This week, I’m walking through my Price Triangulation Mental Model (PTMM), which will help you quickly find a price range for your consulting service that will:

• support your ambitious revenue goals
• and provide confidence when pitching

Naturally, there are 3 points to the triangulation. We’ll cover one each day.

Note: This model works best for productized services (set-length, repeatable), but the principles also hold for customized client services.

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First up: the revenue-based price.

This price can also called the capacity-based price, or the goals-based price.

I like to start here because it ensures you don’t lose sight of your ultimate revenue goal for your consulting business.

To find your revenue-based price, you start with the total annual revenue you seek to earn, and work backwards to find how much you’d need to charge per engagement to meet that goal.

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The formula here is simply = Annual revenue goal / capacity

Annual revenue goal is self-explanatory, although not a capricious variable. An ambitious, yet reasonable goal works best.

But don’t worry - if you go overboard, the other two points of the model will pull you back in check 🙂

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Capacity is a bit more involved to calculate than your revenue goal, but essentially it represents how many engagements of this type you could provide per year.

A few things to factor in:

• The duration of the service itself
• The # of clients you could engage concurrently
• Planned time off
• WOB time (biz dev, lead gen, admin, etc.)
• Any capacity you’ve dedicated to other services
• For more on calculating capacity, visit the post ‘What’s your magic number?’

Let’s use an example:

Imagine Marcos is a marketing consultant — specifically a content strategy consultant.

• Marcos’s revenue goal is $250,000 per year
• His core service is a 4-week diagnostic + content strategy intensive
• He can run only one intensive at a time
• He offers no other services, and built his revenue goal based on a 10-month year to account for time off
• While his intensive is 4 weeks, the structure still affords him ~2 days/week for WOB 'behind-the-scenes'

All combined, in a 10-month year, with a 4-week service, Marcos has capacity for ~10 engagements.

So, as a rough revenue-based price = $250,000 / 10 engagements = $25,000

With that, $25,000 becomes Marcos’s first stake in the ground of the PTMM for his service.

Yup, that’s it! Feel free to follow along - what’s the revenue-based price of your core service? Drop me a line if you have questions.

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🙏 Shoutout to Melisa Liberman for showing me this not-always-obvious revenue-based approach to service pricing. For more, check out this episode of her amazing podcast.

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Tomorrow, we’ll derive the second point in the triangle, based on…

💡

-Wes