Consulting Engagement: How to Structure Your Services Including the Pros and Cons of Each Model Available

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There are three basic models of engagement in consulting services: the hourly model, the project-based model, and the monthly retainer model. The truth is there is nothing like an ideal consulting engagement structure for anyone; the model adopted by each consultant would depend on preference, project type, or situation. However, each of these consulting engagement structures has its merits as well as shortcomings.  
As a consultant, whether you’re operating as a freelancer or as an agency, it is more advantageous for you to adopt a particular engagement structure for your consulting services so as to effectively plan your lead generation and contract needs. Although there might be some occasional changing or combination of models, having a suitable consulting engagement structure in place will put you at an advantage position during the negotiation with your client. In order for you to have a proper understanding of the various engagement structures so you can choose the model that suits you best, let’s consider individual model including their pros and cons.
The Hourly Engagement Structure
If you’re a new freelance consultant, especially if you’re still keeping your steady 9-5 work, you might want to consider the hourly engagements. This is because hourly engagements allow you to strike a balance between your regular job and freelance consulting endeavors. Depending on project, seasoned consultants may sometimes find the hourly engagements structure as the most advantageous strategy to get the most out of a contract. The following are some of the pros and cons of adopting the hourly consulting engagement structure:
Pros:
  • Hourly engagement model is easy to track for both the client and the consultant.
  • This model allows you to price accurately. If you’re new at consulting, this model will help you to avoid under-pricing yourself when engaging with clients on a long term project.
The shortcomings of charging hourly are as follows:
  • For hourly engagement, working faster could mean making less money.
  • In the long run, charging hourly rates yield lower income compared to charging per than project.
  • There is a limit to the number of clients you can serve in a week since you can only work certain number of hours per week.
The Per Project Engagement Structure
The second option involves the structuring of your consulting engagement by project. Although this model might be a bit difficult for new consultants at the initial stage, the model is more rewarding compared to the hourly model once you have mastered the approach. Your marketing strategy should be about making your client feel comfortable with the value you promise to offer. Use the hourly project you did for your first set of clients to create a testimonial page on your website. This will help to make potential clients feel comfortable to accept your proposed rates. In marketing, selling is all about psychology.
The onus is on you to use marketing psychology to your advantage by showcasing yourself as a tested and trusted solution provider in your choosing consulting niche. Naturally, people like to patronize someone whose services have been found satisfactory by others. All you have to do is to make sure your contract is clear on the variables that determine how your clients will assess the quality of your service. Your satisfactory fulfillment of variables such as timeliness, accuracy, customer services, returns or revisions policy, among others, will determine how well per project structure will work for you. The smart approach to achieving great result through project-based engagement structure is to focus more on short affordable projects rather than long but expensive ones. Here, are some of the pros and cons of doing per project service.
Pros:   
  • There is the possibility of continuous relationships.
  • Opportunity to earn more than the hourly rates.
Cons:
  • You might incur increased overhead if project duration and requirements are not proper discussed before embarking on the project.
The Monthly Retainer Engagement Structure
The last of three engagement structures often practice by consultants, is the monthly retainer. This model offers guaranteed security for your consulting business. Although about three to six months are usually required before you can build a solid relationship with your client, monthly retainer is your best bet of all the three models once achieved. Indeed, a monthly retainer, if incorporated successfully, is the sure-fire way to ensure cash-flow that guarantees the sustainable existence for your consulting business. This is because unlike the first two engagement models, project-based and hourly rates, the monthly retainer model allows you to earn regular monthly income in advance of the project.
The monthly retainer involves a contractual agreement between you and your clients, which allows you to receive payments from clients on a monthly basis in lieu of them gaining access to your expertise whenever the needs arise. On your part the upfront regular monthly income makes it easier for you to sustain and grow your consulting business. The clients, on the other hand, enjoy unlimited and instant access to your service. The bottom line is that this engagement structure works to help both parties to achieve their desired objectives. Below are some of benefits and downsides of monthly retainer.
Pros:
  • It permits consistent cash-flow for the consultant through the monthly payments while the clients also have access to your expertise as at when needed.
  • A monthly retainer helps the consultant to plan for the future and track success over time.
  • The experience can be used as case studies.
  • It has the highest rewarding rate.
Cons:
  • You have to be available for a long term project.
  • You have to be on the ready-mode so you can fulfill your contract.
Conclusion
Choosing the right consulting engagement structure that best suits your consulting business will go a long way to guarantee your success in the industry. Thus, it is recommended that you take your time to study the different models discussed above and choose the one that is most applicable to your unique situation.

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