Billing for consulting services by project instead of by hours can benefit your business and your clients. But making the switch doesn’t always feel natural at first. In fact, one of the perennial challenges I help nonprofit consultants navigate is pricing.
Downsides of Hourly Billing as a Consultant
When most nonprofit consultants launch their businesses, they often start out charging hourly rates.
Those rates can vary significantly based on your field, qualifications, and experience. For example, grant writers working hourly may charge anywhere from $25 to $200 per hour (or more!).
But even at the high end of an hourly rate, there are hidden downsides to charging by the hour.
- An hourly rate caps your consulting income. There are, after all, only so many hours in a day.
- Hourly billing can lead to wild swings in your income and cash flow from month to month. This can make your consulting business feel less sustainable, creating stress and anxiety.
- With hourly billing, the better and more efficient you are at your work, the less money you earn—even though you deliver the same value to your clients!
Whether you want to earn more (or work less), the challenge is finding a way to start charging by the value you add (not the hours you work). The answer: project-based pricing.
What Is Project-Based Pricing?
With project-based pricing, a consultant provides a defined scope of work for a set fee that is agreed upon in advance. Many small businesses and consultants use project-based pricing for services like strategic planning, fundraising, grant writing, marketing, and design.
With project-based pricing, instead of trading your hours for your client’s dollars, you are trading your unique expertise for a fair fee that benefits you and your client.
Benefits of Project-Based Consulting Fees
- More flexibility and predictability in your workload.
- Greater clarity with clients on expectations and outcomes.
- Steadier monthly income and cash flow.
- Far less time spent on paperwork and invoicing.
- Higher perceived value for your services, with higher pay to match.
- The ability to reward yourself for working smarter and more efficiently.
Challenges of Project-Based Billing as a Consultant
Some challenges you might encounter early on in your project-based billing journey include:
- Coming up with the right project price (for you and your clients)
- Setting clear boundaries on scopes of work (to protect your time)
- Undercharging for new project-based services (this is common but easy to fix)
- Underestimating the time required for scopes of work (and thus undercharging)
- Communicating the value of project-based pricing with clients who cling to hourly pricing
How to Transition to Project-Based Billing
To get started with project-based billing in your consulting business, you will need to outline a few things:
1) Identify your core services
Project-based pricing is easiest when you develop and price a set of core services in advance. For example, many nonprofit consultants charge flat fees for writing a boilerplate grant proposal or grant template. If you’re starting the transition to project-based billing, it may help to start with 2-3 core services that not only have high demand but that you most enjoy doing.
2) Price your consulting services
When pricing project work, you’ll need to start with a rough idea of how many hours will go into the project and the income you want to make for that amount of time and effort.
Be prepared: it can take some trial and error to find your pricing sweet spot as a consultant.
For example, I helped one of the alums of our One-on-One Nonprofit Consulting Boot Camp start a copywriting business serving nonprofit organizations and consultants. In her first go at pricing a project, she significantly underestimated the amount of time it would take (and the value she would provide). But she diligently tracked her hours on different projects, conducted market research, and set long-term goals for reaching “expert pricing” for different types of copywriting projects. Within a few months, she was easily commanding that expert pricing.
3) Communicate with your consulting clients
It may feel easier to implement project-based pricing with new rather than existing clients. But that doesn’t mean you shouldn’t change how you bill current clients. The key is communicating by focusing on your value.
Think of it this way: your current clients already know and appreciate the incredible value you bring to their organizations—and are eager to keep benefiting from your expertise.
For current clients, reach out at least 2-3 months before your contract expires. Emphasize how much you value the organization as a client and how you want to be able to continue to prioritize their work—and that the transition you’re making to project-based billing will enable you to do just that.
If you’re looking for more customized assistance in making the switch from hourly billing to project-based pricing, we offer on-demand consultations. We can help you find the right pricing for your consulting services and develop an individualized strategy for how to talk to each of your clients (and find more!).
