The Top Three Consulting Pricing Models (And The Best One For You)

I’ve been a marketing consultant for the better part of 35 years. Today, I serve as Head of Growth at Consulting Success®, the world’s leading training organization for consultants. Both in my own consulting work and in my role helping consultants build and scale their practices, one question comes up more than almost any other:“How should I price my work?”It’s a deceptively simple question with significant strategic implications. How you price your services shapes how clients perceive your expertise, how much leverage you have in negotiations, and ultimately how much freedom you have to grow.Let me walk through the three models most consultants use, along with the one I recommend for those serious about building a high-value practice.Most of my consulting work has been project-based, and I price accordingly. I also offer tiered productized service packages for clients who want access to my expertise before or after a project, such as an initial assessment phase, a roadmapping engagement, or ongoing strategic advisory support.Each model comes with its own risks and rewards.Limitations of Hourly BillingWhether it’s a one-time engagement or an ongoing retainer, charging by the hour is the default for most service providers and professionals. It’s the easiest method to set up and the easiest to justify. After all, most people get paid by the hour in standard employment.But hourly billing comes with serious limitations.First, it punishes efficiency. The faster and better you become at your work, the less money you make. Clients know this, too. They know you could drag your feet to pad invoices, which creates a trust problem and often leads to micromanagement.Second, it caps your growth. There are only 24 hours in a day. You can outsource parts of your work, but that cuts into your margins and forces you to charge extra for other people’s time. Suddenly you’ve become a people manager and a project manager on top of delivering the expertise your client actually hired you for.Early in my consulting career in the 90s, I knew I wanted to build something scalable. So I moved away from hourly billing and started pricing based on the estimated time to complete tasks, and eventually on the cost of outsourcing parts of the work. I never tracked my time or included hours as deliverables. I only used time estimates for scoping purposes.My clients always knew exactly what they were getting rather than wondering whether I was padding my hours. This was a step in the right direction, but flat-fee billing had limitations too.Olympic Factor PricingLet’s talk about ongoing or recurring service fees, often called “retainers.” When most people hear the word, they think of the kind lawyers charge. Those are advances against future work. “Having a lawyer on retainer” means paying a set monthly amount to have legal advice available when needed.After completing a project, I sold optional retainer packages for ongoing advisory services like coaching, support, or training. I didn’t bill by the hour but by groups of deliverables, based on a certain number of sessions or reports.I avoided hourly billing because I knew it would place a ceiling on my earning potential. If I automated or outsourced to become more efficient, I’d be losing money either way. I wanted to grow my practice, not limit it.I structured both service packages and monthly retainers as productized services, categorized into three tiers. Think Bronze, Silver, and Gold, though I named them differently to fit my brand and practice. Each tier offered an incremental scope of deliverables.What I call “Olympic Factor Pricing,” which I wrote about in my book Power Positioning, is giving clients the option to choose between three tiers depending on their needs. The Gold tier carries the highest price but includes more deliverables and more value. It’s what my friend Paul Myers called “The THUD! Factor.” The bigger the stack of deliverables, the louder the hypothetical sound it makes when it hits the table.This structure does several things at once. Clients who are budget-conscious can choose a lower tier. The higher price points serve as anchors that increase perceived value through comparison. Unnecessary haggling decreases. Clients have more options. And the relationship has built-in room to upgrade or downgrade over time.I recommend Olympic Factor pricing because it communicates value, reduces price shopping, and gives you leverage in negotiations.You can apply this tiered structure across most pricing models. And that brings us to the three most common ones: input-driven, output-driven, and outcome-driven.Input-Driven PricingThe first and most common approach is billing according to the input of work, whether that’s hours, activities, or effort put into a project or account. The standard practice is to invoice once the service is delivered or on a monthly cycle.Input-driven pricing is the default for most service providers: bookkeepers, copywriters, designers, and many others. It’s also how providers of professional services price their client-facing time, including lawyers, therapists, accountants, and yes, consultants.Lawyers typically charge monthly retainers to cover their time working on a case, including court appearances and work by paralegals who handle much of the heavy lifting.It’s the most common method because it’s easy to estimate and easy to justify to a client. But as I mentioned earlier, time- and task-based billing is quite limiting. The next two models offer better alternatives.Output-Driven PricingThe second approach is pricing according to the output of work. This means billing for deliverables, commissioned projects, or productized services. Recurring flat-fee retainers tied to a defined set of deliverables typically fall into this category as well.Output-based pricing is often the go-to for larger practices, agencies, and professional service firms with cross-functional teams. It makes sense because the “output” delivered to the client may involve “inputs” from multiple people and sources.But solo professionals can benefit significantly from this model too. It allows the provider to automate or outsource parts of their deliverables, or find ways to become more efficient and agile, and therefore more profitable.If a deliverable takes less time than anticipated, the provider still gets paid the full amount. The client still receives what they paid for, as long as deliverables meet expectations. Everyone wins.However, the reverse is also true. Projects can take longer than expected. Unexpected challenges arise. Quality control issues surface. Costs increase. It takes experience and good judgment to properly assess needs, scope projects, and estimate costs accurately.A safer approach is to start with an initial audit or roadmapping phase, which reduces risk for both sides. Conducting a discovery phase beforehand can uncover potential surprises and help you assess costs more realistically before committing to a larger engagement.These initial discovery or pre-assessment phases can also become standalone service packages in their own right, serving as must-buy prerequisites to larger project-based proposals.Outcome-Driven PricingThe third approach is pricing according to the outcome of the work, based on the results it produces or the impact it creates. Most people call this value-based pricing, where the fee is relative to the estimated value gained or saved.This model is by far the most beneficial of the three.There are many ways to gauge value, but the price is usually not contingent on producing a specific result. It’s an estimate used as the basis for calculating the fee.It’s not exclusively for speculative work either, although it can be. In the case of the lawyer mentioned earlier, their retainer might be applied against a percentage of any monies awarded if the case is won.If the value you create is something you can easily forecast or quantify, pricing becomes relatively straightforward. But if the outcome is unique, situation-dependent, or unpredictable, conducting an assessment or roadmapping phase first can provide an appropriate value determination.Vague or Subjective ValueYou might be asking: “What if the outcome is subjective, unquantifiable, or hard to measure?” Every result has some kind of value, whether directly or indirectly. The answer is simple, but it’s not always easy to find.It requires diagnostic questioning.What would such an outcome mean to your client? There are plenty of ways to assess what “value” means in their specific context. Whether it’s the monetary value a result directly achieves, the indirect value it brings through savings in time and effort, the cascading or compounding value it creates downstream, or the value from reducing or eliminating costs entirely.A friend of mine is a cost-efficiency consultant. Clients hire her to audit procurement processes, identify purchasing inefficiencies, and implement streamlined buying workflows. She also renegotiates vendor contracts, sources more economical alternatives, and eliminates supply chain redundancies.She routinely finds hundreds of thousands of dollars in savings. After an initial audit phase, she has a clear picture of how much money she can save her client. Her fee is then based on a percentage of the total estimated savings she generates.But what if you’re a life coach and the result you provide is improving the quality of your client’s life? The question becomes: what would “improving quality of life” specifically mean to that client?If it’s time management, how much more money could they make with more time? How much would they save by eliminating lower-priority tasks? What about the productivity gains from having less stress and anxiety?Whether the value is obvious or buried, it takes skilled probing to uncover it. For some engagements, the answer surfaces quickly. For others, it’s hidden in the client’s responses. But even when the results are direct and measurable, don’t overlook the knock-on effects.Let me illustrate. Take the cost optimization consultant I mentioned. An example outcome is reducing a company’s operational costs by 15% within six months. On a $1,000,000 annual operational budget, the client saves $150,000. That’s a quantifiable result.But she doesn’t stop there.By asking deeper questions, she uncovers the client’s priorities. An extra $150,000 might allow the company to reinvest in growth initiatives, like hiring new talent. They might increase marketing budgets and improve sales. The savings could make the company more attractive to investors due to improved financial health.Saving $150,000 doesn’t just improve the bottom line. It creates opportunities for long-term growth, competitiveness, and resilience. More often than not, these spillover effects all carry their own price tag, adding substantial value to the result you provide.Which Pricing Model is Best?Input-based pricing works best for individual freelancers and service providers who are just starting out. Writers, designers, personal trainers, and similar professionals often begin here because it mirrors how most people get paid in traditional employment. It’s also easier to justify and explain to clients.Output-based pricing is typically best for groups, agencies, and firms. The moment multiple people are involved in delivering a service, things get complicated. Without output-based pricing, every team member’s time becomes subject to the same scrutiny and micromanagement issues that plague hourly billing.Independent professionals often choose output-based pricing too, because it allows them to productize their offerings easily and package them into tiered Olympic Factor pricing, without meticulously tracking hours.However, outcome-based pricing is the strongest model for growth.It’s particularly powerful for consultants, fractional executives, coaches, and advisors who want to scale beyond trading time for money. The value is anchored in your expertise and the impact of your work, not the hours you put in.There are countless ways to structure this model, just as there are countless ways to gauge value. But it requires experience, confidence, and the ability to create substantial, demonstrable value that justifies the fee. Specialization, whether horizontal or vertical, often strengthens the case because it sharpens the perceived value you bring.Depending on the context and turnaround time, you might price a larger engagement by breaking the total fee into monthly installments over the estimated delivery period, or use a graduated approach where the fee increases as milestones are met.Don’t Undervalue YourselfOne of my favorite quotes:“Know your worth, then add tax.”Your prices reflect your expertise, your authority, and your trustworthiness in delivering what you promise. And as a mentor told me early in my career, perceived value is more powerful than value itself.If you’re just starting out with limited experience, input- and output-based pricing may be the right place to begin. They’re straightforward models with minimal risk, and they’ll help you develop a sense of how long things take and what your work is worth.But keep in mind that they become prohibitive over time, particularly in terms of opportunity costs. They can also undermine your perceived value and limit your ability to improve, become more efficient, and grow your practice.Think of it this way. Every hour you bill for is an hour you’re taking away from completing a deliverable for a client who would gladly pay for the value of the outcome, regardless of how many hours it took to produce.If you’re an established consultant, a fractional executive, or an expert advisor with a track record of results, and you want more freedom, more leverage, and the ability to scale, outcome-based pricing is the path forward. Compared to the value your work creates, your fee should be a fraction of what your client gains.If you’re a six-figure consultant dreaming of seven or eight figures, the most direct way to get there is to stop selling your time and start pricing your impact.

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