The telephone in Reshma Shah’s office at Emory University’s Goizueta Business School is ringing constantly. Prof Shah, who runs the student consulting practice at the school, says she is inundated with calls from companies wanting to hire Goizueta’s MBA students to work on their internal projects, rather than going to a name-brand professional firm.

“We’ve had more requests than ever before,” says Prof Shah, head of the Goizueta Marketing Strategy Consultancy. “In a typical week, I hear from five companies, whereas two years ago, I’d get one request every two weeks. The demand is there.”

Interest in the service is being driven by companies keen to take advantage of the comparatively low cost of the student consultancy, says Prof Shah.

The consultancy – which works with between six and eight clients per year, including General Electric and United Parcel Service, the messenger company – charges $30,000 per project. For that price, companies have a dedicated team of seven students, plus a faculty supervisor, working from January until May on a project. (The students participate in the consultancy as part of a class.)

“Coca-Cola, one of our biggest clients, has told me it gets $300,000 worth of strategic consulting for $30,000,” she says.

Goizueta’s student consulting service is not the only one to have seen a rise in interest from companies. The downturn in the economy has spurred a marked increase in those companies cutting costs by hiring business school students to complete their internal projects. Previously companies would have outsourced these projects to professional, high-priced consulting companies.

Student team brings fresh perspectives

When Andy Weber, president of Farm Journal, the agricultural magazine, wanted to develop a new e-commerce model for his Philadelphia-based publication, he had a problem. His company – with revenue of a little less than $50m a year – lacked a business development division or a mergers and acquisitions department.

To hire an expensive consulting group was out of the question. So he turned to a student team from Temple University’s Fox Business School in Philadelphia.

The Fox consulting group had well-known clients, had demonstrated repeat business and the price was right.

Mr Weber was impressed by the students’ work. For example, the students found several of Farm Journal’s assumptions about its potential venture were wrong. Had the company acted on those assumptions, “it would have cost us a lot of time and money”, says Mr Weber.

Most business schools have some sort of student consulting group on campus. The goal is to give students practical experience solving real-world business problems, while giving companies access to thoughtful ideas from bright young business minds, at a fraction of the cost a name-brand firm would charge.

Hiring an MBA student-consulting group rather than a specialised firm may involve a bit more hand-holding on the company’s part – this is, after all, supposed to be a learning experience for the students – but the quality of work is generally high. The majority of students have at least three years’ work experience under their belt and many are only months away from graduation and full-time jobs with large consulting firms.

“These students have relevant, recent experience,” says Prof Shah. “It’s not as though you’re trading McKinsey for a bunch of slackers.”

Student consulting groups usually charge $10,000-$30,000 for work that would cost to the order of $100,000 if done by a mid-sized consulting firm and at least $150,000 if done by a large firm, according to industry data.

Another benefit of the lower cost is that companies can approve smaller expenditure on consulting services more quickly than if they have to wait for approval for larger sums from the board.

According to TL Hill, the managing director of the student management consulting practice at Temple University’s Fox Business School in Philadelphia, companies are increasingly interested in partnering with the school. Fox students used to complete an average of 16 projects per year but that has risen to 19 this year and will further increase to 23 next year.

“In good times we position our [programme] as ‘executive extended’, an inexpensive way to increase your capacity. Now we’re awkwardly turning people away,” says Prof Hill. “We’re not trying to compete with consulting firms. We’re not trying to make as much money as possible.”

Prof Hill says that as companies clamp down on expenses, they are increasingly giving students high-level, high-priority strategic projects, whereas in the past, they tended to give low-risk, tactical assignments. “Companies are starting to feel the pinch and are saying: ‘We need this work done and we’re watching our bottom line.’”

The Fox consulting group, which is offered as part of the MBA programme, charges companies $20,000 per project. The fee helps to pay for a clinical faculty member to oversee the project, as well as research and administrative costs.

Companies are taking the student projects more seriously than in the past, Prof Hill says. “We’re having executives flying in for meetings, they’re not calling in. You can feel the concentration of resources.”

Mays Business School at Texas A&M University has seen a 40 per cent increase in the number of companies that have approached it about potential projects. Most are start-ups, according to Dick Lester, the director of entrepreneurship at Mays.

Mays charges companies a fee of $50 an hour; student consultants earn between $12 and $16 depending on their experience. The consulting service has a staff of 15 students, each of whom work 10-20 hours a week.

Working for the student consulting service is a “highly valued assignment”, according to Mr Lester. “It differentiates [the students’] resumés and gives them direct consulting experience working with real companies on real world problems.”

The University of Georgia’s Terry College of Business has also seen more companies enquiring about student consulting services. Four years ago, the school worked with about five companies a year; today that number is 150. The majority tend to be small businesses – with between $500,000 and $12m in sales per year.

“In better times, they would hire [a big consulting firm] but now they’re coming to us,” says Chris Hanks, director of the entrepreneurship programme at Terry.

Companies tend to contact him for one of three reasons:

“One, it’s strictly survival: our credit line just got pulled, what do we do now? Two, they want us to help them write a business plan to raise capital. Or three, they want students to work on a very specific marketing project – every company is cutting back on marketing today.

They want to figure out how they can attract and retain customers more efficiently through a web strategy, or social marketing.”

Indeed, many companies are looking to student consulting groups to help them modernise their marketing strategy, says Prof Shah. Student consultants are “younger, more tech savvy and more ‘networked’,” she adds.

“These companies want fresh ideas – not cookie-cutter ideas. In this economy, companies are looking for more, with smaller budgets. They’re saying: ‘We want to rethink things. Help us rethink things.’”