Pricing consulting services is rarely straightforward. Many people have no idea what they should pay for the services they require, or how to go about acquiring them. I am certain this makes them hesitant to ask for help. I have addressed these issues at length (see How Does a Potential Client Get Started? PDF).

In working with clients, I offer a number of options but, in general, I remain dissatisfied with traditional approaches to pricing consulting services. I am convinced hourly rates need not reflect the full value of the services provided. Alternatively, clients may have the impression they are being overcharged when billed on the basis of the number of hours worked.

Approaches

I offer four approaches to a consulting relationship. They are as follows:

(1) I sometimes work on the basis of a personal services agreement. Many clients have a standard agreement, which I am willing to sign, provided the terms are mutually agreeable, and the conditions are acceptable. If the client does not have a standard agreement, I can provide one. Under the terms of a personal services agreement, work is performed on an hourly basis. The number of hours is specified, and the hourly rate is identified.

(2) I often work on a contractual basis, with a carefully crafted scope of work, and a detailed budget. The contract can be fixed price, or cost-plus reimbursement (see Contract PDF). A fixed price contract means I will complete all work for a price quoted at the time the contract is signed. A cost-plus reimbursement contract means I will initially provide a good faith budget to accompany my scope of work, both of which can later be changed based on mutual agreement.

(3) When there is considerable uncertainty over the scope of a consulting assignment, or the client is uncertain as to whether or not I can meet their needs, I am willing to share some risk, provided the client is willing to sign a memorandum of understanding. A memorandum of understanding is similar to a personal services agreement. The difference lies in the fact that I will perform some preliminary work for which I am uncompensated. In general, a memorandum of understanding is helpful in establishing the basis for a more formal consulting relationship.

(4) I do some pro bono work for clients who lack sufficient resources to pay my usual rates, or are unable to pay at all. This is often true of appointments to advisory committees, peer review activities, and assistance provided to charitable organizations. Acceptance of pro bono work depends on my availability.