All the ways to price a service

Hourly pricing

I avoid it if I can. It’s unpredictable to the client and incentivizes mediocrity. If you’re exceptionally good at your job, you get faster, and faster pays less in this model.

It is good for repetitive work but not good for strategic work, where more time does not yield a better outcome.

Monthly retainer

Personally, I find the monthly retainer model to be the most effective. A fixed fee is paid in advance, typically monthly, to reserve availability.

This approach eliminates the need to count hours and provides flexibility for changing workloads.

I also feel more engaged with the project’s outcome.

Fixed price (value-based)

This is the holy grail: a fixed price (10-30%) for the measurable increase in value delivered to the client. It’s focused on the ROI. You pay for results not the hours.

But, it’s sometimes hard to measure or predict the value delivered.

Hybrid pricing

One of the above plus a bonus for reaching KPIs.

Performance-based pricing

Paid based on the result. For example, if I lower your cloud bill, you could pay me what I save you in the first year (and all the subsequent years are just your profit).

Yours,

Taj