Written for independent consultants, fractional executives and small consulting firms that use employees or subcontractors.
The short version
- Work out what your time really earns.Divide your fee revenue by all your available hours, billed or not. That is your effective rate.
- Add contingency to every fixed fee.Contingency is a buffer that prices the overrun before it happens. On retainers, cap the days included.
- Send a change order when the client slips.List what the client must provide in the statement of work. If it comes late, price the extra days in a change order, at once.
Pick the pricing model by who should carry the risk of overrun: time and materials where the client carries it, fixed fees where you can price it, retainers for defined access or outcomes, and value fees only against a measurable gain. Then measure what each one is really paying you.
Three numbers to track
- Utilization: billable hours divided by available hours.
- Effective rate: fee revenue divided by available hours.
- Realization: fees billed divided by (hours worked times your standard rate). It shows how much of your time is being written down.
| 1,200 billable hours at $175 | $210,000 |
| 720 available hours not billed | $0 |
| Fee revenue across 1,920 available hours | $210,000 |
| Effective rate per available hour | $109.38 |
$210,000 / 1,920 hours. Utilization is 1,200 / 1,920 = 62.5%.Indicative worked example, as of Oct 2026.
Fixed fees: price the overrun before it happens
| 15 days at $1,600 | $24,000 |
| 15% contingency | $3,600 |
| Fixed fee quoted | $27,600 |
| Effective day rate if it takes 19 days | $1,452.63 |
$27,600 / 19 daysWorked example, as of Oct 2026.
Retainers drift the same way. For example, a $6,000 monthly retainer for four days is $1,500 a day at full use, but $923.08 if the client takes 6.5 days. Cap the included days, say what happens to unused days, and price the excess days.
In that worked example the effective day rate on the job falls from $1,500 to $1,090.91. The change order is how you claim it back.
Margin is not markup
If you resell subcontractors, know which number you are quoting. For example, a subcontractor at $800 a day sold at $1,200 is a 33.33% margin but a 50% markup. Alongside your rates, track win rate, client concentration and days sales outstanding.
Do not price from a rate or utilization figure that has no named, dated source. Price from your ledger and CRM, the client's rate card, current GSA schedule labor prices or a dated association survey. BLS pay data for employed management analysts is not a rate for an independent consultant.
Asked in Greymill
As quoted: $60,000 / 40 days = $1,500 a day
At 55 days: $60,000 / 55 days = $1,090.91 a day
Unpaid: 15 extra days, worth $22,500 at $1,500 a day
Send a change order now. Your SOW made the data their job, and it came late. Price the 15 extra days and ask the client to approve them. That is how you claim the money back.
Next time, list what the client must provide in the SOW, and add contingency (a buffer in the price) for the slip you cannot see yet.
One number to watch: your effective rate. That is fees divided by all your available hours, billed or not.
Want me to draft the change order?
Ask it about your own business
Paste this into Greymill with your own figures, and Cash & Profit works it through for your business.
I run a consulting business in [state], in the US. Last year I billed [hours] hours at [rate] out of about [hours] available, and wrote off about [hours]. I am pricing a fixed fee for [project] that I expect to take [days] days, depending on the client providing [list the dependencies]. Work out my utilization, realization and effective rate, price the fixed fee with contingency, and show what happens to my rate if it runs [days] days over.
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Open the interactive lesson · Every consulting and advisory lesson · What Greymill knows about the trade
Sources
The primary sources behind this lesson, checked Oct 2026.
- FOMC statement September 16, 2026; 2026 calendar (Show the math, source the market)
- October 28, 2026 statement; FOMC calendar 2026 (federalreserve.gov/monetarypolicy/fomccalendars.htm) (Show the math, source the market)