Private Equity vs Consulting: 13 Key Differences to Consider

Last Updated November, 2024

Liz Kenny

Former McKinsey Consultant

There’s a big debate among ambitious graduates about private equity vs consulting. Which industry is better for your career? Which job pays better?

Both careers are good places to hone your business skills, but there are some key differences. So how can you decide which is right for you?

In this article, we’ll discuss:

What the work in private equity vs consulting looks like
6 similarities between private equity and consulting
13 Differences between private equity vs consulting
When to transition between these industries
A personality test – would you make a better consultant vs private equity analyst?

Let’s get started!

Private Equity vs Consulting: What’s the Difference?

Private equity and consulting are both prestigious career options for high performers in college and graduate programs.

Private equity firms buy companies, invest in them for a few years, and either sell them to another investor or help them launch as a publicly traded stocks. They firms are focused on getting a return on their investment within specific time horizons. Everything they do centers on identifying in good opportunities, developing a plan to hit their value targets, and exiting the investment.

Private equity firms tend to attract investment-banker types interested in corporate finance and merger and acquisition (M&A) work. They work really hard, have insanely great financial modeling skills, and celebrate their wins. If you join a private equity firm, you will build a set of repeatable skills by performing value-based work on target companies in many industries. You will also learn a lot about how deals are made and financed.

Consulting firms provide advisory services to companies. They help companies with plans to fix or improve their existing businesses or create long-term strategies for launching new businesses. In consulting, you may work on literally any kind of project a company needs. These can include revenue growth, cost-cutting, supply chain changes, organizational redesign, and more. Truly, there is no limit to the kind of work you may do in consulting.

Consulting tends to attract really smart, curious people who may not know precisely what they want to focus on but know they want to solve big problems. They are often very driven and can demonstrate success and outline the effort they put into something to make it successful. If you join a consulting firm, you will develop quantitative and qualitative analytical skills, great people and communication skills, and hone an expert, quick approach to answering any question.

Consulting firms do not traditionally make investments in companies. However, some have investment arms (e.g., Bain Capital), and some experiment with innovative payment structures, where the firm may be paid with equity or proceeds from an initiative.

Read on to uncover similarities and differences between private equity vs consulting!

Similarities Between Private Equity & Consulting

Don’t stress about choosing between a career in consulting vs private equity. They are both great options.

There are many similarities between a career in private equity & consulting. You will:

Get great professional training. Both private equity and consulting firms have first-class training. You will be coached on how to manage all kinds of professional situations, and you’ll be prepared to meet with and present to executives and excel even under pressure.
Become an expert in PowerPoint & Excel. You will spend most of your work hours working in either PowerPoint or Excel. This may feel tedious at first, but it’s like learning a language. Once familiar with these tools, you will be extremely effective in your work.
Receive great mentorship. Both private equity and consulting are service businesses that depend on great people. All of your managers and principles have walked the path you’re on. They will share what they’ve learned with you so that you can improve.
Build valuable networks. Consulting and private equity are intense jobs. You build tight relationships with your teams when you spend so much time together. Additionally, when you deliver for your clients, they will remember you long after you’re gone.
Work in a variety of industries. Consulting firms force new consultants to experience a variety of industries in their early years. In private equity, there are only so many deals involving companies in one industry, so you’ll naturally get exposure to multiple industries.
Have amazing career opportunities when you leave. If you have a prestigious private equity or consulting firm on your resume, it will open doors for you. But it’s really the skills you learn that will make you shine in any organization you join.

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Differences Between Private Equity vs Consulting

Here are some elements specific to Private Equity. You will:

Learn how to identify a good investment opportunity. Private equity is like a truffle hunt, where firms compete to find hidden gems where the private equity firm can add value. Sometimes, the firm can bring additional capital to a good business that’s ready to become a major player. Sometimes, private equity firms identify a stagnant business that needs a new vision and resources to grow or improve profits. You will know how to spot a good investment (and a bad one!)
Focus on assessing the financial value of various opportunities. Value is the primary driver of investment decisions, and all of your work will focus on how to turn a multi-million dollar investment into a multi-million million dollar return on investment.
Spend a lot of time on financial modeling skills. The primary work in private equity includes valuation models, peer benchmarking, and market assessments. These models are the common language of investing in companies, and you will become fluent in that language.
Repeat the same way of building models over and over again with different inputs so that you are an expert in all the elements that drive value. This is not a bad thing. It will make you an expert.
Be financially rewarded based on the performance of the funds you work with. If your fund does well, you may earn a big bonus. Overall, people can earn more in private equity than in consulting. This can change if either the firm or the target industry struggles. Recent years have been tough for the private equity industry, but a boom could be right around the corner.
Have more contacts at middle-market organizations. Private equity firms typically invest in middle-market companies. These firms have proven businesses that need capital or new leadership in order to get to the next level. You will likely only work with senior leadership.

Here are some career elements specific to consulting. You will:

Focus on how businesses work and how to improve them. As a consultant, you will spend most of your time understanding operational challenges and risks, and identifying solutions. You’ll quickly gain deep insights into the dynamics of how businesses function.
Work with your team to identify the root causes of issues and problem-solve solutions. You may start with your own ideas, but you’ll need to get several people on board with your perspectives. They will come up with ideas, as well. The goal is to get to the best answer together.
Learn how to adapt your structure, approach, and framework to new client situations. Every client situation is very different, so you will learn how to succeed in unique and challenging environments. The ability to adapt is incredibly valuable in consulting.
Develop deep relationships with clients. Projects are quick, but you will deliver signifigant value for your clients when they go well. As a consultant, one goal is to make your clients feel like their voice is included in the solution for the project and to make them look good.
You will have more contacts at larger organizations. Consulting firms typically work with large organizations to help them improve existing businesses or identify sources of growth. Large companies have established systems, hierarchies, and organizations in place to oversee businesses and drive change. You will work with the key stakeholders impacted by your project and generally spend limited time with the C-Suite.
You will be rewarded based on set dimensions. Consulting firms don’t enhance consultants’ bonuses very much based on the firm’s performance. Salary and bonus schedules are typically set at top firms, and they keep compensation in line with their competitors.
You will have a broader set of opportunities when you leave. Consulting firms work with a broad group of clients, and top firms are well-known. Consulting opens the doors to a more extensive set of jobs than private equity firms do. These can include stepping into strategy or operational roles for businesses ranging from start-ups to Fortune 500 firms, transitioning into investing (including private equity or venture capital), or moving into the public sector or social impact work.

When to Transition

It can be hard to make a decision today about private equity vs consulting.

If you think you want to give both industries a try at some point in your career, you should probably start in consulting. People rarely transfer from private equity to consulting, but many people transition from consulting to private equity. During your time in consulting, getting exposure to some client work with heavy financial modeling will be important.

Here are 3 points where a lot of people successfully transition from consulting to private equity:

After 2 years of consulting and with a finance-focused MBA: A good time to transition to private equity is after completing 2 years at a top consulting firm and then earing an MBA in a prestigious, finance-centric program. You will need to demonstrate significant quantitative skills and high grades to stand out in a highly competitive field.
After 2 years as a post-MBA consultant: If you work at a firm known for transaction excellence (e.g., Bain’s PE group), you could position yourself to transition to a private equity firm as you leave consulting. You will need to endear yourself to the teams who perform transaction work and demonstrate that you can build models quickly and get the results needed. If you spend your first two years as a consultant doing a range of projects with limited financial modeling work, it will be challenging.
As a Partner or Junior Partner: If you’ve made it to partner or associate partner, you can use your industry of functional expertise to transition to private equity. The best path would be to join a PE firm in need of someone with your specialty.

There are other times you could transition, but these are more difficult transitions:

After 2 years of pre-MBA consulting: Unfortunately, private equity firms would rather hire an analyst who worked for 2 years as an investment banker because they have serious quantitative modeling skills. It’s possible to transition at this point, but it won’t be easy. If you’re unsuccessful, you can get that finance-centric MBA and recruit for private equity through your MBA program.
After 2 years as a Project Manager: Many consultants decide they don’t want to make consulting their career and transition from their firms at this time. While you have great skills, your network may be stronger in larger organizations, and you may not have enough cache in a specific industry or function to interest PE firms. It’s not impossible to transition to private equity as a project manager, but there are headwinds.

If you would like broader career options over the long term, consulting makes sense. If you have a passion for investment and value, it’s a good idea to build your financial muscles early and join a private equity firm.

Would You Prefer Private Equity vs Consulting? A Personality Test

If you’re struggling to figure out whether you’d prefer a career in consulting vs private equity, take this short personality test.

1. Which best describes you?

a. I’m a competitive person who likes to win.

b. I’m a curious person who likes to be challenged.

2. When researching a company, which of these two things would you look up first?

a. Market value

b. Products/lines of business

3. How comfortable are you with uncertainty?

a. I like consistency, so I want to become an expert at specific skills.

b. I feel like uncertainty gives me opportunities to learn new things.

4. How much time are you willing to spend with your team?

a. I prefer a mix of solo and team time.

b. I enjoy spending all day in the team room.

5. What’s your reaction when someone mentions Excel?

a. It’s one of the coolest tools someone like me could ask for.

b. I know it’s a helpful tool, but it’s tough to navigate.

6. If you had to choose a business catchphrase, which would you choose?

a. Value above all.

b. The best answer wins.

If you chose all or mostly A’s, a career in private equity may be a better fit for you. In private equity, there will be more solo time building your valuation models, repeatable tasks and approaches to your work, and a primary focus on value creation.

If you chose all or mostly B’s, you’re more likely to be interested in a career in consulting. In consulting, there is a great deal more uncertainty because every client is different. There’s also more collaboration because teams develop solutions together.

No matter what you answered, either role could be a good fit. This quiz simply points out what might be a natural fit for your personality.

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In this article, we’ve covered:

What you do in private equity vs consulting
6 similarities of private equity vs consulting
13 ways private equity and consulting are different
The best times to transition to private equity
Is consulting or private equity right for you?

Still have questions?

If you have more questions about choosing between private equity vs consulting, leave them in the comments below. One of My Consulting Offer’s coaches will answer them.

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