Consulting services pricing

20200618

In the interviews conducted by Pablo and I , we discovered that different executives have different concepts of how to price consulting services. And the interview with revealed a completely different model.

This note makes an attempt to break down the difference between why you would want to charge differently based on the situation.

Inclusive fixed price - Best for well defined work (both time and scope) - Requires trust on the part of the client - Some clients like this because they know the budget up front, some don’t like it because project deliverables are revised frequently

Hourly rate - Used more often for contractors than consulting jobs - Used if the project is experimental in nature and there is not a clearly defined deliverable or timeline

Skin-in-the-game - Executives like to have this as an option, but seems that few actually ever do it. - It is good, however, for the consultant to offer this as an option because it shows that they are committed to their process and believe in success. - The consultant upside should be capped because most executives don’t like the idea of an unlimited payday for their consultant. - If the consultant is only in charge of strategy, he takes on the risk of the client not implementing well (or at all).

Daily fee - uses this often. - He disguises the daily fee as a fixes project price by quoting a fixed price that is based on his daily fee. E.g., $2k/day for a 30 day project to diagnose something. Then $1k/day for 6-month project to implement suggestions. - Fun side note: He uses “junior’s” on the longer term implementations so that he can lower the Daily Fee below his own daily requirement but still make money over and above what the junior gets paid.