How to price consulting services: hourly, day rate, project, retainer or value

Start with your floor, not your competitors

Your floor is the lowest rate at which the business works for you. Below it, every new client makes things worse. Work it out before you look at anyone else's prices.

As an employee, your employer paid for things you'll now pay yourself. The Bureau of Labor Statistics reports a median salary of $101,860 for management analysts (May 2025). That's employee pay, before the employer's share of payroll taxes, health insurance, paid time off and equipment. Self-employed, you pay self-employment tax of 15.3% (12.4% for Social Security and 2.9% for Medicare, per the IRS), buy your own health insurance and fund your own time off.

• Add up: the personal income you need, plus yearly business costs (insurance, software, accounting, marketing, travel).
• Add taxes and health insurance. A tax professional can help you estimate both.
• Estimate billable hours honestly. Selling, admin and learning take time you can't bill.
• Divide the total by billable hours. That's your floor hourly rate.
• Example only: if you need $200,000 a year in total and expect 1,000 billable hours, your floor is $200 an hour. With 800 billable hours, it's $250.

The five pricing models compared

Package your work as good, better and best

In Harvard Business Review, pricing consultant Rafi Mohammed describes a good-better-best approach: a stripped-down option to bring in new or price-sensitive buyers, a core option, and a premium option that gives buyers who want more a reason to spend more.

For a consultant, that might be a fixed-fee diagnostic (good), the diagnostic plus a 90-day implementation project (better), and the project plus three months of monthly advisory calls (best). Each step up should add something the client clearly values, such as more of your time, faster turnaround or hands-on help, not just more pages.

Three options change the question in the buyer's mind from "Should I hire this person?" to "Which option suits us?".

Set your first price from the client's side

Once you know your floor, look at the problem from the client's side. What does the problem cost them each month? What would they pay for the alternatives: hiring an employee, a larger firm, or doing nothing? A project that saves a client a hire or protects a large contract can carry a price well above your floor.

Ask about the value in your first conversation: "If this was fixed, what would that be worth to you over the next year?" You can only price on value if you know what the value is.

Test your price with real quotes

Asking friends whether a price sounds fair tells you little. Quoting it to real buyers tells you a lot. Keep a simple record of every proposal: the price, the package and the outcome.

• If nearly every proposal is accepted at once, your price is probably low. Raise it for the next new client.
• If buyers like the work but stall on price, offer the smaller package rather than a discount.
• If buyers don't see the value, the problem is usually the offer or the audience, not the number.
• Review prices at least once a year, and raise them for new clients first.

Write it down

Every price needs a scope next to it. Say what's included, what isn't, how many rounds of changes are covered, and what extra work costs. Ask for a deposit or the first month in advance. Clear terms protect the relationship as much as the fee.

Questions

Sources

• U.S. Bureau of Labor Statistics: Management analysts (Occupational Outlook Handbook)
• IRS: Self-employment tax (Social Security and Medicare taxes)
• HealthCare.gov: Health insurance options for the self-employed
• Harvard Business Review: The Good-Better-Best Approach to Pricing (Rafi Mohammed, 2018)
• U.S. Small Business Administration: Calculate your startup costs

General information, not legal, tax or financial advice. Rules differ by location; check with your own adviser.