Which of the 5 Basic Consulting Pricing Models is the Right Model for YOU?
“How do you determine what is right price to quote to client?”
“I don’t know what I did, but I didn’t earn what I anticipated. Do you have any ideas?”
Boy, I wish when a consultant or freelancer asks questions about pricing, I had a quick and easy answer, but I don’t. I don’t have a secret formula that crunches numbers or a magic wand to flick that displays a number.
I wish I did because just maybe I would never be disappointed when an engagement isn’t as profitable as I would have liked. Or just maybe I wouldn’t struggle to determine the right price to quote.
What I have learned is that when determining a price, it is important to use the right pricing model. There are five basic pricing models from which to choose. Each model has pros and cons and there are variations of each as well.
This article provides an overview of each of the five basic pricing models: time and expense, fixed price, value-base, risk-reward, and retainer. Use this guide to help you determine the model or models that are right for you.
Some people believe there is one right pricing model, but I don’t agree. I believe a consultant needs to decide what is the right pricing model for them
- based on the situation and the consultant’s service offering or approach,
- the client’s pricing requests, and
- the consultant’s comfort level with a particular model.
Two of the models are cost-based models: time and expense, and fixed price. This means that the price you determine is based on the cost of the services to you. This requires having a solid hourly rate or hourly cost that can be used as a basis for determining a price to quote.
The other three models are service oriented models: value-base, risk-reward, and retainer. You determine the price based on the value of the services you provide to the client.