Building Your Pricing Arsenal for What’s Coming

Professional services firms—including management consulting, strategy consulting, and implementation consulting—are experiencing unprecedented pressure on their traditional time and materials (T&M) pricing models. Clients who once accepted hourly billing without question are now asking harder questions about value, efficiency, and outcomes. They’re using AI tools themselves and watching consulting work transform in real-time.

When clients see you generate strategy documents in hours instead of days, or analyze data patterns in minutes instead of weeks, they're asking the obvious question: "If this takes half the time it used to, why am I paying the same amount?"

This pressure isn't theoretical. It's happening in sales conversations right now. The hourly billing model that built our industry is being challenged by clients who understand what AI enables.

What’s Driving the Pricing Revolution in Consulting?

Here's where many are getting it wrong: they think time and materials is "dead" and everything needs to shift to value-based pricing immediately. That's not how change happens in professional services.

The smart money isn't betting on which pricing model wins—it's building the capability to compete effectively in any pricing environment.

Why smart firms need multiple pricing models

The top consulting firms have always used pricing as a strategic lever. The same project might be billed hourly for one client, fixed-price for another, and value-based for a third, depending on the relationship, risk profile, and competitive dynamics.

AI doesn't eliminate this flexibility—it enhances it. What's changing is that firms now need to be genuinely capable of executing across all these models, not just defaulting to T&M because it's safe and predictable.

The reality check

Structural forces will likely keep hourly billing alive longer than many predict:

• Enterprise procurement departments are still built around hourly rate comparisons
• Even when firms want to bid fixed-price, procurement often demands to see the underlying hourly breakdown
• The shift will be gradual and uneven across different market segments

But being ready for gradual change doesn't mean being passive about preparation.

The Five Pricing Models Every Consulting Firm Should Consider

Every pricing model requires different operational capabilities to execute successfully. The Key Requirement represents the foundational capability your firm must have in place to confidently offer that pricing model. The Risk Factor identifies the primary threat that can undermine profitability if not properly managed.

Understanding the requirements and risks up front allows you to build the right systems before you need them, rather than scrambling to develop capabilities during active client negotiations.

1. Time & Materials

T&M isn't going away, but it's evolving. You need to demonstrate clear value and efficiency. When clients question your hours, you need concrete evidence of the expertise and outcomes you're delivering, not just activity reports.

What this requires: Systematic documentation of value delivered, impact metrics captured in real-time, and the ability to show how your expertise compounds project outcomes.

2. Fixed-Price

Fixed-price billing requires institutional knowledge, context awareness, and risk management tools to scope accurately and deliver profitably. Scope creep kills margins when you don't have systems to preserve and apply lessons learned from similar engagements.

What this requires: Predictable delivery methodologies, accurate scoping based on historical patterns, and governance systems that prevent scope creep from becoming margin erosion.

3. Throughput-Based

The throughput-based pricing model charges based on actual work output within a defined time box, e.g. sprints and story points. Think pricing per strategy document, per analysis completed, or per process optimized. It rewards efficiency while maintaining quality standards.

What this requires: Standardized deliverable definitions, quality benchmarks, agreement with the customer about what “consistent output” looks like, and process optimization capabilities that ensure consistent output regardless of team composition or timeline variations.

4. Revenue-Sharing

Partnering with clients by taking a percentage of the revenue generated or costs saved from your recommendations, aligns your success directly with outcomes and careful contract structuring and long-term relationship management.

What this requires: Robust impact measurement systems, legal frameworks for ongoing revenue tracking, and the confidence to tie your compensation directly to business results over extended periods.

5. Value-Based

The ultimate goal, but it requires capturing business impact data, outcome metrics, and success patterns as you deliver them. You can't have value-based conversations without being able to access and apply the collective wisdom of everyone who's delivered similar outcomes.

What this requires: Systematic outcome tracking, business impact measurement, and the organizational infrastructure to make institutional knowledge actionable.

How to Build Pricing Capabilities Before You Need Them

The firms that will thrive aren't trying to predict exactly how billing models will evolve. They're building the capabilities to adapt quickly when the market shifts.

Preserve institutional knowledge: Your pricing strategies shouldn't be dependent on individual consultants. When a senior partner leaves, their pricing wisdom shouldn't walk out the door with them. This means systematically capturing not just what was delivered, but how it was scoped, what assumptions proved accurate, where challenges emerged, and what lessons were learned.

Systematize delivery excellence: Fixed-price, throughput-based, and value-based models all require predictable delivery—which means your methodology needs to work consistently across different team compositions and engagement types. This isn't about rigid processes that stifle creativity. It's about intelligent systems that make your collective expertise accessible when and where it's needed.

Capture value stories in real-time: Every project should systematically document business impact, client satisfaction metrics, and outcome measures that become the foundation for future value conversations. Don't wait until the end of a project to scramble for success metrics. Build outcome tracking into your delivery process from day one.

When Will Value-Based Pricing Become Standard?

We believe the industry is ultimately moving toward more value-based engagements, but it's going to take time. Most firms aren't ready for it yet, and frankly, most customers aren't either.

But the smart firms are already collecting what we call "breadcrumbs"—not just tracking business outcomes and impact metrics, but systematically building the organizational and process infrastructures that will become the foundation for throughput-based, revenue-sharing, and value-based pricing conversations.

This isn't passive data collection; it's intentional preparation for a future business model.

How AI Changes How Work Gets Valued

The AI revolution isn't just changing how work gets done, it's changing how work gets valued. Clients will increasingly differentiate between generic capability (which AI can replicate) and unique expertise (which comes from collective intelligence).

Your pricing strategy becomes a competitive weapon when you can confidently say: "We're not billing you for hours—we're delivering 15 years of experience applied to your specific challenge. The value comes from getting the right solution faster, with fewer revisions, and with predictable outcomes that others can't guarantee."

That confidence comes from having systems that make your collective expertise accessible and actionable. It comes from being able to demonstrate the unique value only you can provide.

The competitive reality

A 12-person boutique firm can now compete with an Accenture and win—not by having more people, but by having compound intelligence. When their system knows the context of 200 previous engagements, the patterns of what works, and the early warning signs of what doesn't, they can scope more accurately, deliver with fewer revisions, and move faster than firms that rely on individual brilliance alone.

Frequently asked questions

Is time and materials pricing actually dead in consulting? No, T&M isn't dead, but it's evolving rapidly. Structural forces like enterprise procurement departments still rely on hourly rate comparisons, and the shift away from T&M will be gradual and uneven across market segments. However, you must be able to demonstrate clear value and efficiency when clients question your hours.

What are the five pricing models professional service leaders need to consider in the time of AI? The five essential pricing levers are: 1) Time & Materials, 2) Fixed-Price, 3) Throughput-Based, 4) Revenue-Sharing, and 5) Value-Based. Each requires different capabilities and risk management approaches.

How does AI impact professional service pricing strategies? AI enables faster delivery, creating client pressure on traditional hourly billing while simultaneously enabling new pricing models. Clients now differentiate between generic capability (which AI can replicate) and unique expertise (which comes from collective intelligence). This shift makes pricing strategy a competitive weapon.

How should professional service leaders prepare for value-based pricing? Start collecting "breadcrumbs" now—systematically building organizational and process infrastructures for outcome tracking, impact measurement, and institutional knowledge preservation. Don't wait for clients to demand value-based pricing; build the capability to execute it confidently.

What's the biggest risk in not adapting pricing models? Commoditization. Firms that can't demonstrate unique value will face a race to the bottom on pricing. Those building compound intelligence and pricing flexibility will have competitive positioning that others can't match.

The Bottom Line

The question isn't whether T&M is dead. It’s whether you're building the capabilities to compete in whatever pricing environment emerges.

The Problem: Clients question hourly billing when AI accelerates delivery

The Solution: Build capability across the pricing models that work best for your market

The Timeline: Shift is gradual, but preparation must start now

The Winner: Firms with compound intelligence and pricing flexibility

Are you ready to deploy pricing as a strategic lever, or are you still hoping clients won't notice that the work is changing?

The firms that understand the shift and prepare for it now will have pricing flexibility, delivery confidence, and competitive positioning that others simply can't match. They won't just survive the transition to new business models—they'll drive it.