Before you can sign those clients and make that goal amount you’ve set for yourself, you’ll need to determine your business model. In short, a business model is how you plan to make money.
The time-based model is pretty common and straightforward. In this model, your rate and scope of work are determined at the outset. You can choose to have an hourly rate or a day rate. Your rate is determined by “the market” and how you present yourself vs. the competition. Notice, I didn’t say “how experienced” you are vs. the competition, as that is a different metric altogether. In any model, presentation has a lot to do with how you’ll be rewarded.
The benefit of this model is that as a consultant, you are paid for each hour of actual work. It can sometimes be challenging to scope the amount of time it will take to address your client’s needs; this model protects you from underbidding. However, this also requires detailed record keeping. For example, when I worked at Adobe, we had to document every 15 minutes of billable work. This could easily take two to three hours per week, which wasn’t billable to the client. Beyond that, clients may ask why something took so long. You may end up explaining why you had to research one thing or another before coming to a conclusion, which eats up even more of your time.
With a project-based model, you agree to perform a specific type of work for a predetermined amount of money. Before starting, the details of all deliverables will be agreed upon by both parties.
An advantage of this approach is that consultants can focus on providing value as opposed to watching a clock. You’ll also have more predictable income since that revenue is more or less locked in once the contract is signed. Once you have enough projects signed, you can back off prospecting and lead generation, to an extent. I’m not saying you should completely stop looking for new business, but you won’t have the same sense of urgency. Beyond that, experienced professionals who can get the job done quicker are rewarded, without having to bill several hours to earn their fee. This doesn’t mean you’re rushing to complete a project. You can just get the job done faster because you’ve already learned some tactics or techniques in the past that can move things along faster. Remember: You’re paid on the value you provide, not how long it took you to do it.
The retainer based model involves providing ongoing or as-needed service over a set period of time. Unlike the project-based model, this model doesn’t necessarily involve a specific deliverable. Instead, it allows you and the client to agree on a set, recurring price and provides flexibility in the scope of the work and deliverables you provide.