Pricing Strategy: 10 things to consider when pricing a consulting project

Pricing is not something widely talked about.

Earlier today, a twitter friend asked this question and I found myself with a lot to say, so sharing it with you now.

1. Avoid an hourly rate, and go flat (or fixed) rate

Getting things done quickly is in conflict with an hourly rate. If you're consulting, it's to the client's benefit to capitalize on opportunities or fix problems fast. For that reason, most projects have flat rate pricing. This is hard for clients to understand until you position the conflict of interest here. They typically have a budget constraint they're working within and if you know it, you can provide honest options for them.

If you're doing more retainer/on-going work then it makes sense to go hourly. And honestly? It's a good thing to project your income. That said, if you can help it, do few retainers and do them only with people you love.

2. Pricing parity is a thing; adjust for regional Pricing

New York has a different expectation of what’s reasonable than Phoenix does. This is just facts. Call it price of living, call it culture, call it values. There's a reason people want to work for companies based in New York, San Francisco, and LA. And it's typically because they're getting paid more. If (and until) that changes, use it to your advantage.

Fun story about this: one of my earliest clients was from New York and owned a big tech consulting company. When he requested a quote from me, I undercharged him so much he called me and told me so. He said "This is the lowest bid we received, and I would run away from a price like that."

We agreed to double it and worked together for four years afterwards.

(I'm forever grateful to him).

3. Analyze the industry range to find your guidelines

I pay attention to the range of salaries in the industry I'm working in just to give me a baseline, and try to choose what’s fair to the client and comfortable to me. Usually this is above average but not at the extreme upper limit.

4. Analyze the range for a particular role you’re filling

It's pretty rare these days that you're only doing one thing as a consultant, so I ask myself: Am I also writing? Designing? Building? Providing support on weekends? That builds into the price proportionally. Don't forget about the mental cost of switching either––that's a real expense.

5. Consider how much you like someone (yep, like it or not, that’s a measure)

The saying that people do business with people they like is not just a saying. Most people quit their jobs because of their managers, not the role. The truth is that if you can afford to say no, you will. So I ask myself, is this client going to be a thorn in my ass? If so, this will skyrocket the price (if I don’t just say no). Are they someone I want to work with? Will I learn from them? Will they make me better? Do I respect what they do and are we on a similar mission? If so and I have the bandwidth, sign me up.

6. Consider how much impact you can make

One of the main reasons I started my business is to help people with good intentions and ideas compete with money-hungry sleazeballs. After studying Enron and seeing that business could be tacitly used for evil, I decided to tacitly use it for good, to market things like gratitude, empathy, care, kindness, and optimism.

I like to help those on that same mission. So I ask, does their success bring a net positive benefit to the world? If so, I want to work with them. I often (to the dismay of family and friends) price it lower.

7. Consider how much Joy you’ll experience in it

Am I going to have a great fucking time? Because these are hours of my life. There isn't a thing I take on that I'm not wholly thinking, If I die in the middle of this, will I be okay with it? 🤷🏻‍♀️ Maybe it's morbid, but it works for making decisions. And, it's life.

8. Consider how much time it’s really going to take

Do I want to spend 3 months of my life worrying about this? Or am I only comfortable working on it for two weeks? We won't always get this one perfect for reasons ranging from procrastination to change of scope, but it's something we need to think about. Lately I've been using Ratios to organize my time: 60% designing, 30% advisement, etc. I use this as guidance on what to incorporate more of and what to let go.

9. Account 20% for taxes (ask your advisor in your case)

I account for 20% taxes. For some this might be excessive, but for me, I’ve seen families nearly get kicked out of their home for not paying them. Because of this, I rather over-prepare.

10. Include processing fees in your total price

I don’t worry about credit card processing fees unless a project is over 20K in which case I prefer (and am grateful for) a check. Processing fees at that level can be a week's worth of groceries, but in general, you want to make it as easy as possible for people to pay you.

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