Should consultants charge by the hour or by the project?
Neither, if "by the project" means your hours multiplied by your rate. Charge one flat price for the outcome.
What hourly feels like when you're the client
Years ago I hired someone who insisted on being paid hourly. Fine. That's how they liked to do it; I wasn't going to argue. But I'm not a big chit-chatter, so when they spent the first 10 minutes of our weekly calls asking me about my day, I was like, "Get to it! I'm paying you for this time." I hated that. And it made me a bad client, because I was always watching the clock.
Most people think charging hourly is better because then they know they're always getting paid when they're working. But it creates an unnecessary tension. As the client, I wonder if they are working efficiently or not because, let's face it, efficiency is not in their best interest.
Personally, I refuse to pay anyone by the hour. I don't want to reward someone for taking longer.
It cuts the other way, too
A friend of mine launched a podcast and was looking to hire an editor. The editor said she charged $100 an hour. My friend had a limited budget, and she was worried the hours would add up, and asked the editor to agree to $100 per episode if they didn't need any content editing.
At first, that felt like a win. But over time, my friend started to feel resentful, even ripped off, because she realized each episode was now only taking about fifteen minutes to edit. She only felt that way because the editor framed her work as hourly. If the editor had simply said, "I edit podcasts for $100 per episode," my friend would never have questioned the value.
This is the problem with tying time to money.
The project fee that's hourly in disguise
In 2012 we landed what seemed like the perfect client: a small consulting firm that needed "a new brand and website."
When I estimated the number of hours it would take and multiplied it by our hourly rate, it came out to almost $10,000. Since I didn't think they would pay that (and I had never charged one client that much at once), I set the price at an uncomfortable but not totally inconceivable $8,500.
When they finally answered the 4th follow-up, they said they were still interested, but it was more than they had hoped to spend. Could we do it for around $7,000? And also, they needed a brochure designed. Could we just add that in as well? We finally agreed on a $7,250 project, with everything they asked for.
Each phase that was intended to take weeks turned into months. When I looked back and calculated how many hours we spent on this project, we made $20/hour, $10/hour less than Steve was making at the low-paying freelance job he had right before we started working for ourselves.
A fixed price didn't save us, because the price was still built on estimated hours. The hours changed. The price didn't.
What they're actually paying for
What they're paying for is not how long you spend; it's how right you get it.
Because people do naturally think in hourly terms, it's your job as the expert to help them focus on the thing that matters: the outcomes. If you focus on time, you teach them to focus on time, too.
I have coached people who are afraid to package their services because they do not trust themselves to stay within a set timeframe. So they charge by the hour instead, which means the client ends up paying more simply because the provider cannot manage their own time.
And if a client came to you and said, "I know this usually takes three months, but I need it done in two weeks," you would feel entitled to a rush fee, wouldn't you? So what is the difference between that and building a process that delivers the same result faster by design?
How to move from hours to an outcome
Start with the result, not the deliverables. We don't just promise a list of deliverables; we connect the package to the result, and what the client will ultimately achieve because of it.
Work out what they actually need before you recommend a package. In my model the first step is always the Lead Product, which defines what success actually looks like for the client. The brief ends with what it will take to make the plan come to life, all summed up in a list of deliverables with one fixed price attached.
Include what improves the outcome. When something is simply included because you know it improves the outcome and streamlines the process, it rarely gets questioned. It doesn't feel like an "add-on" because you haven't positioned it as one.
How to find the number
Start with your Freedom Number, the actual annual revenue you need to support the life you want after taxes and business expenses. That tells you what your main offer needs to cost.
If the gap between that and what you charge now feels enormous, there are only 2 levers you can pull: increase the real and perceived value of what you deliver, and decrease the time it takes to deliver it. The Lead Product does the first. Intensives do the second.
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