Retainers, project fees or upside: pricing consulting work

Pick the fee by the shape of the work, and add a performance component only once the metric, the baseline and the client's part are written down.

• Match the fee to the work. Kyle Poyar charges a retainer for ongoing advising and a fixed fee for workshops and defined projects. Hourly can work for a small, uncertain request, but the client pays more when the work runs long. Japna Sethi sells the first phase, research and a funnel diagnosis, as a fixed-scope project, so the client gets a deliverable even if a later experiment loses.
• Be careful with outcome fees. An agency's revenue result also depends on the client's sales team, budget and execution, Kyle says. Dan Hockenmaier adds a performance fee only after a fixed-fee diagnostic finds a lever the consultant can change, and ties the upside to incremental conversions against an agreed baseline, with a control group where one is feasible.
• Size the fee against the client's upside. Kyle uses a client's estimated upside to judge whether a fixed fee is proportionate, and keeps the fee fixed whatever the result. When the estimate rests on shaky assumptions, he sells a smaller diagnostic first. Alvaro Morales wants the baseline, qualifying events, data source and a dispute window in the agreement.
• Prepaid units for variable requests. Alvaro suggests a prepaid block of work that draws down against priced units, and says it is his recommendation rather than standard agency practice. Ben Williams would use units when requests vary month to month, define each unit by its deliverable, and show units bought, used and remaining on every invoice.