At a glance: Consulting fees are a positioning symptom, not a number
Most consultants started with a formula: decide what you want to earn, then divide it by the billable hours you can work.
It left out the cost of delivering, selling and running the practice, and it never mentioned value.
The five lines give you your floor, the number below which the practice does not work.
The value conversation gives you your ceiling, the number that comes from what the work is worth to a client.
Keep the scarce thing scarce, and raise the number a little at a time until you find where it stops.
Price from value and let the floor protect you.
When I started out, about twenty-seven years ago, there was a formula you were supposed to use to set your price. You started with the number you wanted to earn. Then you worked backwards.
As a consultant you could only bill about twenty hours a week, the formula assumed, because the rest of the week went on finding clients and running the business. So you multiplied twenty hours by the number of weeks you could actually work in a year, divided your target income by the result, and out came your hourly rate.
The arithmetic was neat. It just left out all the things that decide whether your business survives.
What the formula forgot
What it left out was the cost of the work itself. The formula told you what to charge for your hours, but not what those hours cost you to deliver.
- It forgot the cost of sales, the time and money you spend finding and winning each client before a single billable hour starts.
- It forgot the cost of delivery, the make-or-buy question of what it actually costs you to produce the thing, and which parts you should hand to someone else rather than make yourself.
- It forgot the running costs, the software and insurance and bookkeeping and the desk. And
- It forgot that after all of that, a business needs to leave something over: profit to grow on, to pay tax from, to pay yourself a dividend, to survive the months when the work dips.
All of those come out of the same number the formula handed you, and most of the time that number would nowhere near enough to cover them.
The bigger thing it left out, and I'll come to it, is the part that actually matters – the formula never mentioned value.
The business plan was a fantasy with software
The same era sold you the business plan. These were large documents, and you could even buy software to complete them. You projected how much you would charge, how many clients you would win, how the numbers would compound.
Most were elaborate fantasies dressed up as plans, confident about a future that nobody starting out has any right to be confident about. And they carried the same hole as the formula: they were all arithmetic and no value.
I remember a consulting meeting years ago, working with a regional not-for-profit. One of the board members had bought the business-plan software and brought the printed output along with him. He was a teacher, and he had worked through it faithfully. He was proud of what it produced.
My mentor refused to look at it.
I was a teacher once myself, believe it or not, a vice principal. So I knew the gap he was crossing and how much enthusiasm had gone into that binder. I'd made the same shift from teaching into business, and I was very aware of my own limitations. I was embarrassed by his lack of knowledge. But you have to admire the enthusiasm.
The five lines gave me the economics
That mentor was the late Denis Hitchens. I built my marketing services company to work alongside him. He delivered the consultancy, and I did the implementation. He was the one reading the situation; I was the one building what the reading said to build.
He taught me the five lines, and they gave me a better picture than the old formula ever did. They break a practice into what it actually runs on: revenue, the cost of goods sold, the cost of selling, the cost of running the business, and profit. Run each as a share of revenue and you can finally see where the money goes and where it leaks.
The five lines. The old formula only asked the top line;
the other four decide whether the practice survives.
The five lines fixed what the formula got wrong. They forced the costs back into the picture: the delivery cost, the selling cost, the overhead, the profit line. The old formula only asked how much do I want to earn. The five lines ask what does it cost to earn it, and what is left.
And yet, if I am honest, the five lines are still mechanical. They give you your floor, the number you need to charge to keep the practice alive. They do not tell you what the work is worth to the person buying it.
The missing layer: value
That's the part the formula skipped and the five lines never reach.
Blair Enns makes the point plainly in Pricing Creativity. The price of anything made by a mind has almost no relationship to the labour that produced it.
Carolyn Davidson was paid thirty-five dollars for the Nike swoosh in 1971. PepsiCo reportedly paid a million dollars to have its logo redrawn. Nobody argues the Pepsi mark was five thousand times better, and the hours were not meaningfully different. What differed was what the client stood to gain, and the risk riding on the decision.
Value lives in the client, not in the work. It does not exist until a particular client perceives it. Which means you cannot read it off a spreadsheet of your costs.
That is the move the old formula never made. It asked what do I need to earn. The better question to ask is what is this worth to the person who needs it, and what does it cost them not to have it.
The two ways to price
Enns puts it as a reversal.
- The cost-based pricer starts with the product, adds up the costs, arrives at a price, and hopes value follows.
- The value-based pricer starts with the client, works out the value available, sets the price, then decides what costs they can afford, and only then designs the solution.
Client, value, price, cost, solution, in that order. Price before the solution, which feels backwards until you have done it a few times.
Two ways to price the same work. In the value-first chain the value is worked out before the price, and the costs come after.
The fastest way to change how much you charge, Enns says, is to change how you charge. Reverse the order the formula runs in, and the number moves on its own.
Getting work today is a value conversation
Getting work today is a value conversation. You sit with a client and you work out, together, what the future they want is worth: the extra revenue, the reduced risk, the years of not having the problem. The price falls out of that, not out of your hours.
This is easy if you already have a reputation. If they know you and trust you, the conversation starts partway up the hill.
It's harder if you don't. And that's the place a lot of people who used to work inside big companies get stuck.
Why the big-company consultant could not charge the same
There were consultants who worked in big companies who assumed they could walk out and earn the same on their own. What they missed was that the firm's name had been doing half the work, and more than half the risk.
The big company gave the client an excuse to be hired. When things didn't work, the client could point at the well-known firm and stay safe. That is how CEOs looked after themselves, by hiring a name they could blame when the project went wrong.
Individual consultants don't carry that insurance. The moment they went out alone, the name was gone and so was the excuse. They had no positioning, and the price collapsed.
A price is a positioning symptom and when the buyer cannot tell you apart from anyone else, the only thing left to compare is the number.
Scarcity is what lets value keep being captured
April Dunford, the positioning consultant, once had a prospect mishear her fifteen-thousand-dollar workshop as fifty thousand. She held the higher number, kept the workshop scarce, and let the price track the waiting list as it grew.
A newsletter consultant did the reverse. She built a forty-thousand-dollar-a-year business on a ten-dollar-a-month subscription that could not be raised, could not be trimmed, and could not sit next to anything premium, because the cheap offer had already used up the thing a premium one would need: direct access to her.
The two offers were shaped differently from the first client onward. One kept the scarce thing scarce and let the price rise as demand proved itself. The other made the work reproducible, and reproducible is where price gets ground down to the cheapest comparable.
Value is the bigger determinant of what you can charge. Scarcity is what lets that value keep being captured rather than given away.
Most people are frightened to raise their prices
Most of us starting out, and I will admit, many experienced consultants, are frightened to put our prices up. We set a number, and we keep it for years, because the number is working and we do not want to risk it.
Robert Vlach, who I have had on the podcast twice, put his finger on why the fear is so hard to shake. Pricing feedback is one-sided. If you overcharge, the market tells you quickly: the deals do not happen, people push back, the signals are loud. If you undercharge, you hear almost nothing. Clients do not tell you that you are cheap. They just happily buy more.
So you can sit below your real price for years and never know it. The only way to find out is to experiment. Vlach's advice is to raise your price bit by bit, and touch it as often as you can. Put it up, see where it stops. If it holds, put it up again. Somebody has to root for your side of the deal, he says, and the client will not do it for you.
Years ago I had a graphic designer doing beautiful work for the podcast. She charged by the hour and was so efficient that I would get a bill for two dollars fifty. I told her to set a minimum. She had no idea what her work was worth, and no client was going to tell her.
I know the feeling from my own side too. Some of my clients have been with me for fifteen years, and I only crept my prices up last year. Most of them barely blinked. One pushed back a little and then kept paying. The fear was worse than the conversation.
Where the value actually lives now
In the partnership I built with Denis, he did the consultancy and I did the implementation. Back then, the implementation was a real skill and a real service.
Today that implementation work is commodified. Platforms do it cheaply. Anyone can stand up a website, run the ads, send the emails. The doing side of the work has become reproducible.
What has not been commodified is the consultancy: the reading of the situation, the diagnosis, the judgement call about which of the options actually matters. That is where the value was all along. I spent years pricing the doing side and giving away the thinking, like most people do.
Publish the diagnostic, keep the conversation
That's the line I draw now. I publish fixed prices for the two things that are genuinely diagnostics: the Positioning and Practice Audit, and the one-question Strategy Intensive. A fixed price for a diagnosis is not the same as publishing prices for bespoke work, which is what Enns rightly warns against. A fixed price lets a client say yes without a custom quote. It opens the value conversation instead of avoiding it.
The number is public. The conversation is where the value gets named.
Chris Sloane, who writes at csloane.com, puts it better than I can. A billing model is just the box you put the work in.
Hourly, fixed fee, retainer — three boxes. The box doesn't decide whether you make money.
What decides it is three things.
- Did you let the client keep adding to the job without adding to the price?
- Did the job take far longer than you estimated?
- Did you count the hours honestly?
If any of those is broken, you lose money no matter which box you use. Switch boxes and the leak just moves – under hourly you give away extra hours, under a fixed fee you eat the scope growth, under a retainer you quietly over-deliver and never bill it.
Fix the scope and the estimating first. Then pick whichever box fits.
The reason the line earns its place in a piece about pricing is that the billing model sits between the two things this article is actually about.
- The old formula priced by arithmetic.
- The value conversation prices by the client.
In the middle sits the model, and it is easy to mistake the model for the decision. Sloane is pointing out that the model is neither. Fix the scope first, then pick the container that fits it.
The floor and the ceiling
If you came here asking how much you should charge, the answer has two parts.
The first is the floor. Run your practice through the five lines and see what it actually costs you to deliver, sell, and run the thing, and what needs to be left over as profit. That tells you the number below which the practice does not work. Enter your monthly numbers in the calculator below and it does the arithmetic for you.
Work out your five lines
Enter your monthly numbers. Profit is worked out for you.
The second is the ceiling, and no calculator can hand you that one. It comes out of the value conversation: asking what the work is worth to the client, keeping the scarce thing scarce, and raising the number a little at a time until you find where it stops.
The old formula only ever asked the first question, and it got even that one wrong. It never asked the second.
Frequently asked questions
What are the five lines?
Revenue, cost of goods sold, cost of selling, cost of running the business, and profit. Each is measured as a share of revenue, and each has a range it should sit in. They come from Denis Hitchens, who drew them on a piece of paper, and they have guided my pricing and spending decisions ever since.
Why did the old hourly formula get it wrong?
It started from the income you wanted and divided it by the billable hours you could work, without accounting for the cost of delivering, selling, and running the practice, or the profit you need to leave over. It also never asked what the work was worth to the client.
How do I raise my prices without losing clients?
Raise them a little at a time and see where they stop. Most clients expect the increase and accept it. The market tells you quickly when you charge too much, and stays silent when you charge too little, so you have to test to find out.
Should I publish my prices?
For a fixed-price diagnostic, yes. A published price lets a client say yes without a custom quote. For bespoke work, hold the number back until the value conversation has established what the work is worth.
Where this goes next
If you want the full written guide to the five lines, including the healthy range for each one, read The Five-Line Framework: Read Your Practice in Five Numbers. If you want a structured way to see which line is holding your practice back, the Business Clarity in Five Lines assessment works through it in a few minutes.
For the structural side of pricing, The Price You Set on Day One Decides Which Doors Stay Open explains why some offers close their own ceiling. For the profit side of the same problem, read when the capacity problem is really a profit problem.
This article sits in the Sustainable Business Foundations insight hub.
Every Tuesday I send The Wisepreneur, a short letter for experienced professionals building independent practice: one usable idea a week. Sign up at wisepreneurs.com.au/newsletter
When you want a second pair of eyes on your own practice, the Positioning and Practice Audit is how I work with people: wisepreneurs.com.au/marketing-partnership
References
Blair Enns, Pricing Creativity – value conversation, Nike/Pepsi, reverse the order
April Dunford, Allan Dib's Lean Marketing podcast, Positioning For Profit, June 2026 – the $15K→$50K mishearing
Robert Vlach, Episodes 38 and 75 – one-sided pricing feedback, raise bit by bit
Robert Vlach Freelance Pricing Strategies: How Independent Professionals Set Rates That Reflect Experience
Robert Vlach Professional Reputation: Why Your Good Name Beats Personal Branding
Chris Sloane, csloane.com – billing model as a container, not the margin