What are the various IT consulting models and the benefits and drawbacks of each?


1

I am pursuing an opportunity as an outside consultant to an established company, but don't really know how to package my services. Here are a couple of models I have come across:

  • Charge a retainer fee and include a certain number of hours, then charge by the hour above and beyond that
  • Charge by the hour with no retainer
  • Charge a flat fee based on a result or outcome (e.g. fixing a problem, completion of project milestones)

What other models are there, and benefits and drawbacks of each?

A lot of times things can be done remotely. Is it common in IT consulting to establish up-front the expectation of working remote vs. on-site?

Pricing Marketing IT Consulting Service

asked Jan 27 '12 at 06:33
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J.Rightly
106 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll
  • There's no right answer to your question, which [makes it too broad for the format](http://answers.onstartups.com/faq#dontask). You can easily research each of the revenue models on your own and decide which one fits your goals best. – Dnbrv 8 years ago
  • I disagree. Asking what consulting models exist and what the benefits and drawbacks of each are all specific questions that can be objectively answered. – J.Rightly 8 years ago
  • Please see the FAQ section I linked. – Dnbrv 8 years ago

2 Answers


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Definitely don't charge for the result at a flat rate. The seemingly simplest of jobs can turn into hours of nightmarish troubleshooting. All the time spent should be charged so you don't sell yourself short. You may charge a retainer, but they would likely expect immediate service when an issue arises. Don't do this if you are working alone or have multiple, possibly demanding clients. You could charge hourly, but I recommend a first hour, higher rate charge, or a minimum charge per visit so you don't waste time going out to them for 5 minutes of work. It is acceptable, and usually preferable to the client to work remotely. This gives a quicker response time. Remote time should be at smaller increments, usually 15 min. You can also offer pre-paid blocks of time to be used up as needed at a reduced rate. This gives you a little more financial security. As far as pricing, find out what the going rate is in your area. Don't undercut too much or you will be taken advantage of. It is possible to go for a higher than average rate if you can prove your worth and dedication to be above market value.

answered Jan 27 '12 at 06:54
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Manuel Alarcon
188 points
  • Great advice! Thanks! – J.Rightly 8 years ago

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Couple IT consulting models that come to mind

  • Hourly - Typically an initial quote or estimate is still needed
  • Fixed - If it's something repeatable you do often. Setup a new server, re-install a desktop, build a fixed spec website then fixed can be very lucrative if done right. Don't do it on risky projects, only things that you can do with consistent outcome.
  • Fixed weekly / bi-weekly if you are doing something like agile software development
  • Managed Services - or a monthly fee they pay you to make sure there systems are working and running well. If everything is working well you make a lot, if it's breaking and has lots of issues you lose.
  • Retainer - Is a tricky word because it usually implies that you will drop everything and attend to a client ASAP (like a retainer with a lawyer). You would want to setup a fixed amount of time you can work on their account without getting approval from anyone. *Pre-paid - Some companies pay in advance for blocks of time. Can be used over a month, year and it gets re-filled as needed.

Managed Services is pretty popular right now - IT providers like to know that they are getting a fixed amount of income each month in and they can count on that revenue. Clients like it because they know for a fixed amount of money they will be taken care of.

'Break / Fix' is a term used when clients just call when it's broken, you charge them hourly to fix it. It's a common model, but unpredictable and you aren't really rewarded for doing an excellent job. If you do a great job your reward is that your client never calls or gives you another penny again :] So - think of something of value you can do every month for clients for some known recurring revenue.

answered Jan 27 '12 at 15:15
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Ryan Doom
5,472 points

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