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.

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.

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 🙂

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.

🙏 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.

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

💡

-Wes