there’s no assets, inventory, or significant research and development. The value comes from skilled professionals whose knowledge is expensive and generally only needed for a short time.
Karl Marx’s theory of surplus value1 gets more complicated in capital-heavy industries – where inventory, machines, and long timelines muddy the waters. But in labor-only businesses like consulting, the math is a lot simpler. You bill a client more than you pay the worker. That’s surplus. Or, in modern terms: gross margin.
The only real nuance is how long gross margins can go negative – how much cash you need up front, and how much risk you’re taking on. In consulting, there’s not much of either. The value comes straight from the people doing the work. So if the workers are the value, they should also own the place.
Consulting firms should be worker cooperatives because the limited resource – expert workers – should be allocated the surplus value.
Read the rest at Joel Leichty's blog
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